Airline Profits to Halve in 2026 as Fuel Costs Surge, IATA Warns

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Global airline profits are set to halve in 2026, falling to $23bn from $45bn a year earlier, as a near 70 percent jump in jet-fuel prices and Middle East conflict squeeze the industry, the trade body IATA warned at its annual meeting in Rio de Janeiro.

Why airline profits are set to halve

The International Air Transport Association now expects carriers worldwide to post a combined net profit of $23bn this year. That is down from the $45bn it estimates for 2025 and below an earlier forecast of $41bn.

IATA represents most of the world’s scheduled airlines, so its outlook is a closely watched gauge of the industry’s health. A near-halving of profit in a single year is a steep revision by its standards.

The net margin is projected to slip to 2 percent, down from just over 4 percent a year earlier. On a per-passenger basis, that leaves airlines with about $4 to $5 of profit on each traveller, roughly half of last year’s level.

Thin margins are nothing new in aviation, but this is a sharp step down. A buffer that slim leaves little room for any further shock to costs or demand.

Director General Willie Walsh framed the result as resilience under pressure. He noted that the per-passenger figure would not even buy a hot dog at most World Cup venues, and leaves almost no buffer if other costs rise.

The downgrade is notable because IATA had been more upbeat only months earlier. The reversal underlines how quickly a fuel spike can erase a year of careful planning across the industry.

The fuel and conflict squeeze

The single biggest pressure is fuel. Jet fuel is forecast to average $152 a barrel in 2026, nearly 70 percent higher than the $90 average of 2025.

That lifts the industry’s fuel bill to roughly $350bn, up about 40 percent, even though total fuel use barely changes. Fuel now accounts for around 31 percent of operating costs, up from 25 percent.

War-related disruption in the Middle East compounds the problem. IATA expects carriers in that region to fall into losses on weak demand, while airlines elsewhere stay profitable at reduced levels.

The conflict also reroutes flights and lengthens some journeys, adding fuel burn on top of the higher price. Insurance and overflight costs climb in step, widening the gap between regions.

Demand stays strong even as returns shrink

The squeeze is on profitability, not traffic. Revenue is still expected to set a record above one trillion dollars, up more than 9 percent, with passenger numbers rising to over five billion.

Airlines are forecast to fill a record 84 percent of seats and lift ticket revenue toward $840bn. The catch is that costs are rising faster than fares, so fuller planes do not translate into fatter margins.

Return on invested capital is seen at about four percent, still below the industry’s cost of capital. In plain terms, the sector is growing but not yet earning its keep for shareholders.

What it means for Latin America

Holding the meeting in Rio de Janeiro put the region in the spotlight, with LATAM Airlines Group as host. Latin American carriers have spent recent years modernising fleets and tightening costs after the pandemic.

A fuel shock of this size tests that discipline. Carriers that kept unit costs low and debt in check are better placed to absorb dearer fuel than rivals that leaned on state support.

LATAM, the region’s largest full-service group, has rebuilt its balance sheet since exiting bankruptcy and guided to healthy margins for 2026. Lower-cost operators such as Gol and Volaris face the same fuel maths with thinner cushions to fall back on.

For travellers and expats, the likely outcome is firmer fares rather than fewer flights, as airlines pass on part of the cost. For investors, the read-through is a sector with record demand but a shrinking financial cushion.

The region also leans heavily on long-haul links to North America and Europe, the routes most exposed to fuel prices. A sustained spike would test the route maths that carriers built around cheaper energy in recent years.

Hosting the gathering in Rio was also a statement of intent. It placed Brazilian and regional carriers at the centre of an industry conversation usually dominated by the larger markets of North America, Europe and the Gulf states.

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