Global Airline Profits Crater: Jet Fuel Price Increase Cuts Industry Outlook From $41B to $23B

IATA nearly halves its 2026 profit forecast as jet fuel prices surge 70% — Spirit Airlines has already collapsed, and U.S. passengers are paying 31% more to fly.

The International Air Transport Association slashed its 2026 airline profit forecast from $41 billion to $23 billion, as a Middle East-driven jet fuel price increase pushes industry margins to their lowest level since the pandemic.

The revision came at IATA’s 82nd Annual General Meeting in Rio de Janeiro, hosted by LATAM Airlines Group and held June 6–8, 2026. The cut amounts to a 44% reduction from IATA’s prior forecast and a 49% decline from the $45 billion the industry posted in 2025. Net profit margin is now projected at 2.0%, down from 4.2% in 2025 — the weakest reading outside the COVID pandemic in 13 years.

IATA Director General Willie Walsh said the cause was unambiguous.

“When war broke out in the Middle East in March, oil prices jumped, and jet fuel prices skyrocketed. As a result, we expect average jet fuel prices to be 70% higher year-on-year. That will add $100 billion to our collective fuel bill this year.”

— Willie Walsh, IATA Director General, at the 82nd Annual General Meeting, Rio de Janeiro, June 6, 2026

“Considering all this we expect profitability to halve from 2025. Net profits will fall from $45 billion to $23 billion in 2026, and net margins from 4.2% to 2.0%.”

— Willie Walsh, IATA Director General

The Fuel Cost Surge

IATA projects jet fuel will average $152 per barrel in 2026, compared with $90 per barrel in 2025. Total industry fuel costs are expected to reach approximately $350 billion this year, up from roughly $252 billion in 2025 — an increase of nearly 40%. Fuel now accounts for 31.4% of total airline operating expenses, up from 25.4% a year earlier. Brent crude oil is expected to average approximately $95 per barrel in 2026, up from $69 in 2025.

Operating profit across the industry is projected to fall to $48 billion from $76.4 billion in 2025, with operating margins contracting to 4.1% from 7.2%. Return on invested capital is expected to drop to 4.3%, well below the industry’s estimated weighted average cost of capital of 8.5%.

Walsh was candid about which carriers face the sharpest strain.

“It’s a tough year for all airlines, especially those whose balance sheets had not yet recovered from COVID. And, of course, for those operating in the Gulf.”

— Willie Walsh, IATA Director General

U.S. Airlines Absorb a Steep Hit

In the United States, the data is already stark. The U.S. Transportation Department’s monthly report, released June 8, found that fuel costs for U.S. airlines jumped 78% in April to nearly $6.5 billion compared with the year before. The cost per gallon reached $4.11 — up $1.81 from April 2025.

Even as carriers used 2.6% less fuel in April compared with March — a sign of early efficiency measures — the total fuel bill still climbed 26% month over month. Delta Air Lines, United Airlines, American Airlines, and Southwest Airlines together account for approximately 80% of U.S. domestic flights.

The Geopolitical Trigger

The fuel cost shock traces directly to the Middle East conflict triggered by U.S. and Israeli airstrikes on Iran. The conflict effectively closed the Strait of Hormuz — the maritime chokepoint through which approximately 20% of the world’s oil and gas supplies normally flow. Oil prices surged on fears of supply disruption, pushing jet fuel prices sharply higher and widening refinery margins across global energy markets.

The conflict has also forced airlines to reroute flights around closed or restricted Middle East airspace, increasing fuel burn and straining already tight capacity. Walsh warned that replenishing jet fuel supply chains could take months even if the Strait of Hormuz were reopened, due to throttled refining capacity in the region.

Spirit Airlines: The First Casualty

The toll has already claimed one major carrier. Spirit Airlines, an ultra-low-cost U.S. carrier, ceased operations in early May 2026, citing rising fuel prices as the decisive factor. The airline’s restructuring plan had assumed jet fuel costs of approximately $2.24 per gallon; by the time that plan collapsed, prices had climbed to approximately $4.51 per gallon. Spirit disclosed in federal bankruptcy court filings in the Southern District of New York that “recent geopolitical events leading to a significant and prolonged surge in fuel prices” compelled the shutdown.

Spirit transported 50,000 passengers on its final Friday of operations before announcing the wind-down. U.S. Bankruptcy Judge Sean Lane called it “a terrible day for employees” after a proposed $500 million government rescue put forward by President Donald Trump failed to win approval, opposed by some of Trump’s closest advisers and many Republicans in Congress.

