Abu dhabi: The International Air Transport Association (IATA) has announced a significant reduction in the profitability forecast for the global airline industry due to disruptions in the Middle East and escalating fuel prices. These factors have led to a dramatic halving of the industry's expected profits, with a stark contrast between different regions. While airlines in the Middle East are grappling with weak demand and operational challenges, airlines in other regions are still expected to remain profitable, albeit with reduced margins.
According to Emirates News Agency, the IATA's latest outlook predicts a combined net profit of $23.0 billion for 2026, a sharp decrease from the previously projected $41 billion. This figure is also significantly lower than the $45 billion net profit estimate for 2025. The net profit margin for 2026 is expected to be 2.0%, down from the previously anticipated 3.9% and a substantial drop from the 4.2% margin estimated for 2025.
The IATA report indicates that net profit per passenger will decrease to $4.50 in 2026, a significant drop from the $9.10 achieved in 2025. Operating profit is also expected to decline to $48.0 billion with a net operating margin of 4.1%, down from $76.4 billion and a 7.2% margin in 2025. Return on invested capital is projected at 4.3%, which is below the estimated weighted average cost of capital of 8.5%, underscoring the structural weaknesses in the airline industry.
Total industry revenues are projected to grow by 9.4% to reach $1.165 trillion in 2026, compared to $1.065 trillion in 2025. The passenger load factor is expected to reach record highs, with airlines filling 84.0% of seats throughout the year, a slight improvement from 83.5% in 2025. Passenger numbers are anticipated to rise to 5.1 billion, a 2.4% increase from 2025, while cargo volumes are expected to see a marginal 0.2% increase to 71.7 million tonnes.
Willie Walsh, IATA's Director General, emphasized the impact of the Middle East war and fuel price hikes on the industry's outlook, stating, "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% to 2.0%." The rise in jet fuel prices by 70% is a significant contributor to the shrinking margins, with smaller carriers particularly affected due to weaker balance sheets.
Despite a projected revenue growth of 9.4%, operating expenses are expected to grow by 13% to $1.117 trillion, which will halve the industry's net profitability to $23.0 billion in 2026. The global economic environment is expected to present further challenges, with GDP growth projected to slow to 2.5%, inflation rising to 5.0%, and world trade growth falling to 1.9% in 2026.
Fuel costs are anticipated to rise dramatically, with the average price of crude oil expected to reach $95/barrel, a 37% increase from 2025. Jet fuel prices are predicted to average $152/barrel, almost 70% higher than in 2025. The crack spread, or the premium for jet fuel over Brent crude oil, is expected to reach an historic high of $57/barrel.