Global airline profits are projected to fall by half in 2026 due to soaring fuel costs driven by the U.S.-Iran conflict, according to the International Air Transport Association (IATA). The organization’s director general, Willie Walsh, announced at its annual meeting in Rio de Janeiro that net profits will drop from $45 billion in 2025 to $23 billion this year, with net margins shrinking from 4.2% to 2%. The surge in fuel prices, exacerbated by the closure of the Strait of Hormuz, has led to a $100 billion increase in fuel costs for airlines worldwide.
Immediate Impact on Airlines
U.S. airlines spent $6.5 billion on fuel in April, a 78% increase from the same month in 2025, despite using nearly the same amount of fuel. The price per gallon of aviation fuel rose from $2.39 in February to $4.11 in April. Airlines have struggled to pass on the full cost to consumers, with fares rising by about 20% but not covering the entire fuel bill. Some airlines, like Spirit Airlines, have already collapsed due to the financial strain, while others, including American Airlines and Lufthansa, have cut routes and implemented cost-saving measures.
Customer Demand and Industry Response
Despite the turmoil, airline executives report that customer demand remains steady. Etihad Airways, based in Abu Dhabi, noted that ticket sales have returned to pre-conflict levels, seasonally adjusted. United Airlines CEO Scott Kirby also confirmed that bookings continue, even with higher fares. However, budget airlines face greater risks due to their smaller profit margins, making them more vulnerable to the crisis.
Long-Term Implications
IATA expects jet fuel prices to average $152 per barrel in 2026, a 70% increase from 2025. Airlines are responding by canceling flights, raising fees, and cutting perks. The organization warns that the industry’s profitability will remain under pressure unless fuel costs stabilize or alternative solutions are found.