The global airline industry’s profits could be cut in half as it braces for its worst year since the pandemic

Even as travelers keep flying, airlines’ profits could be cut in half, thanks in part to the stranglehold Iran has imposed on the global oil supply, according to a global trade group for the industry. The airline sector’s net profit for the year is projected to collapse to $23 billion from $45 billion in 2025, while its net margins plummet to 2%, less than half of the 4.2% they were last year, said Willie Walsh, the outgoing director general of the International Air Transport Association (IATA). Some of the airlines that could be most affected are those with weaker balance sheets and those that serve the Persian Gulf, he added. Driving this contraction is the Iran war, which has now stretched into its fourth month. It has forced airlines to reroute flights to avoid conflict zones in the Middle East, making planes burn more fuel. But more importantly, Tehran’s subsequent actions to cut off the Strait of Hormuz, through which 20 million barrels of oil a day passed before the war, has sent oil and fuel prices soaring. Fuel prices are set to come in 70% higher year over year, which will add $100 billion to the industry’s collective fuel bill, Walsh said in a report on the state of the industry published Sunday. For now, air travel remains steady, and the IATA sees a strong summer peak season ahead. As air fare prices have climbed 20% this year, some airline CEOs have said travelers, especially at the higher end, are still buying. United Airlines CEO Scott Kirby, told Bloomberg on Sunday that he’s been surprised that demand has been less price-sensitive than he expected. Most consumers expect flight prices to increase in line with oil prices, and about half of them expect to spend more on flights this year, said Walsh, who is leaving the IATA to become CEO of Indian airline IndiGo. But this resilience may not last forever. “The big unknown is how long travelers and shippers can tolerate the higher costs of connectivity,” he said. The Iran war is bringing the airline indu