The International Air Transport Association (IATA) released its latest financial outlook for the global airline industry showing a halving of profitability as a result of war-related Middle East disruptions and high fuel prices.

The regional landscape, however, is highly differentiated. At the geographic center of the Middle East war, airlines in the Middle East are expected to collectively fall into the red with weak demand and operational disruptions. All other regions are expected to deliver profits, but at reduced levels from previous projections. Highlights include:

Airlines are expected to achieve a combined total net profit of $23.0 billion in 2026, which is roughly half the previously projected $41 billion. It is also roughly half the $45 billion net profit estimate for 2025.

The net profit margin is expected to be 2.0 percent in 2026, roughly half the previously projected 3.9 percent. It is also less than half the 4.2 percent estimate for the 2025 net profit margin.

Net profit per passenger transported is expected to be $4.50, half the $9.10 achieved in 2025.

Operating profit in 2026 is expected to be $48.0 billion (down from $76.4 billion in 2025) for a net operating margin of 4.1 percent (down from 7.2 percent in 2025).

Return on invested capital (ROIC) is expected to be 4.3 percent (down from 6.6 percent in 2025). This is below the 8.5 percent estimated weighted average cost of capital. The gap highlights again the structural weakness of the airline industry where profitability shocks quickly erode capital efficiency.

Total industry revenues are expected to reach $1.165 trillion in 2026 (up 9.4 percent on the $1.065 trillion in 2025).

The passenger load factor is forecast to continue to set record highs with airlines expected to fill 84.0 percent of all seats over the year. That is an improvement on 83.5 percent in 2025.

Passenger numbers are expected to reach 5.1 billion in 2026 (up 2.4 percent on 2025).

Cargo volumes are expected to reach 71.7 million tonnes in 2026 (up 0.2 percent on 2025).

“War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse. Globally, airlines are expected to see profitability halve compared to 2025. Profits will shrink from $45 billion in 2025 to $23 billion this year. And margins will shrink from 4.2 percent to 2.0 percent. All airline bottom lines are suffering from the rapid 70 percent rise in jet fuel prices.

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“Some of the additional cost is being recuperated by adjusting prices and improving efficiency, but it will not be sufficient to maintain profitability at the previous year’s level. Smaller carriers that started the year with weak balance sheets are certainly struggling.

“At the regional level, all are in the black but with sharply reduced financial performance, with the exception of the Middle East. The Gulf carriers face operational uncertainty following a near complete shutdown of airspace at the outbreak of the war. These carriers are doing an amazing job maintaining connectivity, but major financial impacts are unavoidable,” said Willie Walsh, IATA’s Director General.

Even in the best of times, the airline industry as a whole suffers from low margins and returns below the cost of capital. The oil price shock has tested airline financial resilience as net margins have been squeezed to 2.0 percent globally.

“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 $4.50, 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,” said Walsh.

Outlook drivers

Overall revenues are expected to grow by 9.4 percent to $1.165 trillion. Revenue per available tonne kilometer (ATK) is expected to grow by 8.8 percent. Outside of the extraordinary period of the COVID recovery, an increase of this magnitude only occurred recently in 2008, when the jet fuel price rose by 40 percent year-on-year, and in 2010, following the 2009 global financial crisis and subsequent jump in the price of jet fuel.

Despite significant improvements, revenue growth is expected to lag operating expense growth of 13 percent to $1.117 trillion, halving industry-wide net profitability to $23.0 billion in 2026.

Revenue

Passenger ticket revenues are expected to reach $839 billion in 2026 (+9.2 percent on $768 billion in 2025). Considering this outpaces expected demand growth of 2.1 percent (measured in RPK or revenue passenger kilometers), air fares are rising in efforts to recoup some of the costs of the oil price shock. Passenger ticket yields are expected to grow by seven percent and load factors are expected to set a new record high of 84.0 percent.

Ancillary and other revenues are projected to rise by 12.6 percent, reaching $165 billion. Rapid growth of ancillary revenue is largely reflecting airline strategies to maximize customer revenues in the face of the oil price shock. For the first time since 2019, ancillary revenues will be a larger revenue contributor than air cargo.

Cargo revenue is forecast to reach $162 billion in 2026 (up 7.2 percent on $151 billion in 2025). With cargo growth measured in cargo tonne kilometers (CTK) expected to expand by just 0.7 percent in 2026 (and just 0.2 percent in terms of actual cargo uplifted), revenue growth is primarily driven by airlines recouping the higher costs from the fuel price shock. Cargo yields are expected to grow by 6.5 percent in 2026 (after three consecutive years of decline).

Costs

Fuel costs are expected to rise by nearly 40 percent from $252 billion in 2025 to $350 billion in 2026. This is based on an expected average price of crude oil at $95/barrel (Brent) for the year (up 37 percent from $69 in 2025). Jet fuel prices are expected to average $152/barrel for the year (up almost 70 percent on $90 in 2025). The crack spread (premium for jet fuel over Brent crude oil) is expected to average $57/barrel, an historic high.

Globally, airlines have hedged roughly one third of their expected fuel consumption for 2026, which helps smooth short-term cost volatility but does not eliminate exposure to sustained price increases.

Furthermore, many airlines hedge against movement in crude oil prices, as this market is more liquid, which leaves them exposed to increases in the crack spread.

Ifeoma Okeke-Korieocha is the Aviation Correspondent at BusinessDay Media Limited, publishers of BusinessDay Newspapers. She is also the Deputy Editor, BusinessDay Weekender Magazine, the Saturday Weekend edition of BusinessDay. She holds a BSC in Mass Communication from the prestigious University of Nigeria, Nsukka and a Masters degree in Marketing at the University of Lagos. As the lead writer on the aviation desk, Ifeoma is responsible and in charge of the three weekly aviation and travel pages in BusinessDay and BDSunday. She also overseas and edits all pages of BusinessDay Saturday Weekender. She has written various investigative, features and news stories in aviation and business related issues and has been severally nominated for award in the category of Aviation Writer of the Year by the Nigeria Media Nite-Out awards; one of the Nigeria’s most prestigious media awards ceremonies. Ifeoma is a one-time winner of the prestigious Nigeria Media Merit Award under the 'Aviation Writer of the Year' Category. She is the 2025 Eloy Award winner under the Print Media Journalist category. She has undergone several journalism trainings by various prestigious organisations. Ifeoma is also a fellow of the Female Reporters Leadership Fellowship of the Wole Soyinka Centre for Investigative Journalism.

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