IATA: Airline profits to halve as fuel costs surge $100B

• Net profit margins are expected to fall from 4.2% in 2025 to 2.0% in 2026, with airlines still recovering from Covid-19 and Gulf region carriers most affected
• Jet fuel prices surged 103% in March compared to the previous month, with oil prices exceeding $100 per barrel following the Middle East conflict
• European carriers like Ryanair and Lufthansa are hedging fuel costs for summer 2026, with some airline executives warning of potential competitor failures if high prices persist

Summary: Airline Industry Faces Profit Collapse on Surging Fuel Costs

The International Air Transport Association (IATA) projects global airline profits will plunge by half in 2026, dropping from $45 billion to $23 billion, with net margins falling from 4.2% to 2.0%. The decline is driven by jet fuel costs that have surged following the U.S.-Iran conflict beginning February 28.

Key Financial Impact

IATA expects jet fuel prices to rise 70% year-over-year, adding a collective $100 billion to airlines' fuel bills. Oil prices jumped above $100 per barrel in March, with jet fuel costs up 103% month-over-month and 62.4% year-over-year for the week ending June 5. Airlines spent $5.06 billion on fuel in March, up from $3.23 billion in February and 30% higher than March 2025.

Companies and Regional Impact

European carriers are particularly affected:

• Ryanair reported a €641 million loss ($735 million) for H1 FY2026 but hedged 80% of summer fuel needs. CEO Michael O'Leary warned of potential European airline failures if oil remains at $150/barrel through summer.
• Lufthansa expects €1.96 billion in additional fuel costs, calling the situation "enormous challenges."
• EasyJet has hedged fuel needs but faces uncertainty from late bookings.

Airlines with weak post-COVID balance sheets and Gulf region operators face the highest risk. While travel demand remains resilient—with 49% of travelers planning to spend more in 2026—IATA warns the tolerance threshold for higher fares remains uncertain. O'Leary predicts European airline consolidation could benefit survivors like Ryanair.