IATA expects sharp profit drop citing West Asia crisis led fuel price hikes

IATA has halved its 2026 airline profit forecast as soaring fuel costs and disruptions from the Iran conflict weigh heavily on the global aviation industry

The global airline industry will suffer a sharp profit drop this year, bringing in only about half the collective earnings previously predicted, as fuel costs and the war in Iran take their toll on air travel, the main aviation federation said.  

Airlines will bring in combined total net profit of $23 billion in 2026, compared with previously projected $41 billion and down from the $45 billion profit estimate for 2025, the International Air Transport Association said on Sunday.  

The dramatic reversal highlights how quickly the industry has been forced into retreat following the war in Iran that started in late February. The fallout has been particularly acute in the West Asia, previously the most profitable region for air travel and an industry growth driver, where carriers like Emirates and Qatar Airways have cut operations following weeks-long air-space closures. 

 

“War-related disruptions in the West Asia and rising fuel costs have shifted the outlook for airlines to the worse,” IATA Director General Willie Walsh said in a release. “Smaller carriers that started the year with weak balance sheets are certainly struggling.” 

Fuel costs, which make up one of the biggest single expenses for carriers, will rise by almost 40% to $350 billion in 2026, IATA estimates. 

While airlines have hedged about one third of their expected fuel consumption for 2026, they’ve slashed capacity and raised fares to protect margins, with deeper cuts to flying likely to happen after the peak summer period. 

At the same time, passenger numbers will rise 2.4% to 5.1 billion in 2026 and the aircraft load factor, a measure of occupancy, will reach 84%, up half a percentage point from last year, IATA predicted. But the growth in demand isn’t able to keep up with rising costs, with airlines earning just $4.50 per passenger this year, IATA said. 

Fuel costs aren’t the only issue holding back the industry. IATA said aircraft production is rising at an insufficient pace to meet growing demand for flying and more fuel-efficient airliners.  

The reversal of fortune is most acute in the West Asia. IATA predicts the region will fall to a $4.3 billion loss this year, down from a $7.2 billion profit in 2025. At the same time, the group said the region has the ability to rebound, given its structural advantages that include favorable taxes, secure access to fuel supply, and low financial leverage. 

In North America, budget carriers will be most exposed to the price swings because their lack of a premium product limits their ability to offset higher costs with higher fares, IATA said.  

Carriers in Europe, meanwhile, have benefited by filling in some capacity abandoned by West Asiaern airlines.  

At the same time, the region is buckling under high cost pressure, the fallout from strikes and stiff regulation, IATA said. 

“These factors suggest that Europe’s competitive position could weaken yet further, even once market conditions normalize,” the group said.