This photograph shows an aircraft of low-cost Irish airline Ryanair parked at the Thessaloniki airport “Makedonia”, in Thessaloniki on May 7, 2026. Ryanair will shut down its base at Thessaloniki Airport in October 2026, informing staff of the move. The decision follows a dispute over increased airport charges imposed by operator Fraport Greece. (Photo by Sakis Mitrolidis / AFP via Getty Images)
Sakis Mitrolidis | Afp | Getty Images
The International Air Transport Association warned that global airlines can expect to see profits plunge by half in 2026 as the rising cost of jet fuel continues to squeeze the industry.
Oil prices jumped and jet fuel costs soared after the U.S.-Iran conflict began on Feb. 28, noted IATA’s outgoing director general Willie Walsh, adding to the challenges he said airlines have faced in recent years from the Covid-19 pandemic to the war in Ukraine.
“As a result, we expect average jet fuel prices to be 70% higher year-on-year,” Walsh said in a report on the State of the Global Air Transport Industry published Sunday. “That will add $100 billion to our collective fuel bill this year.”
Walsh noted that while travel demand remains resilient, airlines are raising fares to cope, but he said growth will inevitably be slower.
“Considering all this, we expect profitability to halve from 2025,” Walsh added. “Net profits will fall from $45 billion to $23 billion in 2026, and net margins from 4.2% to 2.0%.”
Airlines whose balance sheets haven’t recovered from Covid-19 and those operating in the Gulf will be most affected, according to Walsh.
An IATA poll showed that 86% of travelers expected fares to be in line with oil prices, while 49% expected to spend more on travel this year than last.
“The big unknown is how long travelers and shippers can tolerate the higher costs of connectivity,” Walsh said.
The Middle East conflict sent oil prices surging to over $100 a barrel in March and the price of jet fuel increased 103% in March compared to the previous month, according to data from IATA. Jet fuel prices were up 62.4% year-over-year for the week ending June 5, per IATA.
Meanwhile. U.S. carriers spent 56.4% more on jet fuel in March than in February, according to data from the Department of Transportation in May. They spent a total of $5.06 billion on fuel in March, up from $3.23 billion in February, and 30% more than what they paid in March 2025.
How airlines are faring
German airline Lufthansa is also expecting to take on 1.7 billion euros ($1.96 billion) in extra fuel costs this year, with the war posing “enormous challenges,” it said on May 6.
Additionally, 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 told CNBC in April that he expects other European carriers to struggle if jet fuel costs remain high.
“If pricing stays higher for longer this summer, we think a number of our airline competitors in Europe are going to face real financial difficulties,” O’Leary said.
“I think there will be failures,” O’Leary added. “If it continues at $150 a barrel into July, August, September, then you’ll see European airlines fail and that, in the medium term, would probably be good for Ryanair’s business.”
– CNBC’s Leslie Josephs contributed to this report.
