The global airline industry is set for a sharp downturn in profitability in 2026, with earnings almost halved compared to earlier forecasts, as the ongoing Middle East conflict pushes up fuel prices, disrupts key flight routes and strains airline operations worldwide.The International Air Transport Association said on Sunday that it now expects the industry to post a combined net profit of $23 billion in 2026, sharply down from an earlier estimate of about $41 billion and down from $45 billion profit in 2025.The airline body, which represents more than 370 airlines accounting for around 85% of global air traffic, said the downgrade reflects a mix of geopolitical shocks and surging fuel costs, even as passenger demand remains strong.
Fuel surge and airspace disruption hit airlines
According to Reuters, IATA director general Willie Walsh said the outlook had worsened due to two major pressures.“There are two major factors: one is the significant increase in jet fuel prices, which has gone way higher than I think anybody would have expected, and then the disruption to the airlines in the Gulf region,” Walsh said.He added that this combination had forced a steep cut in profit expectations across the industry.Walsh also warned that higher costs could force weaker airlines out of the market, with consolidation likely to increase.“I expect some smaller airlines to go bankrupt or be taken over by bigger carriers,” he said.
Airlines face rising costs despite strong demand
Despite the financial pressure, IATA said global air travel demand remains resilient, with fuller flights and higher revenues projected.The organisation expects industry revenues to exceed $1.1 trillion, driven by strong passenger traffic and additional income from premium services such as upgrades and onboard offerings.However, profitability per passenger has fallen sharply. IATA estimates airlines will earn about $4.50 per passenger in 2026—roughly half of last year’s level.According to news agency AFP, IATA said global carriers are expected to transport around 5.1 billion passengers in 2026, up from about 4.98 billion in 2025, reflecting continued demand growth despite higher fares.
Middle East conflict reshapes aviation outlook
The downgrade comes amid continued instability in the Middle East following US and Israeli strikes on Iran, which has triggered widespread airspace disruptions and forced airlines to reroute flights.These diversions have increased flight times, fuel consumption and operational costs, while also tightening capacity across major international routes.Gulf carriers such as Emirates, Qatar Airways and Etihad Airways are expected to face the most pressure, with IATA warning that Middle Eastern airlines could slip into losses due to both conflict-related disruption and weaker demand conditions.
Fuel costs emerge as biggest burden
IATA estimates the global airline fuel bill will rise to around $350 billion in 2026, up from about $252 billion in 2025, making fuel nearly a third of total operating costs.Walsh said the surge in jet fuel prices is wiping out gains from higher passenger revenues and forcing airlines to rethink route networks.Airlines are also expected to cut unprofitable routes, while fares are likely to remain elevated due to constrained capacity and steady demand.“Air fares are rising, airlines are still absorbing part of the hike in their bottom lines,” IATA noted.
Outlook: Growth in passengers, pressure on profits
While the industry continues to recover in terms of passenger numbers, profitability is expected to remain under strain due to geopolitical uncertainty, fuel volatility and aircraft delivery delays from manufacturers such as Boeing and Airbus.Walsh said the imbalance between rising demand and constrained capacity would continue to support higher fares, even as airline margins shrink.Despite the pressure, IATA described the outlook as one of “resilience,” even if profits fall sharply and regional performance diverges significantly across global markets.
