Airline profits expected to halve in 2026 due to 70% increase in jet fuel prices: IATA

RIO DE JANEIRO – Airline profits are predicted to take a hit in 2026 with a 70 per cent increase in jet fuel prices resulting from the war in the Middle East, said the International Air Transport Association (IATA).

The combined net profit of airlines is expected to drop from the estimated US$45 billion (S$58 billion) recorded in 2025 to US$23 billion in 2026.

Providing a mid-year industry outlook on the second day of the association’s annual general meeting on June 7, IATA’s director-general Willie Walsh said all airline profits are “suffering” from the rapid 70 per cent rise in jet fuel prices.

“It is a tough year for all airlines, but especially for those whose balance sheets have not yet recovered from Covid-19,” Walsh said at the meeting in Rio de Janeiro, Brazil.

He noted that some of the additional cost is being recovered by adjusting prices and improving efficiency, but it will not be enough to maintain profitability at the previous year’s level.

Closer to home, in the Asia-Pacific, the net profit for airlines is forecast to decline from an estimated US$9.8 billion in 2025 to US$6.6 billion in 2026.

This is because the region relies heavily on crude oil imports from the Middle East, said IATA, and the lack of fuel can put greater pressure on refineries, creating aviation fuel shortages and higher jet fuel prices than in other regions.

This has already prompted carriers to adjust capacity on certain routes, in addition to taking longer flight paths due to airspace restrictions – all of which lead to increased fuel burn, tighter effective capacity and higher costs.

The Straits Times previously reported that 11 of 20 carriers that made the largest cuts to their flight schedules in May were based in Asia. These included Vietnamese low-cost carrier VietJet, Garuda Indonesia, Malaysia Airlines, and China’s Sichuan Airlines and Xiamen Airlines.

IATA, nevertheless, flagged that some Asia-Pacific carriers continue to see growing passenger traffic with the rerouting of traffic flows arising from the Iran war, particularly on routes connecting Europe and Asia.

In March, following flight cancellations on routes to and from the Middle East, airlines launched about 90 additional flights between Singapore and cities such as Frankfurt, London, Munich, Muscat, Paris, Perth and Sydney.

Singapore Airlines and its low-cost subsidiary Scoot carried a total of 3.8 million passengers that month – the highest recorded in a month by the group.

Walsh noted that all regions, except the Middle East, are delivering profits, but at “sharply reduced” levels. Meanwhile, Gulf carriers face operational uncertainty after a near-complete shutdown of the airspace, he added.

In the Asia-Pacific, the net profit per passenger transported is forecast to dip from an estimated US$5.30 in 2025 to US$3.40 in 2026, while this figure from the average global passenger is set to be halved from US$9.10 in 2025 to US$4.50 in 2026, IATA figures showed.

“Under the circumstances, that shows resilience,” said Walsh, who will leave the global airline body at the end of July to helm Indian airline IndiGo.

“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.”

The net profit margin for the industry globally is expected to be 2 per cent in 2026, less than half of the estimated 4.2 per cent for 2025.

Airlines, said Walsh, are “bearing the brunt of the fuel price shock” by absorbing part of the hike in their bottom lines.

IATA noted that airlines worldwide are also experiencing higher costs due to the shortage of new aircraft, which has resulted in record aircraft-leasing rates and higher maintenance costs for older fleets. Walsh said the aerospace supply chain has been failing to deliver aircraft and engines as promised, with the aircraft order backlog standing at over 18,000 aircraft. This has resulted in the average fleet age reaching a record of 15.2 years.

Airlines also have to bear the cost of compliance with the Carbon Offsetting and Reduction Scheme for International Aviation, better known as CORSIA. This is projected to be between US$1.2 and US$1.6 billion for the offsetting of carbon emissions.

Other constraints include supply chain challenges, which are delaying the delivery of new aircraft, as well as stagflation, a combination of slow growth and high inflation that potentially reduces the ability of travellers to pay higher fares for prolonged periods, noted the association.

But the passenger load factor, or the number of sold seats on planes, is forecast to continue setting records, with airlines expected to fill 84 per cent of all seats throughout the year, up from 83.5 per cent in 2025.

Based on a public opinion poll of 6,500 respondents across 15 countries done by IATA in April, 41 per cent of those surveyed said they planned to travel more in the coming 12 months than in the previous 12 months, while 52 per cent said they had plans to travel at the same level.

IATA said passenger ticket revenues in 2026 are expected to outpace those recorded in 2025, reaching US$839 billion in 2026 – a 9.2 per cent increase from US$768 billion in 2025.

IATA’s annual general meeting runs until June 8. The next edition will take place in Xiamen, China, from May 30 to June 1, 2027.