Global airline profits are expected to decline significantly in 2026 as higher fuel costs and ongoing geopolitical tensions place increasing pressure on carriers, according to a new forecast by the International Air Transport Association (IATA).
The industry body said airlines worldwide are projected to record a combined net profit of $23bn in 2026, a sharp drop from the estimated $45bn achieved in 2025. The revised outlook also falls well below earlier expectations for the year.
IATA attributed the weaker performance to disruptions linked to conflict in the Middle East, which have affected flight operations and contributed to a steep increase in jet fuel prices. The association noted that the surge in fuel costs has become one of the biggest challenges facing airlines globally.
IATA Director General, Willie Walsh, said the sharp rise in fuel expenses has eroded profitability across the industry, forcing airlines to absorb a substantial portion of the additional costs despite efforts to raise fares and improve operational efficiency.
He explained that while most regions are still expected to remain profitable, earnings will be considerably lower than in previous forecasts. Airlines in the Middle East, however, are projected to post losses as the conflict continues to disrupt operations and weaken demand.
According to Walsh, Gulf-based carriers have faced significant uncertainty following airspace restrictions and flight disruptions triggered by the regional crisis. Although airlines have managed to maintain services in many areas, the financial impact is expected to be substantial.
The association also warned that the industry’s profit margins will narrow considerably in 2026. Net profit per passenger is forecast to fall by nearly half compared to the previous year, reflecting the growing pressure on airline finances.
IATA further projected that operating profits will decline sharply, while returns on invested capital will remain below the industry’s cost of capital. The group said this highlights long-standing structural challenges within the aviation sector, where unexpected cost increases can quickly undermine profitability.
Despite the difficult outlook, IATA said airlines have shown resilience by maintaining operations and adapting to market conditions, though the sector remains vulnerable to further increases in fuel prices and other operating expenses.
