IATA warns Gulf carriers face mounting pressure as jet fuel prices surge 70%.
Middle East airlines are expected to swing to a combined loss of $4.3 billion in 2026, as soaring fuel costs and operational disruptions weigh heavily on the sector, according to the latest financial outlook from the International Air Transport Association.
The industry body said profit per passenger in the region is projected to deteriorate sharply, from a gain of $31.50 last year to a loss of $21.40 in 2026, highlighting the growing financial strain on carriers amid rising jet fuel prices and ongoing geopolitical challenges.
The report, unveiled at the annual general meeting of the International Air Transport Association in Rio de Janeiro, forecasts that airlines worldwide will generate a combined net profit of $23 billion in 2026 — nearly half the $41 billion previously projected.
The Middle East is expected to be the only region to post a collective loss, as carriers grapple with the impact of the ongoing US-Israel-Iran conflict, which has disrupted flight operations, increased costs and created significant challenges for major Gulf aviation hubs.
Passenger demand across the Middle East is projected to decline by 11.4 per cent in 2026, while airline capacity is expected to contract by 4.4 per cent. The region’s net profit margin is forecast to swing sharply into negative territory, falling to minus 6.1 per cent from a positive 9.4 per cent in 2025.
“Positioned at the epicentre of the disruption caused by the conflict in the Middle East, the region is expected to record a net loss in 2026,” IATA said, highlighting the significant impact of the ongoing war on airline operations, passenger traffic and profitability.
Gulf carriers hit by airspace closures
IATA said Gulf airlines are grappling with significant operational challenges following widespread airspace restrictions and flight disruptions caused by the conflict in the region.
“The Gulf carriers face operational uncertainty following a near-complete shutdown of airspace at the outbreak of the war,” said Willie Walsh. “These carriers are doing an amazing job maintaining connectivity, but major financial impacts are unavoidable.”
According to the industry body, airline profitability is being squeezed by a combination of flight cancellations, longer rerouting requirements, weaker transfer passenger traffic and rising operating costs, all of which have intensified pressure on carriers across the Gulf.
Middle Eastern airlines, especially major Gulf carriers, rely heavily on transit passengers travelling between Asia, Europe and Africa. Disruptions to these connecting travel flows have reduced passenger load factors, while lower traffic volumes and operational challenges are driving up costs on a per-passenger basis, placing additional pressure on airline profitability.
Global airline profits set to halve in 2026
The broader global airline industry is also expected to face a much tougher operating environment in 2026.
According to IATA, worldwide airline net profits are projected to fall from $45 billion in 2025 to $23 billion in 2026, while net profit margins are forecast to narrow from 4.2 per cent to 2.0 per cent.
“War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines for the worse,” said Willie Walsh, highlighting the growing pressures facing carriers worldwide.
“Globally, airline profitability is expected to be cut in half compared with 2025,” Walsh said, as the industry grapples with higher fuel costs and geopolitical disruptions.
IATA forecasts that net profit per passenger will fall to just $4.50 in 2026, down from $9.10 a year earlier.
“Under the circumstances, that shows resilience,” said Willie Walsh. “But it won’t even buy you a hot dog at most FIFA World Cup venues, and it leaves very little cushion if costs or taxes rise further,” he added, underscoring the thin margins airlines are expected to operate on despite remaining profitable overall.
Jet fuel prices soar
Fuel remains the biggest challenge facing airlines worldwide, with jet fuel prices expected to surge sharply in 2026.
IATA forecasts average jet fuel prices of $152 per barrel next year, nearly 70 per cent higher than the $90 average recorded in 2025. As a result, the industry’s total fuel bill is projected to climb from $252 billion to $350 billion globally.
The increase will push fuel’s share of airline operating costs above 31 per cent, adding significant pressure to carrier margins at a time when airlines are already contending with geopolitical uncertainty, airspace disruptions and softer demand in key markets.
“No sooner had the industry moved beyond the impact of COVID-19 than it was confronted with aerospace supply chain disruptions, the war in Ukraine, rising geopolitical tensions and major shifts in global trade policies,” said Willie Walsh.
“When conflict erupted in the Middle East in March, oil prices rose sharply and jet fuel costs surged. As a result, we expect average jet fuel prices to be 70 per cent higher year-on-year, adding around $100 billion to the industry’s collective fuel bill this year,” he said.
IATA noted that many airlines remain particularly vulnerable because they hedge against crude oil prices rather than jet fuel itself. This leaves carriers exposed to fluctuations in refining margins — known in the industry as the “crack spread” — which can significantly increase fuel costs even when crude oil prices are relatively stable.
Demand stays resilient, for now
Despite mounting cost pressures, global passenger demand remains robust, helping support airline revenues and profitability.
IATA forecasts total airline revenues will rise 9.4 per cent to $1.165 trillion in 2026, driven by higher airfares, sustained travel demand and growing ancillary income streams. Passenger ticket revenues alone are expected to reach $839 billion, marking a 9.2 per cent increase from the previous year.
Passenger load factors are also projected to hit a record 84 per cent, reflecting strong demand for air travel despite rising ticket prices.
“The positive is that demand is holding up, even as airlines are raising fares and rates to cope,” said Willie Walsh.
IATA’s latest survey found that 49 per cent of travellers expect to spend more on travel this year, while a further 43 per cent plan to maintain the same level of spending as in the previous year, underscoring the continued resilience of consumer demand.
Aircraft shortages and engine delays add billions in costs
The airline industry is also contending with persistent aerospace supply chain disruptions, which continue to affect fleet expansion and operational efficiency.
According to IATA, aircraft order backlogs have surpassed 18,000 jets, while the average age of the global airline fleet has risen to a record 15.2 years. The industry body estimates that supply chain failures cost airlines at least $11 billion in 2025 alone.
As deliveries of new aircraft and engines remain delayed, many carriers are being forced to keep older aircraft in service for longer periods. This has led to higher maintenance expenses, increased aircraft leasing costs and reduced fuel efficiency.
“The consequences of supply chain failures continue to ripple across the industry,” said Willie Walsh. IATA noted that the shortage of newer aircraft has stalled fuel-efficiency improvements for the first time on record during 2024 and 2025, depriving airlines of one of their most important tools for controlling operating costs.
The outgoing IATA chief delivered a sharp rebuke to aircraft engine manufacturers, accusing them of failing to address persistent reliability and supply chain issues.
Without holding back, Willie Walsh said: “My message to the engine OEMs is simple: stop gouging us and get back to making great engines that work and that last. Allowing these failures to extend into the next decade is totally unacceptable to customers.”
His comments reflect growing frustration across the airline industry over engine durability problems, maintenance delays and prolonged shortages of spare parts, which have left hundreds of aircraft grounded and added billions of dollars to carriers’ operating costs.
