Middle East conflict, soaring fuel prices will slash global airline revenues, IATA warns

Global airlines are bracing for a sharp decline in profitability this year as rising tensions in the Middle East and soaring jet fuel prices erode airline industry revenues, according to new estimates released by the International Air Transport Association (IATA).

The industry body said worldwide airline profits were expected to fall to $23 billion in 2026, a sharp drop from the estimated $45 billion recorded in 2025 and well below previous expectations.

In its latest financial projections, IATA projected that while most regions will remain profitable, airlines will face much weaker profits, with airlines in the Middle East expected to be hit hardest by operational disruptions and weakening demand related to the ongoing conflict in the region.

Commenting on the revised outlook, IATA Director General Willie Walsh said the industry’s financial performance had deteriorated due to the combined impact of geopolitical instability and rising energy costs.

“War-related disruptions in the Middle East and rising fuel prices have changed the outlook for airlines for the worst. Globally, airlines are expected to see their profitability halve compared to 2025. Profits will shrink from $45 billion in 2025 to $23 billion this year.

“And margins will shrink from 4.2 percent to 2.0 percent. All airline profits are suffering from a 70 percent increase in jet fuel prices. Some of the additional costs can be mitigated by price adjustments and efficiency improvements, but this will not be enough to maintain profitability at previous year’s levels. Small airlines that started the year with weak balance sheets are certainly in trouble.”

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Walsh noted that the Middle East stands out as the only region expected to post losses, largely due to the severe operational challenges facing Gulf-based airlines.

“At the regional level, all countries are at a disadvantage, but their financial performance has declined sharply, except in the Middle East. Airlines in the Gulf region are facing operational uncertainty following the almost complete closure of airspace due to the outbreak of war. These airlines are doing an extraordinary job in maintaining connectivity, but a major financial impact cannot be avoided.

“Even in the best of times, the aviation industry as a whole still experiences low margins and profits below the cost of capital. The oil price shock has tested the financial resilience of airlines as net margins have shrunk to 2.0 percent globally.

“Airlines are bearing the brunt of the fuel price shock. Even though airfares are rising, airlines are still absorbing some of the increase. Net profit per passenger is expected to fall to $4.50, half of last year’s profit. In this environment, this shows resilience. But the airline won’t even buy you a hot dog at most FIFA World Cup venues, and doesn’t provide much of a buffer if other fees or taxes start to rise.”

The association’s forecasts show that industry-wide net profit margins will narrow to just 2.0 percent in 2026, compared with 4.2 percent achieved in 2025 and lower than the previous projection of 3.9 percent.

IATA also estimates that net profit generated per passenger will decline sharply from $9.10 last year to $4.50 in 2026, underscoring the growing pressure on airline revenues despite rising ticket prices.

Financial strains are expected to outpace net profits. Operating profits in the global aviation industry are projected to fall from $76.4 billion in 2025 to $48 billion in 2026, while operating margins are expected to shrink from 7.2 percent to 4.1 percent over the same period.

The report further revealed that return on invested capital will weaken to 4.3 percent in 2026, down from 6.6 percent in 2025, and still well below the industry’s weighted average cost of capital forecast of 8.5 percent.

According to IATA, the figures highlight persistent structural weaknesses in the aviation sector, where external shocks such as fuel price spikes, geopolitical conflicts and operational disruptions can quickly undermine long-term profitability and capital efficiency.

Despite continued passenger demand and efforts by airlines to improve efficiency, the association warned that the aviation industry will face a difficult year as airlines struggle to absorb rising costs while maintaining global connectivity.