The International Air Transport Association (IATA) has issued a warning that global airline profitability is expected to halve in 2026 due to a dramatic increase in jet fuel costs, which are projected to rise by $100 billion this year following the U.S.-Iran conflict that began on February 28 [1]. According to IATA's outgoing director general Willie Walsh, average jet fuel prices are anticipated to be 70% higher year-on-year, with oil prices surging to over $100 a barrel in March and jet fuel prices increasing 103% in March compared to the previous month [1]. For the week ending June 5, jet fuel prices were up 62.4% year-over-year [1].
Walsh stated that net profits for airlines are expected to fall from $45 billion in 2025 to $23 billion in 2026, with net margins dropping from 4.2% to 2.0% [1]. While travel demand remains resilient and airlines are raising fares to cope with higher costs, growth is expected to slow. An IATA poll revealed that 86% of travelers expect fares to reflect oil prices, and 49% anticipate spending more on travel this year than last [1]. Walsh highlighted that airlines whose balance sheets have not recovered from Covid-19 and those operating in the Gulf region will be most affected [1].
The impact of rising fuel costs is evident among major carriers. U.S. airlines spent 56.4% more on jet fuel in March than in February, totaling $5.06 billion, which is 30% higher than March 2025 [1]. European budget carrier EasyJet reported a headline pre-tax loss of £552 million (about $735 million) for the first half of its financial year ending March 31, with an additional £25 million in fuel costs in March. EasyJet noted customers are booking later, complicating sales forecasts, and has hedged 72% of its summer fuel [1]. Lufthansa expects to incur 1.7 billion euros ($1.96 billion) in extra fuel costs this year, citing the war as an "enormous challenge" [1]. Irish low-cost carrier Ryanair has hedged 80% of its summer fuel and saw profit after tax increase 40% to nearly 2.3 billion euros in the year ending in March. Ryanair's CEO Michael O'Leary expects other European carriers to struggle if jet fuel costs remain elevated [1].
Walsh concluded that the "big unknown is how long travelers and shippers can tolerate the higher costs of connectivity," underscoring uncertainty about future demand and profitability in the sector [1].
CONCLUSION
The sharp rise in jet fuel costs is set to significantly reduce airline profitability in 2026, with industry net profits expected to halve and margins to shrink. While some carriers have managed to hedge fuel costs and maintain profits, others are reporting losses and facing unpredictable demand. The ongoing volatility in fuel prices and geopolitical tensions pose substantial challenges for the global airline industry.