Airline profits are going to be slashed in half this year because of the jet fuel shortage driven by the war between Iran and the United States, according to the latest projections by the International Air Transport Association (IATA), the global airline industry’s trade organization.
“War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse,” IATA director general Willie Walsh said in a press release.
Right after American and Israeli airstrikes began raining down on Iran on February 28, the Islamic Republic shut down virtually all traffic through the critical oil chokepoint of the Strait of Hormuz in retaliation. The move completely disrupted the global energy trade, creating a jet fuel shortage that the head of the International Energy Agency called “the largest energy crisis we have ever faced.”
In March 2026 alone, U.S. airlines spent $5.06 billion on jet fuel, according to the Department of Transportation, dramatically higher than the $3.88 billion spent in March 2025.
According to IATA’s projections, the entire global airline industry is expected to bring in a net profit of $23 billion in 2026, half the previous projections of $41 billion and also half the $45 billion the industry brought in last year.
“Net profit per passenger is expected to fall to $4.50, half of what it was 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 [a] buffer should other costs or taxes start rising.”
That financial fallout is likely to hit both the companies and passengers.
“Unfortunately, I think there will be some carriers that will find this high fuel price very difficult to cope with,” Walsh told Reuters on Tuesday, adding that he expects some airlines to go out of business or get acquired by larger competitors.
One such early example of this was Spirit Airlines. After 34 years in operation, the budget carrier officially ceased all operations last month. Spirit had been struggling financially for some time, but sky-high jet fuel prices were apparently the final blow.
Last month, European budget airline Ryanair’s CFO Neil Sorahan told CNBC that “some of the weaker carriers who were already struggling before the war” could go bankrupt come winter because of the jet fuel prices.
Airlines that cater to a relatively wealthier set of travelers, like United or Delta, are not too worried, as the quickly rising fare prices that have accompanied the jet fuel price hikes have not entirely spooked their passengers from buying plane tickets. But budget airlines that are known for offering affordable fares acknowledge the gravity of the threat they are facing. In April, a group of budget carriers, including Spirit’s former top competitor Frontier Airlines, asked the Trump administration for a $2.5 billion bailout. The bailout request was rejected in May.
There are three main ways airlines are responding to the rising jet fuel prices: absorbing some of the cost, cutting unprofitable routes and raising fares. All of that Walsh expects to continue in the short term. Flight tickets are already up more than 20% from last year.
“High oil prices will inevitably mean higher ticket prices,” Walsh said over the weekend, per The Guardian. “There’s just no way to avoid that.”
The actual “big unknown,” according to Walsh, is not whether the exorbitant fares will continue but just how long air travelers are willing to tolerate the high costs.
