War-Driven Fuel Shock Sends Airline Profits into a Nosedive
Global carriers face a sharp earnings decline with IATA slashing its 2026 net profit forecast from $41bn to $23bn, as Middle East turmoil disrupts routes and doubles jet fuel prices.
RIO DE JANEIRO – The global airline industry is bracing for a dramatic collapse in profitability this year, as the war in the Middle East triggers a fuel-price shock that rips through balance sheets. The International Air Transport Association (IATA) has nearly halved its 2026 net profit forecast for the world’s carriers, from an earlier projection of $41 billion to just $23 billion – a sharp drop from the $45 billion earned in 2025. The revision, announced at IATA’s annual meeting in Rio de Janeiro on Sunday, reflects the dual burden of surging jet fuel costs and widespread operational disruption. Even as passenger demand continues to recover – with 5.1 billion travellers expected, up 2.4% on last year – margins are being squeezed to wafer-thin levels, with the industry’s net margin forecast to slump from 4.2% to just 2%.
At the heart of the crisis lies the conflict involving the United States, Israel and Iran, which has destabilised the Gulf region and effectively closed the Strait of Hormuz – a critical chokepoint for oil shipments. The price of jet fuel has roughly doubled, and IATA now expects the sector’s fuel bill to hit $350 billion in 2026, a staggering $98 billion more than in 2025. Willie Walsh, the association’s director general, cautioned that while passenger demand remains robust, the industry is in “a very tight margin environment” and faces its steepest cost headwinds since the pandemic-era collapse. “I don’t see this as a crisis,” Walsh said, drawing a contrast with the Covid years, but he acknowledged that the sector’s resilience would be severely tested if elevated fuel prices persist.
The pain is not evenly distributed. Carriers in the Middle East – including those from the Gulf Cooperation Council states – are expected to slip into losses as regional demand weakens and airspace closures force costly detours. European and North American network carriers, such as British Airways, are moving to raise fares to pass on part of the burden; BA’s parent IAG says it aims to recover 60% of the increase through revenue and internal savings. In Latin America, the chief executive of LATAM Airlines, Roberto Alvo, warned that if high fuel costs stretch into 2027, the industry would be forced to make deeper capacity cuts, hitting airlines with weaker finances hardest. Meanwhile, some carriers see opportunity: Etihad Airways is using the turmoil to restore pre-war capacity and order dozens of wide-body aircraft, betting on a swift rebound.
Beyond the immediate financial hit, analysts say the war is reshaping the global aviation map. The blockade of the Strait of Hormuz and the rerouting of flights away from Iranian and Iraqi airspace are adding hours and costs to long-haul journeys, while weakening the Gulf hubs’ reputation as secure transit points. Richard Quest, CNN’s aviation expert, described the industry’s recurring cycle of crisis and recovery, noting that “the question is no longer about demand – it’s about cost, and whether passengers will keep absorbing higher fares.” Already, one carrier – Spirit Airlines in the United States – has filed for bankruptcy in 2026, and more failures could follow if fuel prices do not moderate. With net profit per passenger expected to halve to just $4.50, the industry is counting on geopolitical calm to avert an even deeper descent.
How the same story is told elsewhere.
In 2026, airline profits are set to fall by half from 2025 levels even as passenger numbers rise, as the Middle East conflict drives up jet fuel prices without choking off travel demand. IATA projects a net profit of $23 billion, down sharply from $45 billion, illustrating a stark disconnect between traffic volumes and financial returns.
The war in Iran and the de facto closure of the Strait of Hormuz are pushing airline fuel bills up by almost $100 billion, slashing global industry profits in half for 2026. The conflict, in which the US and Israel are direct participants, imposes crippling costs on civil aviation and sends oil-shock ripples through the world economy.
The US-Israeli military campaign against Iran, under a repeatedly violated ceasefire, is ravaging the Persian Gulf's economy and security, while the blockade of Hormuz is choking trade. Latin American airline chief executives warn of more capacity cuts if fuel costs remain high, exposing how a distant war inflicts serious harm on developing-world livelihoods.
Against the backdrop of the Middle East conflict, British Airways says it will raise fares to pass higher fuel costs on to passengers, with its parent company aiming to recover 60% of the extra expense. The Gulf press report frames the move as a routine business adjustment, reflecting a pragmatic, non-alarmist take on the war's economic consequences.
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