On 7th June, the International Air Transport Association (IATA) released its industry outlook for the remaining months of 2026, and it was rather pessimistic in the face of the ongoing conflict in West Asia.
Per the report, airlines may only be able to achieve half the previously projected total combined profit of US$41 billion, with the conservative estimate standing at around US$23 billion.
Circumstances have understandably halved the projected net profit margin to just two percent for this year, and net profit per passenger transported will be at US$4.50, a drop from the US$9.10 per seen as of end-2025.
As IATA director-general Willie Walsh remarked in a statement released during the Association’s recently concluded annual general meeting in Brazil: “War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse. All airline bottom lines are suffering from the rapid 70 percent rise in jet fuel prices. Some of the additional cost is being recuperated by adjusting prices and improving efficiency, but it will not be sufficient to maintain profitability at the previous year’s level.”
Are we seeing the writing on the wall for low-cost carriers?
While all airlines continue to struggle and scramble for solutions to maintain viability, it is low-cost carriers which have been hit the hardest.
Around a month before IATA released that report, the Financial Times pointed out the possibility that the financial repercussions of the West Asia crisis could be a death-knell for low-cost commercial aviation.
In The Iran War and the future of cheap flights, Peter Campbell wrote how rising prices have jeopardised the future of the sector as rising fuel costs are driving up the price of the average plane ticket which has, in turn, forced many would-be-travellers to shelve their plans.
But Campbell reminded both industry professionals and consumers that the current issue is just one of many which have hit commercial aviation through the decades, and that the industry continues to bounce back.
He said: “The winnowing of the airline industry, notorious for its low margins and cut-throat price battles, is a semi-regular occurrence. Most years see dozens of smaller carriers cease operations in bankruptcies that go largely unremarked upon outside of passengers or staff directly affected.”
Indeed, airlines either stop operations, shift to a different operational model, enter strategic alliances, or are bought out by bigger players in a bid to maintain industrial viability.
Also, the industry does recover; but it is never the same and some players never get back into the game.
No big deals here
One thing is certain in the face of the crisis: much-trumpeted mega-deals are now unlikely to push through.
Consider the purported purchase of American Airlines by its chief rival United: despite United CEO Scott Kirby’s audacity, going so far as to bring the matter to no less than US President Donald Trump, the deal may be chalked up as a no-go.
IATA’s Walsh opines: “I don't think that's going to happen. I think the regulatory hurdles would be very significant. I don't know whether that was a genuine effort to pursue consolidation or [Kirby] just trying to stir up some media.”
Indeed, US aviation and commercial authorities are in a position to nix the proposal, citing how it could serve as a precedent leading to the monopolisation of commercial aviation in the country by a mere handful of players.
The issue of deals falling through isn’t just isolated to the United States, of course, as even their counterparts in the United Kingdom have been shying away from final decisions for a number of mergers and acquisitions over the past several months.
Looking ahead, the future remains uncertain: commercial aviation is in for a challenging time, but if the known geopolitical issues remain unresolved, that could run for a protracted period.
