IATA 2026: Global Airline Profitability Halves and Pushes MENA into Deficit.

At the 82nd International Air Transport Association (IATA) Annual General Meeting (AGM) and the World Air Transport Summit in Rio de Janeiro (June 6-8, 2026), hosted by LATAM Airlines Group, aviation industry leaders met amid significant industry volatility. Outgoing Director General Willie Walsh’s “Report on the State of the Global Air Transport Industry” warned that record passenger demand is not yielding equivalent financial returns.

For MENA aviation professionals, the financial narrative was particularly severe. The dual impact of airspace disruptions in the Middle East and a massive surge in jet fuel prices has effectively halved global airline profitability, dragging the previously surging Gulf region into collective deficit.

Why Global Profits Are Halving

Although total passenger counts are projected to reach a record  5.1 billion in 2026, the industry’s financial performance is in decline. IATA downgraded its global net profit forecast for 2026 to $23 billion, roughly half the $45 billion estimate for 2025. Global net profit margins will drop to a tenuous 2%, while the Return on Invested Capital (ROIC) is projected to slide to 4.3%, well below the industry’s 8.5% estimated weighted average cost of capital.

“Airlines are bearing the brunt of the fuel price shock,” Walsh noted during his address. “While air fares are rising, airlines are still absorbing part of the hike in their bottom lines. Net profit per passenger is expected to fall to $4.50, half of what it was last year. Under the circumstances, that shows resilience”.

MENA Reversal: The Collective Deficit

The most surprising revelation from the 2026 report was the geographic asymmetry in profitability. Driven by the localised conflict, the Middle East is the only global region forecast to collectively fall into the red.

This marks a critical reversal. Only last year, the Middle East led global aviation profitability with the highest net profit margins and profit per passenger worldwide. Today, the necessary rerouting of the MENA air map has substantially decreased efficiency. 

To manage current challenges, carriers must adopt extended flight paths to bypass restricted or prohibited airspace. This results in significantly higher fuel consumption and substantial financial pressure, leaving the industry to confront a major downturn driven by these airspace limitations.

Walsh directly acknowledged this localised hardship. “It’s a tough year for all airlines, especially those whose balance sheets had not yet recovered from COVID,” he stated. “And, of course, for those operating in the Gulf”.

Jet Fuel Surge Erases Margins 

Adding to the airspace restrictions is the jet fuel crisis. Global fuel costs are expected to surge by nearly 40% to $350 billion in 2026. The average price of Brent crude oil is projected to reach $95 per barrel, representing a 37% increase from the $69 average in 2025. 

Refining costs for aviation-grade jet fuel hit a record high average of $57 per barrel. These costs pushed jet fuel prices up roughly 70% year-on-year to $152 per barrel, compared to $90 in 2025.

Despite stable consumption at 104 billion gallons, global fuel costs will jump $100 billion to $350 billion in 2026, up from $252 billion previously. Fuel now accounts for 31.4% of operating expenses, up significantly from 25.4% in 2025.

Widespread financial hedging has failed to insulate airlines from this shock. While carriers hedged one-third of 2026 fuel needs, many contracts used crude oil rather than refined jet fuel. This leaves the industry exposed to a record $57 crack spread, making traditional hedging ineffective against current volatility.

Delivering a critical assessment of margin erosion, Willie Walsh noted that global net profit per passenger is projected to drop to $4.50 – half of the $9.10 recorded in 2025. He observed that while efficiency gains and price adjustments help, they cannot fully offset the costs to maintain previous profitability levels.

To survive this margin erosion, airlines are aggressively targeting unbundled revenue. For the first time since 2019, ancillary revenues, expected to jump 12.6% to $165 billion, will outpace air cargo as a larger revenue contributor.

Aerospace Supply Chain Under Pressure

Simultaneously, the industry is grappling with persistent bottlenecks in the aerospace supply chain. With an aircraft order backlog exceeding 18,000, airlines are forced to operate older, less efficient fleets, driving up lease rates and maintenance costs. 

Walsh delivered a scathing critique of manufacturing duopolies and engine Original Equipment Manufacturers (OEMs). “My message to the engine OEMs is simple,” Walsh declared to the assembly. “Stop gouging us and get back to making great engines that work and that last”.

How MENA Airlines Plan to Survive

Full planes and record passenger volumes no longer ensure strong margins. While the industry forecasts a historic 84.0% load factor and 5.1 billion passengers, the Return on Invested Capital (ROIC) has still dropped.

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

While the CEO of Oman Air Con Korfiatis, noted that airlines cannot pass on all the extra fuel costs to travellers, Emirates President Sir Tim Clark maintained confidence in a rapid commercial rebound, forecasting that Emirates would still emerge as the world’s most profitable airline by the end of 2026.

To counter extreme jet fuel premiums, major Gulf carriers are using varied financial risk strategies to mitigate the $57 Crack Spread. Emirates secured physical supplies and hedging through 2029, while Etihad Airways utilises robust hedging for price volatility. Conversely, Saudia (via flyadeal) relies on spot-market pricing, offsetting costs by pushing aircraft productivity over 12 hours daily.

Gulf legacy carriers are also adopting budget models by unbundling base fares. In the GCC, which drives 61% of regional ancillary activity, seat upgrades comprise 26% of these sales, according to the Airline Ancillary Services Market Overview. Airlines now monetise baggage, WiFi, and meals to offset fuel costs, notably extending this to premium cabins.

Emirates “Business Special” excludes chauffeur services, seat selection and lounge access. Qatar Airways “Business Lite” also removes complimentary lounge access and reduces mileage. Etihad Airways “Business Value” cuts free lounge access, seat selection, and cancellations.

For MENA aviation leaders, the 2026 IATA AGM highlights a critical need for strategic agility. While structural resilience may prevent insolvency, airlines must prioritise operational efficiency and ancillary growth to survive a prolonged period of narrow margins until regional stability returns.