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IATA cuts 2026 airline net profit view to $23B as oil holds near $90-$95 a barrel.
Industry revenues seen at $1.17T, but costs rise 13% with fuel costs likely to jump to $350B in 2026.
AAL expects record summer travel with 75M passengers on 750,000 flights from May 21-Sept. 8, 2026.
The International Air Transport Association (IATA) has sharply reduced its profit outlook for the global airline industry in 2026, citing a surge in oil prices triggered by escalating geopolitical tensions in the Middle East. The industry body warned that higher fuel costs are expected to weigh heavily on airline earnings. Fuel remains one of the largest operating expenses for carriers, making airlines particularly vulnerable to disruptions in global energy markets.
IATA noted that passenger demand remains relatively resilient. Moreover, airlines may attempt to pass some of the additional fuel costs on to consumers through higher ticket prices, but competitive pressures and concerns about weakening consumer spending could limit their ability to do so.
As a result, many carriers are expected to face increased financial strain despite continued growth in air travel demand. Given this backdrop, we believe that investors would do well to keep an eye on airline stocks like Southwest Airlines (LUV - Free Report) , AmericanAirlines (AAL - Free Report) and SkyWest (SKYW - Free Report) .
Surge in Fuel Costs: A Bane for Airlines’ Bottom Line
The fragile ceasefire between Iran and the United States has revived uncertainty in financial markets. Crude oil prices have experienced significant swings in response to developments surrounding the Strait of Hormuz, a vital global shipping corridor.
Oil has continued to trade at elevated levels, moving within the $90–$95 per barrel range amid concerns about rising inflationary pressures. High fuel costs are naturally hurting the bottom line of airlines. This is because fuel expenses represent a key input cost for airlines.
IATA’s Revised Forecast for 2026
Due to high fuel costs, IATA nearly halved its profitability projection for 2026. Per IATA, airlines are projected to earn a combined net profit of $23 billion this year, down from an estimated $45 billion in 2025 and well below an earlier forecast of $41 billion for 2026. The industry's net profit margin is expected to shrink to 2% from 4.2% last year. The earlier projection for the 2026 net profit margin was 3.9%.
Passenger ticket revenues are, however, expected to remain strong and drive 9.4% year-over-year growth in industry revenues to $1.17 trillion. Per IATA, passenger revenues in 2026 are anticipated to be $839 billion (up 9.2% year over year), which is nearly 72% of total revenues. The increasing ticket prices are likely to cover the substantial increase in airlines’ key input costs. Airlines are also relying on capacity discipline-related measures, like discontinuing unprofitable flights and consolidating routes to counter the high fuel costs.
Ancillary revenues are expected to be $165 billion. Per IATA, 5.1 billion people are likely to take to the skies in 2026, up 2.4% year over year. Cargo revenues in 2026 are expected to be $162 billion, representing a 7.2% year-over-year increase. Cargo volumes in 2026 are expected to reach 71.7 million tonnes in 2026, up marginally from year-ago levels.
Despite the top-line improvement, revenue growth is expected to lag operating expense growth of 13% to $1.12 trillion. Fuel costs are expected to rise by nearly 40% from $252 billion in 2025 to $350 billion in 2026. The average price of crude oil is anticipated at $95/barrel (Brent) for the year (up 37% from $69 in 2025). Non-fuel costs are expected to rise 4% to $767 billion, driven by a 4% uptick in labor costs. The shortage of renewal aircraft, too, has put a strain on the cost picture. Passenger load factor (% of seats filled by passengers) is expected to touch a record 84% during the year.
On a region-wise basis, North American carriers are expected to reap net profits of $9.4 billion in 2026, down from $12.4 billion in 2025. With most U.S. carriers having abandoned fuel hedging strategies, such an oil supply disruption has left them fully exposed to price spikes.
European carriers are expected to reap net profits of $9.6 billion, despite being highly dependent on Gulf imports for jet fuel. The profitability of carriers in regions like Latin America, the Middle East and the Asia Pacific is likely to decline in 2026 from the year-ago levels, mainly due to the jet fuel crisis.
