The global airline industry is headed for a year in which its profits are projected to be cut nearly in half as carriers grapple with a $100 billion surge in fuel costs triggered by the war in Iran.
According to a report by the International Air Transport Association (IATA), airlines worldwide are now expected to generate a combined net profit of $23 billion in 2026, down sharply from the $45 billion earned in 2025 and well below the organization's previous forecast of roughly $41 billion for 2026.
The downgrade comes as jet fuel prices have climbed about 70% following disruptions to oil markets and air traffic routes linked to the war with Iran and its regional spillover effects. The airline industry's fuel costs are now expected to reach approximately $350 billion in 2026, compared with $252 billion a year earlier.
Fuel will account for nearly one-third of airline operating costs, once again becoming the industry's most significant expense. "War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse," IATA Director General Willie Walsh said while presenting the organization's updated outlook at its annual meeting in Rio de Janeiro.
Despite the deteriorating picture, demand for air travel remains surprisingly resilient. IATA expects industry revenue to grow 9.4% this year to approximately $1.16 trillion as airlines pass part of the higher fuel costs on to travelers through increased fares. Passenger traffic is still expected to rise, although at a slower pace than previously forecast.
Industry-wide net margins are projected to fall from 4.2% in 2025 to just 2.0% this year. On a per-passenger basis, airlines are expected to earn only $4.50 in profit, roughly half last year's figure.
However, the financial pressure is not being felt equally across the industry. Airlines operating in the Middle East are expected to be among the hardest hit because of weaker travel demand and operational disruptions in the region. Budget carriers with limited financial cushions are also considered particularly vulnerable to prolonged high fuel prices.
With airlines forced to keep older, less fuel-efficient aircraft in service longer than planned, operating costs continue to rise. IATA has criticized aircraft and engine manufacturers for delivery shortfalls that have prevented airlines from modernizing fleets and improving fuel efficiency.
For travelers, the outlook points to more expensive tickets in the months ahead. Walsh acknowledged that higher airfares are becoming unavoidable as carriers attempt to absorb unprecedented fuel costs. Industry surveys cited by IATA suggest many passengers already expect airfare increases, though questions remain about how long consumers will tolerate rising travel costs.
