This photo shows a plane of the Irish low-cost airline Ryanair parked at the airport of Thessaloniki “Makedonia”, in Thessaloniki on May 7, 2026. Ryanair will close its base at the airport of Thessaloniki in October 2026, informing the employees of the move. This decision follows the dispute regarding the increase in airport fees imposed by the company Fraport Greece. (Photo by Sakis Mitrolidis / AFP via Getty Images)
Sakis Mitrolidis Afp | Getty Images
The International Air Transport Association has warned that global airlines can expect to see profits halved by 2026 as rising jet fuel costs continue to squeeze the industry.
Oil prices jumped and jet fuel costs rose after the US-Iran conflict began on February 28, noted outgoing IATA director-general Willie Walsh, adding to the challenges he says airlines have faced in recent years from the Covid-19 pandemic to the war in Ukraine.
“As a result, we expect jet fuel prices to increase by 70% year over year,” Walsh said in a report on the State of the Global Air Transport Industry published on Sunday. “That will add $100 billion to our combined fuel debt this year.”
Walsh noted that while demand for travel remains strong, airlines are raising fares to accommodate it, but said growth will slow.
“Taking all of this into account, we expect profits to decline in 2025,” Walsh added. “Gross profit will decline from $45 billion to $23 billion in 2026, and gross income from 4.2% to 2.0%.”
Airlines whose balance sheets have not yet recovered from Covid-19 and those operating in the Gulf will be particularly affected, according to Walsh.
The IATA survey showed that 86% of travelers expect fares to keep pace with oil prices, while 49% expect to spend more on travel this year than last year.
“What’s largely unknown is how long travelers and shippers can tolerate connection costs,” Walsh said.
The conflict in the Middle East sent oil prices soaring to more than $100 a barrel in March and the price of jet fuel rose 103% in March compared to the previous month, according to IATA data. Jet fuel prices were up 62.4% year-over-year in the week ending June 5, per IATA.
In the meantime. US carriers used 56.4% more jet fuel in March than in February, according to Transportation Department data in May. They spent a total of $5.06 billion on gasoline in March, up from $3.23 billion in February, and 30% more than they paid in March 2025.
How airlines operate
A German airline Lufthansa it also expects to take 1.7 billion euros ($1.96 billion) in additional fuel costs this year, with the war causing “big challenges,” it said on May 6.
Additionally, Ireland’s low-cost carrier Ryanair hedged 80% of its summer fuel and saw profit after tax rise 40% to around 2.3 billion euros in the year ending in March.
Ryanair CEO Michael O’Leary told CNBC in April that he expects other European airlines to struggle if jet fuel costs remain high.
“If prices stay high for a long time this summer, we think a number of our airline competitors in Europe will face real financial difficulties,” O’Leary said.
“I think there will be failures,” O’Leary added. “If it continues at $150 a barrel in July, August, September, then you will see European airlines fail and that, in the medium term, it will probably be good for Ryanair’s business.”
— CNBC’s Leslie Josephs contributed to this report.
