Global aviation industry slashed its profit expectations for 2026 by nearly half last Sunday (June 7) due to the Iran conflict pushing up fuel costs and disrupting major air routes, worsening the already slim profits of the aviation industry. The International Air Transport Association (IATA), representing over 370 airlines worldwide accounting for around 85% of global air passenger traffic, stated in its annual report that the net profit of the aviation industry in 2026 is now expected to be only around $230 billion, far below the previous forecast of $410 billion and below 2025’s $450 billion.
This downward revision highlights that despite strong passenger demand for air travel and expected revenues exceeding $1.1 trillion, the actual profitability of the aviation industry is easily affected by geopolitical conflicts, fuel price fluctuations, and other factors.
Before the US-Iran conflict, Brent crude prices were around $70 per barrel. After the conflict, prices soared to $120 per barrel before settling around $90 per barrel now. Former CEO of British Airways and current IATA Director General Willie Walsh mentioned at the annual meeting in Rio de Janeiro, “The downward revision mainly has two factors: one is the significant increase in aviation fuel prices, far beyond expectations. The other is the disruption to the operations of airlines in the Persian Gulf region.”
Walsh warned that with rising fuel costs, some smaller airlines are expected to go bankrupt or be acquired by larger airlines between this year and next. US low-cost carrier Spirit Airlines filed for bankruptcy in May, becoming the first airline to collapse after the outbreak of the Iran conflict.
He also mentioned that airlines are expected to cut unprofitable routes to maintain profit margins, and the surge in ticket prices since the Iran conflict erupted is unlikely to see a quick decline in the short term. “Despite the demand remaining strong, with the reduction in capacity, ticket prices are likely to remain high.”
IATA’s survey showed that 86% of passengers “expect ticket prices to be linked to oil prices,” with around 49% of passengers “expecting to spend more on travel this year.”
The Middle East conflict has forced many airlines to alter routes to avoid restricted or closed airspace. This not only increases flight times and fuel consumption but also tightens the already strained capacity.
Walsh pointed out that most regions should still maintain profitability, although profit levels will decrease, but airlines in the Middle East region such as Emirates, Qatar Airways, and Etihad Airways are currently facing losses due to conflicts and weak demand.
IATA predicts that airlines’ fuel expenditures will surge from $252 billion in 2025 to around $350 billion this year, with fuel costs accounting for almost a third of their operating costs.
This situation is eroding the profitability of these airlines, and this year’s average profit margin is also expected to drop from 4.2% last year to about 2%, resulting in airlines making only around $4.5 in profit per passenger, nearly half of last year’s figure.
IATA also stated that despite the decreasing profit margin, driven by stable travel demand, higher ticket prices, and additional revenue growth from seat upgrades and in-flight services, the overall revenue of the aviation industry in 2026 is still expected to grow by 9.4% to approximately $1.16 trillion.
The aviation industry is not only facing the aforementioned pressures but also facing pressure from aircraft shortages. The average age of global aircraft has now exceeded 15 years, reaching a historic high, and the industry is currently facing a backlog of up to 18,000 new aircraft orders.
In response to this, Walsh mentioned that delivery delays from Boeing and Airbus are forcing airlines to extend the service life of older, less fuel-efficient aircraft, increasing airlines’ maintenance costs and weakening their efforts to improve profit margins.
IATA estimated that during the period until 2025, continuing to use older aircraft has caused airlines to spend around $11 billion more on fuel costs.
Walsh added, “Persistently high oil prices will only make the situation worse.” He urged these aircraft manufacturers, “to return to producing engines of exceptional performance and durability. Allowing these failures to continue into the next decade is completely unacceptable.”
(Reference: Reuters)