Despite carrying a record number of passengers and strong revenue, airline net profits worldwide are expected to fall to $23 billion, which is roughly half of the estimated $45 billion registered in 2025. Before the beginning of the war in Iran, global profits for 2026 were forecast to be $41 billion.
Airlines are forecast to carry 5.1 billion passengers this year, compared to 4.98 billion in 2025, which represents a year-on-year increase of 2.4%. Industry revenues are expected to reach $1.16 trillion this year.
The war in Iran and the closing of the Strait of Hormuz has pushed up the price of gasoline, diesel, petroleum-derived products, and jet fuel. When the price of jet fuel rises, airline profits go down. Jet fuel, which has risen in price by about 78%-to-94% this year, now costs $4.11 per gallon in the US.
According to IATA (International Air Transport Association), globally, fuel accounts for more than 31% of the operating expenses of airlines, compared to 26.8% in 2025. Some think tanks predict that jet fuel will reach 40% of operating expenses this year. Jet fuel is forecast to average $152 per barrel in 2026.
According to IATA stated:
“Airlines remain profitable in aggregate, but margins are under severe pressure from the fuel cost shock and limited scope for further efficiency gains.”
“Industry revenue is projected to rise by 9.4% in 2026, supported by higher yields, yet net profit is expected to fall to USD 23 billion, cutting the net margin to 2%, the weakest outcome since the covid years.”
Who is affected the most?
We have all been affected negatively by the rise in the price of oil, including jet fuel. According to most reports, European and Gulf (Middle East) countries face the most serious financial problems.
Gulf carriers, such as Emirates, Qatar Airways, Etihad Airways, and Gulf Air, face major financial losses due to the closure of regional airspace. Just two days ago, during the supposed “ceasefire,” Iran fired missiles at Kuwait and Bahrain; Kuwait Airport’s Terminal 1 suffered major damage.
In Europe, the United Kingdom and France have been identified as being the most seriously affected due to their heavy dependence on Gulf supplies as well as their deep short positions. If a country has “deep short positions,” it means that it made massive financial bets that jet fuel prices would fall.
The United States is also suffering. Fuel costs for US airlines have risen by nearly 80% compared to 2025. Major US airlines such as Delta, United, American, and Southwest are cutting less profitable routes, raising airfares, and increasing baggage fees.
The economic effect
Global GDP is expected to slow from approximately 3% to about 2.5% this year. Should the disruption persist into 2027, the economic consequences could become devastating for the airline industry.
Global inflation is expected to rise to more than 5%, increasing the risk of stagflation. “Stagflation” occurs when there is a combination of higher inflation and stalling economic activity.
IATA predicts that over the next year, many less profitable airlines will go bankrupt while consolidation will increase globally. “Consolidation,” in this context means that the airline industry will shrink down to fewer, larger competitors as the financially stronger ones acquire or merge with their struggling competitors.
