European airline stocks weakened across the board on Monday after the International Air Transport Association (IATA) sharply downgraded its profit outlook for 2026, blaming a large increase in jet fuel prices tied to disruptions from the Middle East conflict.
By 04:40 ET (08:40 GMT), shares of IAG, Air France-KLM, Lufthansa, Wizz Air and Ryanair were down between 1.47% and 2.1%. easyJet was a relative outlier, showing a smaller decline of 0.86%.
IATA now expects the global airline industry to record a combined net profit of $23 billion in 2026. That figure compares with $45 billion in 2025 and is well below an earlier projection of $41 billion. The association forecasts that the industry net profit margin will narrow to 2.0% in 2026 from 4.2% in 2025, and that net profit per passenger will drop to $4.50 from $9.10.
Willie Walsh, IATA’s Director General, summarized the scale of the decline: "Profits will shrink from $45 billion in 2025 to $23 billion this year. And margins will shrink from 4.2% to 2.0%." He added a pointed remark on the practical effect of the change in per-passenger profitability: "It won’t even buy you a hot dog at most of the FIFA World Cup venues."
Fuel is the central driver of the downgrade. IATA projects jet fuel prices will average $152 per barrel in 2026, an increase of nearly 70% from $90 per barrel in 2025, based on an assumed average Brent crude price of $95 per barrel. As a result, fuel bills for the industry are forecast to rise by about 40%, reaching $350 billion in 2026 versus $252 billion in 2025. Fuel's share of total operating expenses is expected to climb to 31.4% from 25.4%.
On an operating basis, total expenses for airlines are forecast to hit $1.117 trillion, while revenues are expected to grow 9.4% to $1.165 trillion.
European carriers are singled out as particularly exposed to the impact. IATA projects European airline net profit will fall to $9.60 billion in 2026 from $13 billion in 2025, and that the region's net margin will decline to 3.1% from 4.5%. Profit per passenger for European carriers is forecast to drop to $7.50 from $10.30. Although European airlines had hedged roughly 70% of their fuel needs before the crisis, IATA cautions that higher fuel costs will become more pronounced as those hedges roll off.
The assessment also points to stark regional differences. The Middle East is expected to suffer the steepest swing, moving to a net loss of $4.30 billion in 2026 from a $7.20 billion profit in 2025, with demand as measured by revenue passenger kilometres (RPKs) projected to fall 11.4%. North American carriers are forecast to earn $9.40 billion in 2026, down from $12.40 billion in 2025, while Asia Pacific profits are expected to decline to $6.60 billion from $9.80 billion.
Smaller carriers that entered the year with weak balance sheets are identified as facing particular strain, a point emphasized by IATA leadership: "Smaller carriers that started the year with weak balance sheets are certainly struggling," Walsh said.
Return on invested capital across the airline industry is projected to fall to 4.3% in 2026 from 6.6% in 2025, which would sit below the estimated weighted average cost of capital of 8.5%. Alongside the profit and margin figures, IATA expects total passenger numbers to reach 5.10 billion in 2026 and for the industry load factor to set a record at 84%.
Market context: The downgrade and associated figures signal pressure on carriers' unit economics, with higher fuel costs eroding margins and reducing profit on a per-passenger basis. The effect is particularly acute in regions where demand or exposure to fuel cost volatility is high.