Airlines’ 2026 profit to drop by 50% over Middle East disruptions
The global airline industry’s profit outlook for 2026 has been cut in half as war-related disruptions in the Middle East and soaring fuel prices create one of the sector’s most challenging operating environments in recent years, according to the latest financial forecast released by the International Air Transport Association (IATA). Daily Trust reports that the […]
The global airline industry’s profit outlook for 2026 has been cut in half as war-related disruptions in the Middle East and soaring fuel prices create one of the sector’s most challenging operating environments in recent years, according to the latest financial forecast released by the International Air Transport Association (IATA).
Daily Trust reports that the Middle East crisis started in March and has disrupted global fuel supply especially with the closure of the Strait of Hormuz.
IATA now projected airlines worldwide to generate a combined net profit of $23 billion in 2026, significantly lower than the previously projected $41 billion and almost half the estimated $45 billion profit recorded in 2025.
The industry’s net profit margin is expected to fall to 2.0%, down from the earlier forecast of 3.9% and less than half the 4.2% achieved in 2025. Profit per passenger is also projected to decline dramatically to $4.50, compared with $9.10 last year, highlighting the narrow margins under which airlines continue to operate.
Operating profit is forecast to fall to $48 billion from $76.4 billion in 2025, while the industry’s operating margin is expected to decline to 4.1% from 7.2%.
Return on invested capital (ROIC) is projected at 4.3%, well below the estimated weighted average cost of capital of 8.5%, underscoring the industry’s long-standing struggle to generate returns that exceed financing costs.
Despite the sharp drop in profits, airline revenues are expected to continue growing.
Total industry revenue is forecast to reach a record $1.165 trillion in 2026, representing a 9.4% increase from $1.065 trillion in 2025.
Passenger ticket revenue is expected to rise to $839 billion, up from $768 billion last year, as airlines increase fares in an effort to recover some of the additional fuel expenses. Passenger yields are projected to increase by 7%, while global passenger demand measured in revenue passenger kilometres is expected to grow by 2.1%.
The number of passengers travelling by air is forecast to reach 5.1 billion, an increase of 2.4% compared with 2025. Airlines are also expected to set a new record load factor of 84%, meaning aircraft will operate fuller than at any previous point in aviation history.
…Fuel prices as biggest threat
The most significant pressure on airline finances is expected to come from fuel costs, which are forecast to surge by nearly 40%, reaching $350 billion in 2026 compared with $252 billion in 2025.
IATA estimates that average crude oil prices will rise to $95 per barrel during the year, up from $69 per barrel in 2025.
Jet fuel prices are expected to increase even more sharply, averaging $152 per barrel, compared with $90 per barrel a year earlier.
As a result, fuel’s share of total airline operating expenses is expected to rise from 25.4% in 2025 to 31.4% in 2026, making it by far the industry’s largest cost category.
Middle East carriers face greatest impact
The association representing over 370 airlines accounting for 85 per cent of global air traffic project that the financial damage is expected to be most severe for airlines operating in the Middle East, where the conflict has led to widespread operational uncertainty, airspace restrictions and disruptions to flight schedules.
IATA said airlines in the region are expected to collectively fall into losses during 2026, making the Middle East the only region projected to record a net loss. Gulf carriers, which serve as major global transit hubs linking Asia, Europe and Africa, have been particularly affected by airspace closures and route diversions since the outbreak of hostilities.
While carriers have managed to maintain connectivity and continue serving key international markets, the operational and financial consequences are expected to be substantial throughout the year.
All other regions are forecast to remain profitable, although earnings are expected to be considerably lower than previously projected due to higher costs and slower economic growth.
Despite record revenues, strong passenger demand and historically high aircraft occupancy rates, IATA warned that the industry remains financially fragile.
The projected decline in profit margins demonstrates how quickly external shocks can erode airline earnings. While airlines have improved operational efficiency and passed some costs on to consumers through higher fares, the sector continues to operate with limited financial buffers.
According to IATA Director General Willie Walsh, the sharp deterioration in profitability is primarily the result of conflict-related disruptions across the Middle East and a rapid escalation in fuel costs.
“War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse. Globally, airlines are expected to see profitability halve compared to 2025,” he said.