IATA projects weakest airline profits since pandemic as US fuel costs surge

The International Air Transport Association (IATA) has revised its 2026 global airline profit forecast downwards to $23bn, describing the margin as the weakest outcome since the COVID-19 pandemic. The projection, released in the association’s annual report on Sunday, represents a significant contraction from the $41bn previously anticipated and marks a decline from the $45bn recorded in 2025. The downturn is driven by escalating tensions between the United States and Iran, which have disrupted energy shipments through the Strait of Hormuz and forced carriers to reroute flights, thereby increasing fuel burn and operational expenses.

Data released by the US Department of Transportation on Monday confirms that jet fuel costs in the United States surged by 78 per cent in April to nearly $6.5bn, following a 26 per cent increase in March. The price per gallon rose to $4.11, nearly double the cost recorded in late February. IATA noted that jet fuel availability is threatened and that the sector’s annual fuel bill is expected to reach approximately $350bn this year, up from roughly $252bn in 2025, with fuel accounting for nearly a third of operating costs.

The financial strain has already impacted carrier viability, with budget airline Spirit Airlines ceasing operations in early May. In court filings, the carrier attributed its collapse to surging fuel prices after three decades in service. Other major carriers have responded to the cost pressures with operational adjustments; United Airlines announced potential fare increases of up to 20 per cent, while American Airlines temporarily suspended several transcontinental routes, including services between Charlotte and Sacramento, and Los Angeles and Pittsburgh.

Consumer costs have risen in tandem with operational expenses. According to the US Labor Department’s Bureau of Labor Statistics, US airfares increased by 5.5 per cent since the onset of the conflict, with rises of 2.7 per cent in March and 2.8 per cent in April. Despite these increases, domestic travel demand remains robust, with the American Automobile Association forecasting 3.6 million travellers for the Memorial Day holiday weekend, signalling the unofficial start of the summer travel season.

Market reactions have been mixed as investors weigh the geopolitical risks. Global oil prices rose by more than 5 per cent during Asia trading hours following renewed strikes on Iran, though they pared gains after Iran announced the end of military operations against Israel. On Wall Street, major airline shares faced downward pressure, with Delta Air Lines, United, JetBlue, and Southwest all recording declines, although American Airlines saw a slight increase. Meanwhile, gold prices rebounded to $4,331.69 per ounce as investors sought safe-haven assets amid the uncertainty.