Airlines Brace For Worst Profit Squeeze Since COVID

Airline stocks came under pressure Wednesday following a downgraded global profit outlook from the International Air Transport Association (IATA).

IATA warned that airlines face mounting pressure in 2026 as the closure of the Strait of Hormuz triggers a severe fuel supply shock, weakens economic growth, and raises operating costs across the aviation industry.

In a new industry outlook, IATA said the disruption that began on February 28 removed about 10 million barrels per day of crude oil supply from global markets.

Including refined products and liquefied natural gas, the disruption affected roughly 15 million barrels per day of energy supply and briefly pushed crude prices toward $150 per barrel.

Jet Fuel Costs Surge

The aviation sector has been hit particularly hard. IATA said jet fuel prices have roughly doubled since late February, while jet fuel crack spreads reached a record $80 per barrel in April as refinery outages and constrained throughput tightened supply.

The association noted that Hormuz-linked flows account for about one-fifth of global seaborne jet fuel trade. Supply competition has intensified across Europe, the U.S. West Coast, and parts of Asia, increasing the risk of regional shortages and higher fuel costs.

Passenger And Cargo Growth Slow

IATA now expects global passenger traffic to grow 2.1% in 2026, a sharp slowdown from recent years. Higher fuel costs, airspace disruptions, and longer flight routes are weighing on demand, although consumer willingness to travel remains relatively resilient.

Regional performance is diverging. The Middle East is expected to face a significant contraction due to airspace restrictions, while Africa and Asia-Pacific could benefit from traffic rerouting.

Air cargo demand is also slowing. IATA forecasts cargo volumes will rise just 0.7% in 2026 as the conflict disrupts hub connectivity and limits available capacity.

Profitability Under Pressure

IATA expects industry profitability to weaken. Airline revenue is projected to rise 9.4% in 2026, but net profit is forecast to fall to $23 billion, reducing the industry’s net margin to 2%, the weakest level since the COVID-19 pandemic.

The association also warned that the energy shock is likely to slow global GDP growth to about 2.5% in 2026 from around 3% previously, while pushing global inflation above 5%, increasing the risk of stagflation.

Airline Stocks Retreat On Weaker Outlook

Alaska Air Group fell 3.61% to $43.50, United Airlines Holdings declined 3.27% to $106.05, Frontier Group Holdings lost 3.46% to $6.13, American Airlines Group slipped 2.31% to $13.76, Delta Air Lines dropped 2.36% to $79.25, and Southwest Airlines shed 2.39% to $42.14.

JetBlue Airways fell 1.63% to $4.84, Ryanair Holdings lost 2.03% to $56.82, Copa Holdings declined 1.62% to $133.18, SkyWest slipped 1.14% to $86.78, and LATAM Airlines Group eased 1.02% to $48.76 as of publication Wednesday, according to Benzinga Pro data.