The global airline industry’s net earnings are set to almost halve during 2026 due to the massive spike in jet fuel prices since the start of the Iran war, according to the latest financial outlook from the International Air Transport Association (IATA).
The airline association is now forecasting that jet fuel prices will average $152 per barrel in 2026, which would be a 70 per cent rise on 2025’s average price of $90 per barrel. These higher costs will add an extra $100 billion to the sector’s fuel bill this year.
Even though airlines have raised fares to partially offset the rise in fuel costs, IATA is now forecasting a total net profit for the sector of $23 billion in 2026 — down from its previous predicted earnings of $41 billion and nearly half of the $45 billion net profit achieved in 2025. Net profit margin is also set to drop from 4.2 per cent in 2025 to just 2 per cent this year.
Willie Walsh, IATA’s outgoing director general, said the industry was again facing “challenging and unpredictable times”, during his speech at the association’s annual general meeting in Rio de Janeiro on Sunday (7 June).
“No sooner did we put Covid behind us than we faced aerospace supply chain failures, war in Ukraine, geopolitical tensions, and tectonic shifts in trade policies,” said Walsh. “And, when war broke out in the Middle East, oil prices jumped, and jet fuel prices skyrocketed.
“The positive however, is that demand is holding up, even as airlines are raising fares and rates to cope. But growth will inevitably be slower: 2.1 per cent for the passenger business and 0.7 per cent for cargo [compared with 2025].”
Despite rising fares, passenger numbers are still expected to reach 5.1 billion in 2026, which would be a 2.4 per cent increase on 2025. While load factors are also expected to rise by 0.5 percentage points year-on-year to reach 84 per cent of seats. The sector’s revenue is forecast to reach $1.16 trillion in 2026, which would be 9.4 per cent rise on last year.
“Some of the additional cost is being recuperated by adjusting prices and improving efficiency, but it will not be sufficient to maintain profitability at the previous year’s level. Smaller carriers that started the year with weak balance sheets are certainly struggling,” added Walsh.
European carriers face 'cost pressure'
IATA’s report said that European airlines were “facing significant cost pressure” due to higher fuel prices, although this is being partly mitigated by pre-crisis hedging by airlines at an average of 70 per cent of their summer 2026 fuel requirements. But IATA added that “higher costs will feed through as hedges roll off”.
European airlines have benefited from “some traffic gains” by adding direct flights between Europe and Asia, following the reduction in services through the Middle Eastern hubs, added IATA. Although, airports body ACI Europe last week reported a decline in total European air traffic during April.
IATA also took aim at “onerous” regulations impacting airlines in Europe, including EU and UK mandates on the use of alternative aviation fuels, as well as “elevated” airport and air navigation changes.
Walsh criticised Europe’s governments for going ahead with mandates while failing to incentivise the production of what the industry calls “sustainable” aviation fuel (SAF).
“Sadly, most governments put the horse before the cart with mandates — these pushed prices up but did not create supply,” added Walsh.
“Seemingly oblivious to these developments, governments, through ICAO (International Civil Aviation Organization), set a 5 per cent emission reduction target through SAF by 2030. To be blunt, there is no path to meet that outcome. There is still hope for [reaching net zero on emissions by] 2050 — but that’s fading fast.”
IATA’s latest forecast predicts a net profit of $9.6 billion for European airlines this year, down from $13 billion in 2025, with net profit margin likely to fall from 4.5 per cent to 3.1 per cent over the same period.
Passenger demand for European carriers in 2026, as measured by revenue passenger kilometres (RPKs), is set to rise by 2.8 per cent year-on-year, with capacity increasing by 1.3 per cent. This is significantly below last year’s rise in demand of 5.3 per cent and capacity increase of 5.2 per cent.