Higher costs squeeze industry profits
The Middle East conflict has driven up crude oil and jet fuel prices, prompting major airlines, including Delta Air Lines, to cut annual profit forecasts. Rising operating expenses and supply-chain disruption have strained carriers' liquidity, while global trade tariffs are complicating fleet planning and assessments of future demand.
The International Air Transport Association's June 7, 2026, outlook put global airline net profit at $23.0 billion for 2026, roughly half the $45 billion earned in 2025. IATA projected a net profit margin of 2.0%, down from 4.2%.
Its forecast assumed an industry fuel bill of $350 billion, nearly 40% above the previous year's $252 billion. Jet fuel was expected to average $152 a barrel, an increase of almost 70% year over year.
Fuel availability had also raised concerns earlier in the year. On April 16, 2026, International Energy Agency chief Fatih Birol said Europe had "maybe six weeks or so of jet fuel left." European jet fuel prices had more than doubled since the Middle East war began on February 28, 2026.
Airlines reduce flights and fleets
Ryanair reduced its winter capacity by around 4%, leaving it expecting two million fewer passengers for the financial year. The airline said the cuts should lower its fuel bill by as much as €100 million.
Two rounds of reductions at easyJet removed approximately 1.3 million to 1.4 million seats from its winter schedule. The airline also agreed in October 2026 to a £5.7 billion takeover by U.S. private equity firm Apollo.
Other European carriers announced reductions earlier in the year. Lufthansa's April 2026 plans covered 38 aircraft: all 27 planes at its CityLine subsidiary, its last four Airbus A340-600s, two Boeing 747-400s and another five aircraft from its core airline for the 2026-2027 winter schedule. KLM separately said it would fly 80 fewer round trips to and from Amsterdam Schiphol in May.
O'Leary warns of higher fares and airline failures
Ryanair CEO Michael O'Leary warned that prolonged high fuel prices and disruption from the conflict could drive multiple weaker European airlines into financial collapse.
Speaking in Brussels in October 2026, he said European airfares could climb by as much as 20% over the next 12 months, calling it the "biggest increase in airfares... in history". He said Ryanair lacked pricing protection for 85% of its estimated fuel requirements for the following year.
airBaltic seeks protection from creditors
Latvia's airBaltic voluntarily filed for Chapter 11 bankruptcy protection in the U.S. on September 14, 2026. Reuters described it as the second airline casualty linked to the Iran war, following Spirit Airlines' collapse in May 2026.
Reuters reported that airBaltic had not hedged its jet fuel needs, leaving it exposed to sharp oil-price increases. In a separate assessment, ratings agency Fitch put the hedged share of its 2026 fuel consumption at only around 10%. Latvia's government supplied a €30 million state loan in April 2026 but made no pledge of further support.
The airline secured a commitment for €350 million in debtor-in-possession financing and expects to finish its restructuring around June 2027.
