Global airline profitability is expected to fall sharply in 2026 as rising jet fuel prices and war-related disruptions in the Middle East put renewed pressure on carrier balance sheets, according to the latest financial outlook from the International Air Transport Association (IATA).
IATA now expects airlines to generate a combined net profit of $23 billion in 2026, roughly half the $45 billion estimated for 2025. The industry’s net profit margin is forecast to fall to 2%, down from 4.2% in 2025, leaving airlines with a much smaller financial buffer despite continued passenger demand.
According to IATA Outlook, the biggest pressure point is fuel. Airline fuel costs are forecast to rise from $252 billion in 2025 to $350 billion in 2026, an increase of nearly 40%. Jet fuel prices are expected to average $152 per barrel, almost 70% higher than the previous year.
As a result, fuel is expected to account for 31.4% of airline operating expenses in 2026, compared with 25.4% in 2025. This means airlines will spend significantly more to operate the same level of fuel consumption, with IATA forecasting total fuel use to remain broadly unchanged at 104 billion gallons.
The fuel shock is expected to hit airline margins even as carriers raise fares, increase ancillary revenues, and improve load factors. Passenger ticket revenues are forecast to rise to $839 billion in 2026, supported by higher yields, while airlines are expected to fill a record 84% of seats. However, revenue growth is not expected to keep pace with the increase in operating costs.
“Airlines are bearing the brunt of the fuel price shock. While air fares are rising, airlines are still absorbing part of the hike in their bottom lines. Net profit per passenger is expected to fall to half of what it was last year. Under the circumstances, that shows resilience. But it won’t even buy you a hot dog at most of the FIFA World Cup venues, and it does not leave much of a buffer should other costs or taxes start rising,” Willie Walsh, IATA’s Director General, said.
The pressure is expected to be especially difficult for smaller airlines and carriers with weaker balance sheets. While larger network airlines may have more tools to offset higher fuel prices through premium aircraft cabins, fare segmentation, and stronger international networks, smaller operators and low-cost carriers have much fewer options. They are more exposed to price-sensitive demand and may struggle to pass higher costs on to passengers without weakening flight bookings.
IATA expects Middle Eastern airlines to be hit hardest in 2026. The region is forecast to move from a combined $7.2 billion net profit in 2025 to a $4.3 billion net loss in 2026, marking an $11.5 billion fall year-on-year. The region’s net margin is expected to fall from 9.4% in 2025 to -6.1% in 2026. Profit per passenger is also expected to drop sharply, from $31.50 per passenger in 2025 to a loss of $21.40 per passenger in 2026.
The downturn reflects both weaker traffic and higher costs. IATA projects the Middle East airline demand, measured in revenue passenger kilometers, to fall by 11.4% in 2026, compared with 6.8% growth in 2025. Capacity, measured in available seat kilometers, is forecast to decline by 4.4%, after growing 5.9% in 2025.
Overall global industry revenues are expected to reach $1.165 trillion in 2026, but operating expenses are forecast to grow even faster. This means 2026 is likely to be a year of weaker profitability, higher fares, tighter margins, and increased financial pressure on airlines.