Air transport

IATA, summit in the shadow of war: skyrocketing fuel and airline profits at risk

The closure of Hormuz and rising jet fuel prices dominate the world summit. From the carriers tariff increases, route cuts and consolidation assumptions.

by Mara Monti (Rio de Janeiro)

6 June 2026

4' min read

Translated by AI

Versione italiana

4' min read

Translated by AI

Versione italiana

The air transport industry is meeting today in Rio de Janeiro for the annual assembly of the IATA (International Air Transport Association), called to confront what many operators consider to be the most serious crisis in the sector since the pandemic. The war in Iran and the subsequent closure of the Strait of Hormuz have caused a sharp rise in fuel costs, forcing airlines to cancel flights, raise fares and prepare for the risk of jet fuel rationing during the summer.

The summit, scheduled for 6-8 June, is the world's most important air transport event and brings together hundreds of airline executives, manufacturers and suppliers. IATA represents over 370 carriers, accounting for about 85 per cent of global air traffic, and arrives at the meeting at a radically different time than a few months ago. In December, the association forecast record profits of USD 41 billion for 2026; today, however, the industry is preparing for a significant downward revision of estimates.

Moody's cut outlook for the sector

Confirming the worsening scenario is Moody's Ratings, which lowered the outlook for the industry from stable to negative. According to the agency, fuel price increases linked to the Iranian conflict and disruptions to routes around the Strait of Hormuz will significantly reduce the companies' operating profits in 2026. The most pessimistic estimates indicate a contraction of more than 35%, before a possible recovery in 2027.

The first signs of the slowdown are already visible. IATA data for April recorded the first drop in global air traffic since the post-pandemic recovery phase, mainly reflecting the sharp reduction in the activities of the major Gulf carriers, including Emirates, Etihad Airways and Qatar Airways.

Sviluppo trasporto aereo, dibattito fra esperti in Milano-Bicocca

Companies react in a scattered way to the crisis

Airlines are reacting to the crisis in different ways. Carriers that can count on robust demand and a premium clientele have greater margins to pass on part of the cost increase to passengers. However, fully recovering the fuel price increase seems difficult. Bob Jordan, CEO of Southwest Airlines, said that US airlines have raised fares seven times since the start of the conflict without seeing a weakening in demand, but added that current fare levels remain insufficient to offset the full increase in fuel costs.

Particularly delicate is the situation of the Gulf carriers. Forced to cancel hundreds of flights due to the closure of regional airspaces, Emirates, Qatar Airways and Etihad Airways are trying to gradually restore normal operations. More complex is the situation in Kuwait, where the attempt to reopen the airport was interrupted by a drone attack that resulted in one fatality and a new airport closure. Kuwait Airways and Jazeera Airways had to temporarily suspend operations.

Who wins and who loses

However, there is no shortage of opportunities for some operators. Carriers with direct connections between Asia and Europe, such as Lufthansa Group, Air France-KLM, Singapore Airlines and Cathay Pacific, can benefit from the difficulties encountered by airlines more exposed to the Gulf routes: several Asian airlines recorded record low-factor levels in March and April, benefiting from capacity cuts at Middle Eastern hubs. While the supply of seats on direct Europe-Asia flights now shows a 10% increase over 2025. Even for these groups, however, rising fuel prices come on top of higher costs resulting from the continued closure of Russian airspace, forcing longer and more expensive routes.

Consolidation makes a comeback

The energy shock has also brought the issue of industry consolidation back into focus. Airlines with less room for manoeuvre on prices are struggling to absorb cost increases and risk following the fate of the US low-cost airline Spirit Airlines, which went bankrupt.

In Europe, investors are already considering new opportunities. The American air transport company Castlelake, which is among the shareholders of the Scandinavian company SAS, said it was considering a possible bid for easyJet. In the US, on the other hand, United Airlines' informal approach to a merger with American Airlines has attracted attention, a proposal which was reportedly rejected by the latter.

The effects on airline budgets

According to aviation industry analyst firm Cirium, which examined the balance sheets of 30 airlines globally, the sector continues to show remarkable resilience despite the consequences of the conflict with Iran and the resulting increase in fuel prices.

Of the 21 companies that have already published their first quarter or first half results, 16 reported an increase in operating margins, two a decrease and three substantially stable results. This trend reflects the strong demand for air transport recorded before the escalation of the conflict.

Operating margins are generally up in the three major geographies - the US, Europe and Asia - with most carriers reporting robust demand in the first quarter. Many companies also expect this trend to continue in the second quarter, despite the impact of the geopolitical crisis and higher jet fuel prices.

Capacity cuts and tariff increases

To cope with rising costs, most companies have announced a reduction in planned capacity of between 1% and 5% compared to their original plans for the remainder of 2026. The cuts are mainly attributed to high fuel prices and not to physical supply problems.

Uncertainty about the development of energy prices and fuel availability has prompted several companies to withdraw their financial guidance. In the US, where carriers generally do not adopt hedging strategies against fuel price fluctuations, a certain optimism prevails, however: it is believed that they will be able to offset cost increases through fare increases of up to 20%, supported by both ticket and ancillary service revenues.

At present, there is little evidence of structural action on fleets or employment. The only notable exception is Lufthansa's decision to divest its CityLife regional division by withdrawing its fleet of 27 CRJ900s from service and redeploying 2,000 employees.

Overall, the sector seems to regard the current crisis as a temporary phenomenon and prefers to keep its operational capacity intact in order to be ready for the recovery once the emergency is over.