Airlines' profits predicted to halve in 2026 due to fuel price hikes

Profits of global air carriers may halve in 2026, the International Air Transport Association (IATA) has warned. The key negative factor for the industry remains higher prices for jet fuel, which soared due to the oil shock amid the Iranian crisis.

The airline industry's net profit in 2026 could almost halve from $45 billion in 2025 to $23 billion, and net profitability could fall from 4.2% to 2%. This forecast is contained in the latest IATA report on the state of the industry.

Airline revenues have been hit hard by the sharp rise in the price of oil and jet fuel since the start of the conflict in the Middle East, explains Willy Walsh, head of the association. According to IATA, the average price of fuel rose 62.4% year-on-year in the week ended June 5. And by the end of the year, Walsh estimates the cost increase will be 70%. That would increase the industry's total fuel costs by another $100 billion, he predicts.

The escalation in the Gulf has exacerbated the crisis that airlines have been living through in recent years, from the Covid-19 pandemic to the military conflict in Ukraine, Walsh recalls.

According to him, demand for travel is still stable, but carriers are forced to raise ticket prices to compensate for rising costs. This will inevitably lead to a slowdown in industry growth, the IATA chief predicted. "The big question is how long passengers and shippers can tolerate higher transportation affordability costs," Walsh told CNBC.

U.S. carriers spent 56.4% more on jet fuel in March than in February, in the midst of the conflict in the Middle East, according to data from the U.S. Department of Transportation. In annual terms, airlines' spending rose by a third.

European low-cost carrier EasyJet in April reported a pre-tax loss of £552m for the first half of its financial year. It notes that the trend toward late bookings has made it harder to forecast sales. To hedge against further price increases, EasyJet has hedged 72% of its fuel for the summer season.

Germany's Lufthansa is also preparing for overpayments: the company expects fuel costs to rise by €1.7 billion this year. The Middle East conflict poses "enormous challenges" for the business, it warned.

Irish budget carrier Ryanair has fixed prices for 80% of the fuel it needs for the summer, but also admitted it has developed a plan in case of "armageddon" due to the fuel crisis. "If prices remain elevated for an extended period of time this summer, we think a number of our competitors in Europe will face real financial difficulties," Ryanair CEO Michael O'Leary told CNBC in April.

This article was AI-translated and verified by a human editor