Airline Profitability Falls as Fuel Costs and Middle East Disruptions Weigh on Industry

Middle East Conflict Drives Down Airline Profitability Outlook for 2026

The International Air Transport Association (IATA) has revised its financial outlook for the global airline industry, forecasting a sharp decline in profitability in 2026 as carriers contend with higher fuel prices and operational disruptions linked to the conflict in the Middle East.

According to IATA, airlines are expected to post a combined net profit of $23 billion in 2026, down from an estimated $45 billion in 2025. Net profit margins are forecast to fall from 4.2% to 2.0%, while profit per passenger is expected to decline from $9.10 to $4.50.

Despite the weaker earnings outlook, industry revenues are projected to rise by 9.4% to $1.165 trillion in 2026. Passenger numbers are expected to reach 5.1 billion, while airlines are forecast to fill an average of 84% of available seats, reflecting continued demand for air travel.

IATA said the main challenge facing airlines is rising fuel costs. Jet fuel prices are expected to average $152 per barrel in 2026, compared with $90 per barrel in 2025. Fuel expenditure is projected to rise to $350 billion, making it the largest cost pressure across the sector.

The impact of these developments varies across regions. Airlines in the Middle East are expected to record collective losses due to airspace restrictions, flight disruptions, and reduced transfer traffic. Other regions are still expected to remain profitable, although earnings are projected to be lower than previously anticipated.

Europe, North America and Asia-Pacific carriers are likely to face higher operating costs linked to fuel prices and longer flight routings. Meanwhile, supply chain constraints continue to affect fleet expansion plans, with aircraft delivery delays increasing costs and limiting growth opportunities.

IATA also noted that airlines continue to face infrastructure constraints, labour costs, and sustainability-related expenses, including investments in Sustainable Aviation Fuel (SAF) and compliance with carbon-reduction programmes.

While demand for air travel remains resilient, the association said the industry’s financial performance remains vulnerable to geopolitical developments, fuel market volatility and broader economic conditions during the year ahead.

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