IATA Warns of $100 Billion Spike in Airline Fuel Bills, Forecasts Profit Halving

The International Air Transport Association (IATA) has warned that airlines face an additional $100 billion in jet fuel costs this year, driven by the closure of the Strait of Hormuz following hostilities with Iran. The association said the resulting surge in fuel prices would “inevitably” lead to higher airfares.

Jet fuel prices are expected to average 70 percent higher across 2026, IATA said, forecasting that collective industry profits would halve to $23 billion. The body added that some carriers may struggle to survive the price shock caused by the supply disruption that began in March.

Speaking at IATA’s Annual General Meeting in Rio de Janeiro, Director General Willie Walsh said higher crude oil prices would leave airlines with no choice but to raise ticket prices.

“High oil prices will inevitably mean higher ticket prices. There’s just no way to avoid that,” Walsh was quoted as saying by The Guardian UK.

He noted that industry polling indicated passengers were braced for higher fares and willing to pay more, but cautioned: “The big unknown is how long travellers and shippers can tolerate the higher costs of connectivity.”

Describing the current environment as “challenging and unpredictable” with “wafer-thin margins,” Walsh said concerns over actual fuel shortages had eased despite soaring costs. He contrasted the situation with the COVID-19 pandemic, stating it was not a crisis.

“It’s going to be very challenging and for a lot of airlines the increase in the fuel bill is potentially existential,” he said. Nevertheless, he noted that the industry remained profitable and on a growth trajectory, with passenger traffic up two percent. “If you factor out the impact on the Middle East for the rest of the world it remains a pretty positive environment,” he added.

Separately, British Airways Chief Executive Sean Doyle suggested that long-haul and business travellers would bear the brunt of fare increases. “There will be no getting away from it – if fuel goes up, fares have to go up,” Doyle said on the sidelines of the conference. He added that more price-sensitive short-haul leisure flights would likely see increases last, noting that a carrier like BA, with substantial long-haul and premium traffic, would expect a higher pass-through of costs than competitors focused solely on short-haul leisure.

According to IATA research, approximately half of passengers are prepared to pay substantially more if fares track oil prices, a finding Walsh said “bodes well” for the upcoming northern summer season.

In a recurring assessment, IATA also identified Nigeria as one of the world’s most expensive countries for airline operations, citing high costs that continue to undermine the viability and growth of local carriers.

Kamil Al-Awadhi, IATA’s Regional Vice President for Africa and the Middle East, acknowledged ongoing reform efforts by Nigeria’s Minister of Aviation and Aerospace Development, Festus Keyamo. However, he stressed that airlines in the country still face significant cost pressures, including excessive taxes, charges, and other operational expenses.

The high-cost environment, Al-Awadhi said, has made it difficult for Nigerian airlines to remain competitive and profitable, limiting the sector’s potential. He noted that Nigeria ranks among the most challenging markets from a cost perspective.

To address the issue, Al-Awadhi urged member states of the Economic Community of West African States (ECOWAS) to implement a proposed 25 percent reduction in aviation taxes and charges. Such a measure, he argued, would lower air travel costs, stimulate passenger traffic, and improve the competitiveness of airlines across West Africa.

IATA has repeatedly highlighted Nigeria as one of the most expensive and difficult places to conduct airline business. Research presented by Al-Awadhi at an African Aviation Conference in Abuja several years ago, and published by THISDAY, found that Nnamdi Azikiwe International Airport in Abuja ranks as the most expensive airport in Africa, closely followed by Murtala Muhammed International Airport in Lagos.

Al-Awadhi noted that the Nigerian government imposes at least 27 different charges on airlines. He criticised the country for making it difficult for Nigerian airlines to operate profitably, saying high airport charges effectively abort their growth.

“In a recent research conducted, we discovered that the most expensive airport in Africa is Abuja airport, followed by Lagos airport,” he said. “With all these exorbitant charges, Nigerian airlines can’t compete with their foreign counterparts.”

He added: “Africa has put itself in a place where it cannot help its own – expensive fuel, excessive charges, leasing and insurance through the roof. The airlines need to be financially viable too. The airlines contribute to the country’s GDP, but Nigeria needs to decide what to do for them to survive.”