The war in Iran has caused airlines around the world to cut their profit forecasts for 2026
The global airline industry has significantly reduced its 2026 profit forecast, attributing this change to the ongoing conflict in the Middle East, which has led to increased fuel costs, disrupted essential air corridors, and highlighted the vulnerability of a sector that operates on narrow margins.
The International Air Transport Association, representing over 370 airlines that account for approximately 85% of global air traffic, stated in its annual report that it now anticipates the industry will achieve a combined net profit of $23 billion in 2026. This figure is significantly lower than an earlier projection of around $41 billion and a decrease from $45 billion in 2025.
The downgrade highlights the airlines’ vulnerability to geopolitical shocks and fluctuations in fuel prices. Despite these setbacks, passenger demand continues to be strong, with planes operating at full capacity and revenues projected to exceed $1.1 trillion.
There are two major factors: one is the significant increase in jet fuel prices, which has risen much higher than anticipated, and then the disruption to the airlines in the Gulf region. This combination has led us to reduce the forecast,” IATA Director General Willie Walsh told Reuters at the group’s annual meeting in Rio de Janeiro.
Walsh expressed his anticipation that several smaller airlines may face bankruptcy or be acquired by larger carriers in the upcoming year due to the impact of rising fuel costs. Last month, Spirit Airlines, a low-cost carrier in the U.S., ceased operations, marking the first airline affected by the Iran war.
Airlines are anticipated to eliminate unprofitable routes to safeguard their margins, and fares, which have risen significantly since the onset of the Iran war, are not expected to decrease in the near future, according to Walsh. “In a scenario where demand stays strong, but capacity decreases, it is probable that fares will continue to be high,” Walsh stated.
Fuel cost shock eliminates increased revenues.
The conflict in the Middle East, ignited by U.S. and Israeli airstrikes on Iran, has compelled airlines to alter flight paths to avoid closed or restricted airspace. This has resulted in extended travel times, heightened fuel consumption, and further pressure on already limited capacity.
Simultaneously, oil prices have risen significantly due to concerns over supply disruptions, leading to a sharp increase in jet fuel prices and an expansion of refinery margins, which has resulted in airlines confronting a substantial rise in their primary expense.
Gulf airlines like Emirates, Qatar Airways, and Etihad Airways are experiencing significant operational uncertainty following a near-total shutdown of regional airspace at the onset of the conflict.
Walsh indicated that while most regions are expected to maintain profitability, it will be at reduced levels. In contrast, airlines in the Middle East are anticipated to experience losses due to the ongoing conflict and diminished demand.
IATA anticipates that airlines’ fuel expenses will rise to approximately $350 billion this year, up from around $252 billion in 2025, with fuel representing nearly one-third of operating costs.
Profitability per passenger is declining, with airlines now anticipated to earn approximately $4.50 per passenger, which is about half of last year’s figure.
IATA predicts a 9.4% increase in industry revenues this year, reaching approximately $1.16 trillion, driven by steady travel demand, higher fares, and increased income from additional services like seat upgrades and onboard offerings.
Aircraft shortages are putting pressure on the sector. Delivery delays at Boeing and Airbus are compelling airlines to retain older, less fuel-efficient aircraft in operation for extended periods, which is increasing maintenance costs and hindering efforts to enhance profit margins, Walsh stated.
