Airlines are grappling with soaring fuel prices, operational disruptions, airspace restrictions, and growing concerns over the impact of regional instability on global economic growth.
The International Air Transport Association (IATA) warned in its latest industry outlook, released Sunday during its 82nd Annual General Meeting in Rio de Janeiro, Brazil, that the Middle East conflict and soaring jet fuel prices are expected to sharply reduce airline profits worldwide in 2026.
According to the report, global airline net profits are projected to fall to $23 billion in 2026, compared with approximately $45 billion in 2025. Net profit margins are expected to decline from 4.2 percent to 2 percent, while net profit per passenger is forecast to drop to just $4.50 from $9.10 a year earlier.
Industry operating profits are expected to fall to $48 billion in 2026 from $76.4 billion in 2025. The return on invested capital is projected to decline to 4.3 percent from 6.6 percent last year, remaining significantly below the estimated average cost of capital of 8.5 percent.
Despite weaker profitability, IATA expects the aviation industry to generate record revenues. Total industry revenues are forecast to increase by 9.4 percent to reach $1.165 trillion in 2026, up from $1.065 trillion in 2025. Passenger numbers are expected to rise by 2.4 percent to 5.1 billion travellers, while global air cargo volumes are projected to reach 71.7 million tons. The industry's load factor is also expected to hit a record high of 84 percent.
“The disruptions caused by the war in the Middle East and the sharp rise in fuel prices have significantly worsened the outlook for airlines,” said Willie Walsh, Director General of IATA.
Walsh said airlines worldwide have been hit by an almost 70 percent increase in jet fuel prices compared with last year. While many carriers have managed to offset part of the additional costs through higher fares and operational efficiencies, he said such measures have not been sufficient to preserve previous profitability levels, particularly among smaller and financially weaker airlines.
Fuel costs soar
Fuel remains the single biggest challenge facing the industry.
IATA forecasts that total fuel costs will rise by nearly 40 percent to reach $350 billion in 2026, compared with $252 billion in 2025. The average price of jet fuel is expected to climb to $152 per barrel from $90 per barrel last year, representing an increase of almost 70 percent.
As a result, fuel is expected to account for 31.4 percent of total airline operating expenses, up from 25.4 percent in 2025, adding to pressure from higher financing and operating costs.
Middle East swings into losses
The Middle East is expected to be the region hardest hit by the conflict.
According to IATA, airlines in the region are projected to move from profits of $7.2 billion in 2025 to losses of $4.3 billion in 2026. Net profit margins are forecast to plunge from 9.4 percent to negative 6.1 percent.
Revenue per passenger is expected to deteriorate sharply, shifting from a profit contribution of $31.50 per passenger to a loss of $21.40.
IATA anticipates an 11.4 percent decline in passenger demand across the region and a 4.4 percent reduction in capacity as airlines contend with flight cancellations, airspace closures, security concerns, and rising fuel prices.
Despite these challenges, the association stressed that the Middle East retains important long-term strengths, including world-class aviation infrastructure, a strategic geographic position linking major international markets, and relatively low levels of industry debt.
Africa records the strongest traffic growth
In Africa, airlines are expected to remain profitable, although earnings will be modest.
IATA forecasts net profits of $100 million for African carriers in 2026, down from $300 million in 2025. Profit margins are expected to decline from 1.6 percent to 0.2 percent, while profit per passenger is projected to fall from $2.10 to just $0.40.
Despite weaker profitability, Africa is expected to record the fastest growth in air travel demand globally, with passenger traffic increasing by 10 percent in 2026. Airline capacity across the continent is forecast to expand by 7.7 percent.
Supply chain pressures persist
Beyond geopolitical instability, airlines continue to face significant supply-chain constraints.
IATA reported that the backlog of aircraft orders reached 18,100 aircraft by May 2026, compared with 17,000 in 2024. The figure now represents more than half of the world's operational commercial aircraft fleet, underscoring persistent manufacturing delays and delivery bottlenecks.
The association identified stagflation risks, geopolitical tensions, and constraints in airport and airspace infrastructure as the principal threats facing the global aviation industry in the coming years.
Travellers remain confident
Despite the industry's mounting challenges, consumer confidence in air travel remains remarkably strong.
An IATA survey covering 6,500 travellers across 15 countries found that 97 percent of respondents were satisfied with their most recent travel experience, while 91 percent said they consider air travel a safe mode of transportation.
The survey also showed that 41 percent of respondents plan to travel more frequently this year, suggesting demand remains resilient despite one of the industry's most challenging operating environments since the pandemic.
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