MUSCAT: Airlines in the Middle East are expected to slip into losses in 2026 as regional conflict, airspace disruptions and soaring fuel costs weigh heavily on financial performance, according to the latest outlook released by the International Air Transport Association (IATA).

While airlines in all other regions are projected to remain profitable, albeit at lower levels than previously forecast, the Middle East is expected to be the only region to record a collective net loss.

IATA said global airline profitability is expected to decline sharply this year, with industry net profits forecast to fall from $45 billion in 2025 to $23 billion in 2026. Net profit margins are projected to narrow from 4.2 per cent to 2.0 per cent.

“War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse,” said Willie Walsh, Director General of IATA.

He noted that airlines worldwide are grappling with a nearly 70 per cent increase in jet fuel prices, forcing carriers to absorb a significant portion of the additional costs despite efforts to improve efficiency and adjust fares.

“At the regional level, all are in the black but with sharply reduced financial performance, with the exception of the Middle East,” Walsh said. “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.”

According to IATA, fuel costs are expected to rise from $252 billion in 2025 to $350 billion in 2026, accounting for more than 31 per cent of total airline operating expenses, compared with 25.4 per cent a year earlier.

The forecast is based on an average Brent crude oil price of $95 per barrel in 2026, up from $69 per barrel in 2025. Jet fuel prices are expected to average $152 per barrel, compared with $90 per barrel last year, while the premium of jet fuel over crude oil is projected to remain at historically high levels.

Despite airlines hedging approximately one-third of their expected fuel consumption, IATA said carriers remain vulnerable to sustained increases in fuel prices and elevated refining margins.

Global fuel consumption is expected to remain broadly unchanged at around 104 billion gallons in 2026, meaning higher fuel prices alone are responsible for the significant increase in operating costs.

Walsh said the industry’s financial resilience is being severely tested, noting that net profit per passenger is expected to fall to $4.50, nearly half the level recorded in 2025.

The Middle East, positioned at the centre of the geopolitical crisis, is expected to face the strongest financial headwinds. Capacity reductions, flight cancellations, operational disruptions and higher fuel prices are driving up operating costs, while the loss of transfer traffic is weakening load factors and increasing unit costs.

IATA said these combined pressures are expected to push the region’s airlines into losses despite continued efforts by Gulf carriers to maintain connectivity across their global networks.

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