Global Airline Industry Halves Profit Outlook Due to Middle East Conflict

IATA’s latest financial outlook for the global airline industry shows 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.

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

The net profit margin is expected to be 2.0% in 2026, just 50% of the previously projected 3.9%. It is also less than half the 4.2% estimate for the 2025 net profit margin.

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

Global Air Cargo Demand Up 4% in April Despite Middle East Disruption

Return on invested capital (ROIC) is expected to be 4.3% (down from 6.6% in 2025 ). This is below the 8.5% 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 US$1.165 trillion in 2026 (up 9.4% on the $1.065 trillion in 2025 ).

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

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

Willie Walsh, IATA’s Director General said: “War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse. All airline bottom lines are suffering from the rapid 70% rise in jet fuel prices.

"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.”

Even in the best of times, the airline industry 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% globally.

Walsh added: “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 buffer should other costs or taxes start rising.”

Outlook drivers

Overall revenues are expected to grow 9.4% to $1.165 trillion. Revenue per available tonne kilometer (ATK) is expected to grow 8.8%.

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 40% year over 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% to $1.117 trillion, halving industry-wide net profitability to $23.0 billion in 2026.

Risks and Constraints

Supply chain challenges continue. Despite a gradual recovery in deliveries, supply conditions remain structurally constrained. Aircraft production is increasing but not at a sufficient pace to close the gap created during the pandemic.

Deliveries remain below pre-COVID peak levels and are therefore still unable to shrink the accumulated shortfall. At the same time, demand for new aircraft remains strong, with orders continuing to exceed deliveries. As a result, the backlog reached 18,100 in May 2026, up from 17,000 in 2024 - representing over 50% of the active fleet.

With insufficient infrastructure capacity available to meet demand, the war in the Middle East has become a particular concern for airport slot allocation rules.

Rules enabling flexibility to avoid penalising airlines are needed when airspace or airport closures/restrictions have limited the ability to use allocated airport slots.

Similarly, economic regulators must ensure that any reduction in demand due to the war and its impacts are met with efficiency gains instead of rate increases.

Read More: War-Driven Disruptions Send Air Freight Prices Soaring in March