Middle East Disruptions & High Fuel Prices Slash Airline Profitability in Half

As we frequently say in the travel industry – it’s always something. The International Air Transport Association (IATA) released its latest financial outlook for the global airline industry showing a halving of profitability as a result of war-related Middle East disruptions and high fuel prices. 

The regional landscape is highly differentiated. At the geographic centre of the Middle East war, airlines 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. 

Highlights include:

• Airlines are expected to achieve a combined total net profit of $23.0 billion in 2026, roughly half the previously projected $41 billion. It is also roughly half the $45 billion net profit estimate for 2025.
• The net profit margin is expected to be 2.0% in 2026, roughly half the previously projected 3.9%. It is also less than half the 4.2% estimate for the 2025 net profit margin. 
• Net profit per passenger transported is expected to be $4.50, half the $9.10 achieved in 2025. 
• Operating profit in 2026 is expected to be $48.0 billion (down from $76.4 billion in 2025) for a net operating margin of 4.1% (down from 7.2% in 2025).
• 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. IATA says the gap highlights the structural weakness of the airline industry where profitability shocks quickly erode capital efficiency.
• Total industry revenues are expected to reach $1.165 trillion in 2026 (up 9.4% on the $1.065 trillion in 2025).
• The 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.
• Passenger numbers are expected to reach 5.1 billion in 2026 (up 2.4% on 2025).
  

“War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse,” said Willie Walsh, IATA’s Director General.

“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. 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,” Walsh added.

IATA says carriers are taking most of the pain.“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,” said Walsh.