Airline Profits Halve; Walsh Tells OEMs to ‘Stop Gouging’

RIO DE JANEIRO — The global aviation industry faces a sharp financial reversal in 2026, with net profits projected to halve compared to last year. Driven by a 70% year-on-year spike in jet fuel prices and severe operational disruptions from the war in the Middle East, the International Air Transport Association (IATA) has slashed its global net profit forecast to $23 billion, down from $45 billion in 2025.

Delivering his State of the Industry report at IATA’s 82nd Annual General Meeting (AGM) and World Air Transport Summit in Rio de Janeiro, Director General Willie Walsh painted a picture of an industry trapped between robust consumer demand and punishing macroeconomic headwinds.

The 2026 Financial Squeeze

While total industry revenues are on track to climb 9.4% to a record $1.165 trillion, operating expenses are rising faster at 13%. This mismatch is putting a severe squeeze on margins. Global net profit margins will drop to a razor-thin 2.0%, down from 4.2% in 2025, leaving airlines with an average profit of just $4.50 per passenger.

The primary culprit is a $100 billion surge in the industry’s collective fuel bill. Driven by geopolitical tensions, crude oil is averaging $95 a barrel, while jet fuel has skyrocketed to an average of $152 a barrel due to a historic crack spread of $57.

The table below outlines the stark shift in global aviation performance metrics between 2025 and 2026:

Regional performance is highly fragmented. Hit hardest by the conflict, Middle East carriers are projected to plunge into a $4.3 billion net loss this year as airspace closures and lost transfer traffic decimate regional load factors. Conversely, North America ($9.4 billion) and Europe ($9.6 billion) remain the most profitable regions in absolute terms, though their margins have softened considerably.

Walsh Unleashes Wrath on Aerospace Supply Chain

Adding to the pain of high fuel prices is an ongoing aerospace supply chain crisis that Walsh termed an absolute failure. Airlines are burning more fuel because they are forced to fly older, less efficient aircraft due to manufacturers failing to deliver new jets and engines on schedule.

The global aircraft order backlog has swelled past 18,000, pushing the average global fleet age to a record 15.2 years. Walsh noted that the industry is short roughly 5,000 fuel-efficient replacement aircraft that airlines had built into their strategies, racking up $11 billion in extra maintenance and leasing costs in 2025 alone.

Walsh did not mince words when addressing original equipment manufacturers (OEMs), pointing out the paradox of surging engine manufacturer profits alongside widespread airline groundings. “My message to the engine OEMs is simple—stop gouging us and get back to making great engines that work and that last,” Walsh said. “Allowing these failures to extend into the next decade is totally unacceptable to the customers.”

While praising an extended agreement with CFM to bolster aftermarket competition and parts availability, Walsh warned that the remedy is far from a magic bullet.

IATA’s chief also used the Rio platform to attack localized taxation policies and consumer protection laws that defy global standards, focusing heavily on the host nation, Brazil, and the European Union.

• Brazil’s VAT Shock: Walsh strongly criticized Brazil’s plans to implement a 26.5% Value Added Tax (VAT) on airline tickets. IATA models suggest the move would add an average of $195 to international fares, wiping out up to 3.6 million international journeys and dealing far harsher damage to the domestic economy than any tax revenues gained.

• The “EU261” Poster Child: Turning to passenger rights, Walsh branded Europe’s EU261 regulation the “poster child of bad regulation,” noting its penalties routinely exceed ticket prices. He highlighted that Brazil currently handles 95% of all passenger rights litigation worldwide due to similar regulatory overreaches.

• Heathrow Monopoly Defended: On infrastructure, Walsh leveled a scathing critique at London Heathrow’s management after the airport’s CEO explicitly noted that existing shareholders would refuse to invest if the airport’s development were opened to rival investors. Walsh called the stance an “outrage,” asserting that Heathrow continues to operate under a perverse regulatory model that rewards spending rather than consumer value.

Walsh asked for a blunt reassessment of aviation’s decarbonization path. While airlines maintain their 2050 Net Zero target, fundamental pillars of the strategy are crumbling.

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is starved of offset credits, as only 10 countries have made Eligible Emissions Units (EEUs) available so far. Meanwhile, Sustainable Aviation Fuel (SAF) production is heavily lagging. Expected 2026 SAF volumes will reach 2.4 million tonnes—a fraction of a percent (0.8%) of global airline fuel needs.

Walsh blasted European and British SAF mandates for forcing airlines to pay billions in “compliance add-ons” that effectively compensate fuel suppliers for failing to produce the fuel in the first place. “Airlines are paying penalties because fuel suppliers aren’t making SAF, despite airlines wanting to buy more than is being made,” Walsh stated. “You could not make this stuff up!”

Walsh conceded that the industry has no path to meet ICAO’s interim 5% emissions reduction target by 2030, calling for an urgent, action-oriented dialogue to hammer out a realistic, revised timeline.

Willie’s Last Dance (at IATA)

The 82nd AGM marks Walsh’s final major appearance as the head of IATA, as he will step down in a few weeks to assume the role of CEO at IndiGo Airlines, a low-cost Indian giant. The executive surprised the audience because, despite widespread speculation, no successor has been named at the event so far.

Even in the immediate financial turbulence of 2026, Walsh concluded on a note of resilient optimism, pointing to the rapid adoption of Artificial Intelligence (AI) as a tool that will unlock massive cost and operational efficiencies over the coming decade.

“While the forces of conflict and division seem to make our world more dangerous day by day, aviation makes the world a better place by bringing people together,” Walsh said. “We offer hope and enable freedom.”

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Pablo Diaz

Pablo Diaz is an award-winning journalist based in Buenos Aires, Argentina. He is also Editor In Chief of Aviacionline.com. Law, Engineering, and a pinch of science. When in doubt, trust evidence.

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