The updated profitability forecast for 2026 highlights the industry's continued exposure to geopolitical risks and commodity price volatility. Until tensions in the Middle East ease and fuel prices moderate, airlines are likely to focus on cost-control measures, fuel-efficiency initiatives, and capacity adjustments to protect earnings in an increasingly uncertain operating environment.
3 Airline Stocks to Keep a Tab On
Despite the oil price volatility, air-travel demand remains upbeat. As a result, investors interested in the Zacks Transportation - Airline industry would do well to keep airline stocks on their radar for healthy gains.
Our Choices
Southwest Airlines is benefiting from its lean cost structure, expanding operations and strategic partnerships. Efforts to reward its shareholders also bode well. LUV no longer aggressively follows the practice of fuel hedging, having discontinued the practice. However, the low-cost carrier still has some hedging contracts.
LUV has a decent earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters, missed on one occasion and came in line in the other quarter, delivering an average surprise of 247%. Southwest Airlines currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
AmericanAirlines expects record travel during the ongoing summer season (May 21-Sept. 8, 2026). During the period, the airline expects to fly a record 75 million passengers across 750,000 flights.
American Airlines’ shares have gained 6.3% over the past month. The carrier’s earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters and missed the mark once. The average earnings beat was 2.6%. American Airlines currently carries a Zacks Rank #3.
SkyWest is benefiting from strong air travel demand, despite the macroeconomic tensions, and its associated fleet modernization initiatives. A solid balance sheet enables the regional carrier to reward shareholders with share repurchases consistently. SKYW currently carries a Zacks Rank #3
SkyWest is based in St. George, UT. Its resilient business model, whereby the carrier has capacity purchase agreements with major carriers, minimizes direct exposure to fuel price fluctuations. The company's earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 8.8%
View the Zacks #1 Rank List
Image: Bigstock
3 Airline Stocks to Watch Amid IATA's Subdued 2026 Profit Forecast
Key Takeaways
The International Air Transport Association (IATA) has sharply reduced its profit outlook for the global airline industry in 2026, citing a surge in oil prices triggered by escalating geopolitical tensions in the Middle East. The industry body warned that higher fuel costs are expected to weigh heavily on airline earnings. Fuel remains one of the largest operating expenses for carriers, making airlines particularly vulnerable to disruptions in global energy markets.
IATA noted that passenger demand remains relatively resilient. Moreover, airlines may attempt to pass some of the additional fuel costs on to consumers through higher ticket prices, but competitive pressures and concerns about weakening consumer spending could limit their ability to do so.
As a result, many carriers are expected to face increased financial strain despite continued growth in air travel demand. Given this backdrop, we believe that investors would do well to keep an eye on airline stocks like Southwest Airlines (LUV - Free Report) , American Airlines (AAL - Free Report) and SkyWest (SKYW - Free Report) .
Surge in Fuel Costs: A Bane for Airlines’ Bottom Line
The fragile ceasefire between Iran and the United States has revived uncertainty in financial markets. Crude oil prices have experienced significant swings in response to developments surrounding the Strait of Hormuz, a vital global shipping corridor.
Oil has continued to trade at elevated levels, moving within the $90–$95 per barrel range amid concerns about rising inflationary pressures. High fuel costs are naturally hurting the bottom line of airlines. This is because fuel expenses represent a key input cost for airlines.
IATA’s Revised Forecast for 2026
Due to high fuel costs, IATA nearly halved its profitability projection for 2026. Per IATA, airlines are projected to earn a combined net profit of $23 billion this year, down from an estimated $45 billion in 2025 and well below an earlier forecast of $41 billion for 2026. The industry's net profit margin is expected to shrink to 2% from 4.2% last year. The earlier projection for the 2026 net profit margin was 3.9%.
