The worldwide airline industry dramatically cut its 2026 earnings outlook on Sunday, reducing projections by nearly half as Middle East tensions drive up jet fuel prices and force costly route changes around restricted airspace.
The International Air Transport Association, representing over 370 carriers that handle roughly 85% of worldwide air travel, announced in its yearly assessment that industry-wide net earnings are now projected at $23 billion for 2026. This marks a significant drop from earlier estimates of approximately $41 billion and falls short of 2025’s anticipated $45 billion.
The revised projections highlight how vulnerable airlines remain to international tensions and fluctuating fuel prices, despite strong passenger numbers, packed flights, and revenues climbing above $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 organization’s yearly conference in Rio de Janeiro.
Walsh predicted that some smaller carriers will face bankruptcy or acquisition by larger airlines this year and next as elevated fuel expenses take their toll. U.S. budget airline Spirit Airlines ceased operations last month, becoming the first carrier casualty of the Iran war.
Carriers are also anticipated to eliminate money-losing routes to safeguard profit margins, while ticket prices that have jumped since the Iran conflict began are expected to stay high, Walsh noted.
“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.
The Middle East crisis, sparked by U.S. and Israeli military strikes on Iran, has compelled airlines to redirect flights around closed or limited airspace, extending flight times, boosting fuel consumption, and putting pressure on already limited aircraft availability.
Simultaneously, crude oil prices have jumped on concerns about supply interruptions, driving jet fuel costs sharply upward and expanding refinery profit margins, creating a substantial increase in airlines’ biggest expense.
Middle Eastern carriers including Emirates, Qatar Airways and Etihad Airways are experiencing the most significant operational challenges following an almost total closure of regional airspace when the conflict started.
Walsh indicated that most global regions should maintain profitability, albeit at reduced levels, while Middle Eastern airlines will likely record losses due to the crisis and decreased travel demand.
IATA projects airlines’ fuel expenses will jump to approximately $350 billion this year from about $252 billion in 2025, with fuel representing nearly one-third of operational expenses.
This development is reducing earnings per traveler, with carriers now anticipated to generate roughly $4.50 per passenger, about half of last year’s amount.
On a positive note, IATA forecasts industry revenues will climb 9.4% to around $1.16 trillion this year, supported by consistent travel demand, increased ticket prices, and growing income from additional services like seat upgrades and onboard amenities.
Aircraft supply shortages are also pressuring the industry. Production delays at Boeing and Airbus are compelling airlines to operate older, less efficient aircraft longer, increasing maintenance expenses and hampering efforts to boost profit margins, Walsh explained.
