War-related Middle East disruptions and high fuel prices are the key reasons behind the International Air Transport Association's decision to nearly halve its global airline profitability outlook for 2026, the association announced Sunday at its annual general meeting in Rio de Janeiro, Brazil.
IATA now projects airlines to report a total net profit of $23 billion in 2026, down from the previously projected $41 billion and about half of the $45 billion the association projects they realized in 2025.
"All airline bottom lines are suffering from the rapid 70 percent rise in jet fuel prices," IATA outgoing director general Willie Walsh said in a statement. "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."
IATA Projection Metrics
The new profit projection is based on estimated 2026 revenue growth of 9.4 percent year over year to nearly $1.2 trillion but a 13 percent increase in expenses to more than $1.1 trillion. That would set net profit margins at 2 percent, down from the prior 3.9 percent forecast. That works out to approximately $4.50 per departing passenger, half the $9.10 estimate for 2025, according to IATA.
"Under the circumstances, that shows resilience," Walsh added. "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."
Fuel costs in 2026 are projected to increase by nearly 40 percent year over year to $350 billion, based on a forecast of average Brent crude oil at $95 per barrel, up from $69 in 2025. Jet fuel prices are projected to average $152 per barrel, an increase from $90 in 2025. IATA anticipates non-fuel costs will increase 4 percent to $767 billion, of which labor is the largest component.
Passenger load factor is forecast to "continue to set record highs" at 84 percent for 2026, up from 83.5 percent in 2025, while passenger volume is projected to reach 5.1 billion, up 2.4 percent year over year.
Macroeconomic factors affecting the industry are expected to deteriorate in 2026, with gross domestic product growth reducing to 2.5 percent from 3.4 percent in 2025, inflation rising to 5 percent from 4.1 percent, and world trade growth falling to 1.9 percent from 4.6 percent, according to IATA.
Passenger ticket revenue in 2026 is projected to reach $839 billion, an increase of 9.2 percent year over year. "Considering this outpaces expected demand growth of 2.1 percent, measured in revenue per kilometer, air fares are rising in efforts to recoup some of the costs of the oil price shock," IATA noted.
Ancillary and other revenue types are expected to increase 12.6 percent year over year to $165 billion. "For the first time since 2019, ancillary revenues will be a larger revenue contributor than air cargo," according to IATA, which projects cargo revenue to be $162 billion.
Additional factors IATA considers relevant for airline industry results include continued supply chain challenges, election-related uncertainty, stagflation and infrastructure constraints.
Regional Highlights
North America: IATA forecasts 2026 net profit for the region of $9.4 billion, down from the estimate of $12.4 billion in 2025, while net margins are expected to shrink to 2.5 percent from 3.5 percent. Profit per passenger is projected to be $8.10 compared with $10.80 in 2025. Demand is forecast to increase 0.8 percent year over year as capacity is expected to grow 0.3 percent.
As North American carriers largely move away from fuel hedging, "immediate pricing responses" are used to cover rising costs, according to IATA. Network carriers are in a better position than low-cost carriers to withstand market softness as the latter lacks more "meaningful" premium offerings, limiting their ability to offset cost pressures through upselling and fare segmentation. But the region has had strong profitability in recent years and is relatively isolated from operational shocks in the Middle East.
Europe: IATA forecasts 2026 net profit for European carriers at $9.6 billion, down from $13 billion estimated for 2025, with 2026 net margins of 3.1 percent compared with 4.5 percent a year prior. Profit per passenger is expected to decline to $7.50 from $10.30. Demand is forecast to increase 2.8 percent year over year with capacity poised to increase 1.3 percent.
RELATED: BTN Europe's coverage of IATA's European carrier forecast
Asia-Pacific: The forecast for Asia-Pacific carriers sets net profit for 2026 at $6.6 billion, down from $9.8 billion a year prior, with net margins of 2.1 percent in 2026 compared with 3.5 percent in 2025. Profit per passenger is expected to decline to $3.40 from $5.30. Air demand is projected to increase 5.1 percent year over year, with capacity set to increase 3.6 percent for the period.
The region relies heavily on crude oil imports from the Gulf, according to IATA, which disproportionately can cause more acute pressures on refineries and create jet fuel shortages as well as higher jet fuel prices. Disruptions at Middle East hubs, however, have led to some Asia-Pacific carriers benefitting from shifting traffic flows linked to the Middle East conflict, particularly on Europe-Asia routes.
Middle East: IATA forecasts a 2026 net loss of $4.3 billion compared with an estimated profit of $7.2 billion in 2025. Net margins are expected to be negative 6.1 percent for 2026 compared with 9.4 percent in 2025. This region's carriers are projected to have a loss of $21.40 per passenger compared with a per-passenger profit of $31.50 a year prior. Demand is forecast to decline 11.4 percent year over year with capacity shrinking 4.4 percent for the period.
The loss of transfer traffic is "weighing on load factors and raising unit costs," according to IATA. Some structural features support resilience for the region, including a favorable tax environment, relatively secure access to fuel supply and comparatively low financial leverage. Recovery for the Middle East is likely to be driven by pricing more than by a rapid return of volume.
Africa: Although the region is seeing "the strongest growth in traffic as it re-routes to avoid the Middle East," profitability is expected to weaken because of cost-side vulnerabilities, particularly fuel. IATA forecasts a 2026 net profit of $100 million compared with $300 million estimated for 2025, with net margins of 0.2 percent versus 1.6 percent a year prior. Profit per passenger is expected to drop to $0.40 from $2.10. Demand is expected to increase 10 percent year over year, with capacity projected to increase 7.7 percent.
Latin America: "Downward pressure" on several of the region's currencies resulting from the energy crisis will influence its performance this year. IATA forecasts 2026 net profit of $1.2 billion, down from an estimate of $1.9 billion for 2025, with net margins of 2.1 percent versus 3.8 percent a year prior. Profit per passenger is expected to decline to $3.50 from $5.90. Demand is forecast to increase 5 percent year over year, with capacity gaining 3.3 percent.
"Demand conditions in Latin America remain more sensitive than in other regions, reflecting lower income levels and a lower share of business travel in total demand for air transport," according to IATA.
RELATED: IATA Predicts 2026 Profit Increase for Global Air Industry