Middle East airlines face $4.3 billion loss in 2026, says IATA

Rio de Janeiro: Middle East airlines are expected to plunge into a collective $4.3 billion loss in 2026, with profit per passenger dropping from $31.50 last year to a loss of $21.40, International Air Transport Association (IATA) said in its latest financial outlook for the global airline industry.

The report, released at IATA’s annual general meeting in Rio de Janeiro, said global airlines are expected to achieve a combined total net profit of $23.0 billion in 2026, roughly half the previously projected $41 billion.

The Middle East is the only region globally expected to slip into the red as airlines battle the fallout from the US-Israel-Iran war, which has severely disrupted operations across key Gulf hubs.

Passenger demand in the region is forecast to fall 11.4 per cent, while airline capacity is expected to decline 4.4 per cent. Net margins are projected to tumble to minus 6.1 per cent, compared to a positive 9.4 per cent in 2025.

“Sitting at the centre of the shock from the war in the Middle East, the region is expected to generate a net loss in 2026,” IATA said.

Gulf carriers hit by airspace closures

IATA said Gulf airlines are facing operational uncertainty after widespread airspace restrictions and flight disruptions linked to the conflict.

“The Gulf carriers face operational uncertainty following a near complete shutdown of airspace at the outbreak of the war,” said Willie Walsh, IATA Director General. “These carriers are doing an amazing job maintaining connectivity, but major financial impacts are unavoidable,” said Walsh.

The industry body said flight cancellations, rerouting, reduced transfer traffic and elevated operating costs are all weighing heavily on profitability.

Middle Eastern airlines, particularly major Gulf hubs, depend heavily on transit passengers connecting between Asia, Europe and Africa. The loss of this transfer traffic is reducing load factors and increasing unit costs.

Global airline profits set to halve in 2026

The wider global airline industry is also heading into a significantly weaker year.

IATA forecasts global airline profits will fall from $45 billion in 2025 to $23 billion in 2026, while net profit margins will shrink 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 to the worse,” Walsh said.

“Globally, airlines are expected to see profitability halve compared to 2025.” Net profit per passenger globally is expected to drop to $4.50, compared to $9.10 last year.

“Under the circumstances, that shows resilience,” Walsh said. “But it won’t even buy you a hot dog at most of the FIFA World Cup venues and it does not leave much of buffer should other costs or taxes start rising,” said Walsh.

Jet fuel prices soar

Still, the biggest pressure point for airlines remains fuel. Jet fuel prices are expected to average $152 per barrel in 2026, almost 70 per cent higher than the $90 average seen in 2025. Fuel costs are forecast to jump from $252 billion to $350 billion globally this year, pushing fuel’s share of airline operating expenses to more than 31 per cent.

“No sooner did we put COVID behind us than we faced aerospace supply chain failures, war in Ukraine, geopolitical tensions, and tectonic shifts in trade policies. And, when war broke out in the Middle East in March, oil prices jumped, and jet fuel prices skyrocketed,” said Walsh.

“As a result, we expect average jet fuel prices to be 70 per cent higher year-on-year. That will add $100 billion to our collective fuel bill this year,” he said.

IATA said many airlines remain exposed because they hedge crude oil rather than jet fuel directly, leaving them vulnerable to widening refining margins, known as the crack spread.

Demand stays resilient, for now

Despite rising costs, passenger demand continues to hold up globally. Airline revenues are expected to rise 9.4 per cent to $1.165 trillion in 2026, supported by higher ticket prices, strong travel demand and growing ancillary revenues.

Passenger ticket revenues alone are forecast to hit $839 billion, up 9.2 per cent year-on-year. Passenger load factors are also expected to reach another record high of 84 per cent. “The positive however, is that demand is holding up, even as airlines are raising fares and rates to cope,” Walsh said.

IATA polling showed that 49 per cent of travellers expect to spend more on travel this year, while another 43 per cent plan to spend the same as last year.

Aircraft shortages, engine delays add billions in costs

The report also stated that airline industry is also struggling with persistent aerospace supply chain failures.

IATA said aircraft order backlogs have climbed beyond 18,000 jets, while the average age of the global fleet has reached a record 15.2 years.

“Supply chain failures cost airlines at least $11 billion in 2025.” Airlines are increasingly being forced to keep older aircraft in service longer, resulting in higher maintenance costs, increased lease rates and reduced fuel efficiency.

The shortage of newer aircraft has also halted fuel-efficiency gains for the first time in history during 2024 and 2025, according to IATA.

The outgoing IATA chief blasted engine makers. Without mincing words, 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 the customers.”