RIO DE JANEIRO: The global airline industry nearly halved its 2026 profit forecast on Sunday (Jun 7), citing conflict in the Middle East that has driven up fuel costs, disrupted key air corridors and exposed the fragility of a sector operating on thin margins.
The International Air Transport Association, which represents more than 370 airlines accounting for about 85 percent of global air traffic, said in its annual report that it now expects the industry to post a combined net profit of US$23 billion in 2026, well below a previous projection of about US$41 billion and down from US$45 billion in 2025.
The downgrade underscores airlines‘ exposure to geopolitical shocks and fuel volatility, even as passenger demand remains resilient, planes are flying fuller and revenues are set to rise to more than US$1.1 trillion.
“There are two major factors: one is the significant increase in jet fuel prices, which has gone way higher than I think anybody would have expected, and then the disruption to the airlines in the Gulf region, so that combination has led us to reduce the forecast,” IATA Director General Willie Walsh told Reuters at the group’s annual meeting in Rio de Janeiro.
Walsh said he expects some smaller airlines to go bankrupt or be taken over by bigger carriers this year and next as higher fuel costs bite. US low-cost carrier Spirit Airlines shut down last month, the first airline casualty of the Iran war.
Airlines are also expected to cut unprofitable routes to protect margins, while fares, which have surged since the start of the Iran war, are unlikely to fall soon, Walsh said.
“In an environment where demand remains pretty robust, but capacity comes down, that will likely lead to a situation where fares will remain elevated,” Walsh said.