Passenger ticket revenues are, however, expected to remain strong and drive 9.4% year-over-year growth in industry revenues to $1.17 trillion. Per IATA, passenger revenues in 2026 are anticipated to be $839 billion (up 9.2% year over year), which is nearly 72% of total revenues. The increasing ticket prices are likely to cover the substantial increase in airlines’ key input costs. Airlines are also relying on capacity discipline-related measures, like discontinuing unprofitable flights and consolidating routes to counter the high fuel costs.
Ancillary revenues are expected to be $165 billion. Per IATA, 5.1 billion people are likely to take to the skies in 2026, up 2.4% year over year. Cargo revenues in 2026 are expected to be $162 billion, representing a 7.2% year-over-year increase. Cargo volumes in 2026 are expected to reach 71.7 million tonnes in 2026, up marginally from year-ago levels.
Despite the top-line improvement, revenue growth is expected to lag operating expense growth of 13% to $1.12 trillion. Fuel costs are expected to rise by nearly 40% from $252 billion in 2025 to $350 billion in 2026. The average price of crude oil is anticipated at $95/barrel (Brent) for the year (up 37% from $69 in 2025). Non-fuel costs are expected to rise 4% to $767 billion, driven by a 4% uptick in labor costs. The shortage of renewal aircraft, too, has put a strain on the cost picture. Passenger load factor (% of seats filled by passengers) is expected to touch a record 84% during the year.
On a region-wise basis, North American carriers are expected to reap net profits of $9.4 billion in 2026, down from $12.4 billion in 2025. With most U.S. carriers having abandoned fuel hedging strategies, such an oil supply disruption has left them fully exposed to price spikes.
European carriers are expected to reap net profits of $9.6 billion, despite being highly dependent on Gulf imports for jet fuel. The profitability of carriers in regions like Latin America, the Middle East and the Asia Pacific is likely to decline in 2026 from the year-ago levels, mainly due to the jet fuel crisis.
The updated profitability forecast for 2026 highlights the industry's continued exposure to geopolitical risks and commodity price volatility. Until tensions in the Middle East ease and fuel prices moderate, airlines are likely to focus on cost-control measures, fuel-efficiency initiatives, and capacity adjustments to protect earnings in an increasingly uncertain operating environment.
3 Airline Stocks to Keep a Tab On
Despite the oil price volatility, air-travel demand remains upbeat. As a result, investors interested in the Zacks Transportation - Airline industry would do well to keep airline stocks on their radar for healthy gains.
Our Choices
Southwest Airlines is benefiting from its lean cost structure, expanding operations and strategic partnerships. Efforts to reward its shareholders also bode well. LUV no longer aggressively follows the practice of fuel hedging, having discontinued the practice. However, the low-cost carrier still has some hedging contracts.
LUV has a decent earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters, missed on one occasion and came in line in the other quarter, delivering an average surprise of 247%. Southwest Airlines currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Southwest Airlines Price and EPS Surprise
Southwest Airlines price-eps-surprise | Southwest Airlines Quote
American Airlines expects record travel during the ongoing summer season (May 21-Sept. 8, 2026). During the period, the airline expects to fly a record 75 million passengers across 750,000 flights.
American Airlines’ shares have gained 6.3% over the past month. The carrier’s earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters and missed the mark once. The average earnings beat was 2.6%. American Airlines currently carries a Zacks Rank #3.
American Airlines Price and EPS Surprise
American Airlines Group Inc. price-eps-surprise | American Airlines Group Inc. Quote
SkyWest is benefiting from strong air travel demand, despite the macroeconomic tensions, and its associated fleet modernization initiatives. A solid balance sheet enables the regional carrier to reward shareholders with share repurchases consistently. SKYW currently carries a Zacks Rank #3
SkyWest is based in St. George, UT. Its resilient business model, whereby the carrier has capacity purchase agreements with major carriers, minimizes direct exposure to fuel price fluctuations. The company's earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 8.8%
SkyWest Price and EPS Surprise
SkyWest, price-eps-surprise | SkyWest Quote