Carriers Cut Capacity, Raise Fares

The largest U.S. carriers are scaling back growth plans and raising ticket prices to offset the shock. Delta Air Lines CEO Ed Bastian characterized issuing any full-year financial forecast as “imprudent” given market unpredictability. Delta guided second-quarter all-in fuel costs at approximately $4.30 per gallon, against roughly $2.62 per gallon in the first quarter — a 64% sequential increase — with the second-quarter fuel headwind estimated at more than $2 billion above second-quarter 2025 levels. Delta announced plans to “meaningfully” cut capacity growth in the short term. The carrier holds a partial competitive advantage: it owns a refinery that processes crude oil into jet fuel, providing some insulation against the broader price shock.

JetBlue Airways reported a first-quarter net loss of $319 million, or $0.86 per share, widened from a $208 million loss a year earlier. The carrier suspended its full-year financial outlook and guided second-quarter fuel at $4.13 to $4.28 per gallon. CEO Joanna Geraghty outlined the airline’s response.

“We have three main strategies at our disposal: adjusting fares to better reflect input costs, moderating inefficient capacity, and seeking additional cost-saving measures.”

— Joanna Geraghty, JetBlue Airways CEO, Reuters, April 28, 2026

Geraghty added that the carrier is moving decisively despite volatile conditions.

“While the macro environment, particularly fuel, has become more volatile, we are taking decisive actions to manage what is within our control, including adjusting capacity, optimizing revenue, and maintaining disciplined cost control.”

— Joanna Geraghty, JetBlue Airways CEO

JetBlue planned capacity cuts of just below 1% in the second quarter and 2% to 3% in subsequent periods. The airline indicated it aimed to recapture 30% to 40% of increased fuel costs in the second quarter, targeting full recapture by early 2027.

Middle East Hardest Hit; Global Demand Holds

The Middle East is the only region IATA expects to post a net loss in 2026, with a combined deficit of $4.3 billion — reversing a $7.2 billion profit in 2025. Passenger demand in the region is forecast to decline 11.4%, while capacity contracts 4.4%. Europe is projected to earn $9.6 billion, down from $13 billion in 2025; Asia-Pacific $6.6 billion, down from $9.8 billion; and Latin America $1.2 billion, down from $1.9 billion. IATA noted that while airlines are expected to remain profitable in every region except the Middle East, industry returns remain below the cost of capital.

Globally, passenger numbers are forecast to rise 2.4% to 5.1 billion in 2026, with load factors reaching a record 84.0%, up from 83.5% in 2025. Total revenues are projected to climb 9.4% to a record $1.165 trillion, driven by higher fares, ancillary revenues, and cargo. Passenger ticket revenues are expected to reach $839 billion, up 9.2%. Ancillary revenues — covering seat upgrades, baggage fees, and in-flight services — are forecast to grow 12.6% to $165 billion, surpassing cargo revenues of $162 billion for the first time since 2019. Operating expenses, however, are expected to rise 13% to $1.117 trillion, outpacing every revenue gain. Net profit per passenger is projected at $4.50 in 2026, down from $9.10 in 2025.

IATA polling cited by Walsh found that 86% of travelers expect fares to track oil prices, and 49% expect to spend more on travel in 2026 than in 2025, with an additional 43% planning to spend the same.

Passengers Already Paying More

Those fare increases are reaching U.S. consumers. According to KAYAK search data cited in the USDOT report, average fares for flights with a U.S. origin have risen by as much as 31% for domestic trips and 22% for international ones in 2026, compared with the same weeks in 2025. CNBC reported that domestic economy ticket prices are up 21% from a year earlier to an average of $570, while premium-seat prices rose 17% to an average of $1,444 per journey. NPR and KAYAK data found that a domestic flight in mid-May costs, on average, about $94 more than it did a year ago. The U.S. Travel Association’s Travel Price Index showed airline fares surging 20.7% on an annual basis as of April 2026.

Aging Fleets and a Long Road Back

Walsh used the summit to highlight a compounding factor: airlines are absorbing the fuel shock with older, less efficient aircraft than they had planned to operate. The global aircraft order backlog now exceeds 18,000 aircraft, and the average fleet age has reached a record 15.2 years. Airlines are short more than 5,000 fuel-efficient replacement aircraft that had been anticipated — a gap that cost the industry at least $11 billion in 2025 alone, and likely more in 2026 given higher fuel prices.

Global sustainable aviation fuel production is expected to reach approximately 2.4 million tonnes in 2026, covering only 0.8% of total fuel consumption. Additional spending on SAF is projected at $4.3 billion for the year.

In December 2025, before the conflict erupted, IATA had characterized 2026 as potentially one of the strongest financial years in industry history, projecting a $41 billion net profit. The June revision erased nearly half that figure in a single update, leaving the industry profitable but below its cost of capital — and, Walsh warned, vulnerable to any further shocks.