Airlines Brace for a Tough Year as Fuel Costs Add $100 Billion to Expenses

Global airlines are staring at a sharp drop in profits this year, with the International Air Transport Association (IATA) warning that net earnings could be cut in half as jet fuel prices soar. The industry group said Sunday that rising fuel costs—driven by the ongoing U.S.-Iran conflict that began in late February—are adding $100 billion to carriers' collective fuel bills.

IATA's outgoing director general, Willie Walsh, noted that oil prices jumped past $100 a barrel in March, pushing jet fuel costs 70% higher than last year. That squeeze is forcing airlines to raise fares, even as travel demand holds steady. But Walsh cautioned that growth will slow. Net profits are expected to fall from $45 billion in 2025 to $23 billion this year, with margins shrinking from 4.2% to just 2.0%.

The pain won't be spread evenly. Airlines still recovering from the pandemic, along with those based in the Gulf region, face the biggest hit, Walsh said. A recent IATA poll found that 86% of travelers expect ticket prices to track with oil, and nearly half plan to spend more on travel this year than last. The big question, Walsh added, is how long passengers and shippers will put up with higher costs.

U.S. carriers saw their fuel spending jump 56% in March compared to February, hitting $5.06 billion, according to the Department of Transportation. European airlines are also feeling the heat. EasyJet posted a first-half loss of £552 million, blaming an extra £25 million in fuel costs. Lufthansa expects an additional €1.7 billion in fuel expenses this year. Ryanair, which hedged 80% of its summer fuel, saw profits rise 40%—and its CEO, Michael O'Leary, predicted that rivals could fail if prices stay high through the summer.