The airline industry is facing a perfect storm: jet fuel prices have surged 70% this year, pushing airlines to spend an extra $100 billion on fuel—while global profits are set to halve to $23 billion, according to the International Air Transport Association (IATA). With Middle East conflicts disrupting oil flows and forcing costly detours, carriers are raising fares, slashing routes, and bracing for bankruptcies as smaller airlines struggle to absorb the shock.
Why fares are rising—and who’s paying the most
The math is brutal. Jet fuel prices now average $142 a barrel, up from $83 in early 2025, according to IATA’s latest data. That means airlines will shell out $100 billion more this year alone—money that has to come from somewhere. And with industry profits expected to plummet from $46 billion in 2025 to $23 billion in 2026, the answer is clear: passengers will foot the bill. The Guardian reports that long-haul and business travelers are the first to feel the squeeze, while budget carriers like Ryanair are scrambling to keep prices in check through promotions. But even they won’t escape unscathed.
The pain isn’t evenly distributed. Legacy carriers like British Airways, which rely on premium cabins and corporate bookings, will pass along costs more directly than budget airlines competing on short-haul leisure flights. “A brand like BA, which has got a lot of long haul, a lot of corporate, a lot of premium—we’d expect maybe to have more pass-through of prices than maybe a carrier who’s solely competing for leisure short haul,” Sean Doyle, BA’s CEO, told reporters at IATA’s summit in Rio de Janeiro this week. The message to travelers? Book a budget airline for a weekend getaway in Europe, but brace for sticker shock on transatlantic or intercontinental trips.
Yet the fare hikes aren’t just about fuel. Airlines are also cutting capacity to match weakened demand. Passenger traffic fell 3.4% in April—the first decline since the pandemic—while forward schedules show fewer flights in the coming months, Yahoo Finance reports. The Middle East conflict has forced Gulf hubs like Dubai and Doha to scale back operations, disrupting global routes. “The slowdown is no longer isolated to a specific region,” analysts at Cirium noted, pointing to Western Europe’s first drop in demand since 2020.
Who’s at risk—and who might survive
Not all airlines will weather this storm. IATA’s director general, Willie Walsh warned this week that midsize carriers with limited cash reserves are the most exposed. “Unfortunately, I think there will be some carriers that will find this high fuel price very difficult to cope with,” he told Reuters at the Rio summit. The collapse of U.S. budget carrier Spirit Airlines in May is a harbinger: Walsh expects more bankruptcies and consolidations in the coming months.
Photo: AOL.comAirlines add surcharges, raise fares over fuel costs
But the low-cost model isn’t dead—just under pressure. Ryanair’s aggressive sales and Air France-KLM’s recent move to offer free ticket changes prove that some carriers can still attract passengers by absorbing costs. Walsh pointed to Ryanair’s strong performance in Europe as evidence that the model remains viable outside the U.S., where the “big three” legacy carriers (United, Delta, American) dominate and squeeze out budget competitors. “I don’t see that the low-cost model is broken,” Walsh said. “In fact, quite the opposite.”
The bigger risk lies with airlines that can’t pass along costs or secure financing. Walsh dismissed talk of a blockbuster merger between United and American Airlines—proposed earlier this year by United CEO Scott Kirby—as unrealistic. “I don’t think that’s going to happen,” Walsh said. “The regulatory hurdles would be very significant.” But consolidation is already happening at the margins, with smaller carriers either folding or being acquired by larger rivals.
Supply chain chaos: Why airlines are stuck with empty planes
If fuel costs weren’t enough, airlines are also grappling with a global aircraft shortage. Delays from Boeing and Airbus, combined with engine shortages from GE Aerospace and Pratt & Whitney, have left carriers with fewer planes to fly—and no relief in sight. Walsh estimated that supply chain disruptions cost airlines $11 billion in 2025, yet engine makers continue to post record profits. “We’re disappointed they’re not moving faster,” Walsh said. “They’re not sharing the pain that the airline industry is sharing.”
The Middle East conflict has only worsened the crisis. With Gulf hubs like Dubai and Doha scaling back operations, airlines must reroute flights around the Strait of Hormuz, adding hours and fuel costs to long-haul journeys. Walsh downplayed long-term damage to the Gulf’s aviation dominance, noting that its strategic location and popular carriers (Emirates, Qatar Airways, Etihad) make it irreplaceable. “That capacity cannot be replaced by airlines from other regions around the world,” he said. But for now, the detours are eating into margins.
Europe’s border chaos: Will travelers face 90-second passport checks?
Even if airlines survive the fuel crunch, European travelers face another headache: the EU’s new Entry-Exit System (EES), which requires fingerprinting and photographing non-EU citizens at border controls. Set to go live on September 7, the system threatens to create longer lines and delays—especially if the biometric checks take 90 seconds per passenger, as IATA warns. Rafael Schvartsman, IATA’s vice president for Europe, called the timeline “unrealistic.” “Normally, we would process a passenger in 20 to 25 seconds,” he said. “You’re already stipulating that it will take 90 seconds, and on top of that you have unreliability of the systems. The probability that people will be waiting in lines for a long time is very, very high.”
Photo: Yahoo Finance
IATA is urging Europe to delay or modify the rollout, arguing that the system’s inflexibility could disrupt summer travel. With fewer passengers venturing outside Europe due to high fares and geopolitical uncertainty, the last thing the industry needs is border bottlenecks. But with the EU’s deadline firm, airlines are bracing for chaos—unless Brussels agrees to extend flexibility.
What happens next: Three scenarios for the industry
The next 12 months will test the resilience of the airline industry. Here’s how it could play out:
Scenario 1: The fuel spike peaks, but consolidation continues. If oil prices stabilize below $150 a barrel, airlines may avoid mass bankruptcies—but expect more mergers and route cuts. Legacy carriers will raise fares further, while budget airlines double down on promotions to retain passengers.
Scenario 2: The Middle East conflict drags on, deepening the crisis. If the Strait of Hormuz remains blocked, fuel prices could climb higher, forcing more carriers into bankruptcy. Gulf hubs may permanently lose market share to Asian or African alternatives.
Scenario 3: Europe’s border system collapses under its own weight. If the EES rollout fails due to technical glitches or long lines, the EU could be forced to delay or revise the system—giving airlines a temporary reprieve.
One thing is certain: passengers will pay. Walsh’s warning—that “high oil prices will inevitably mean higher ticket prices”—isn’t just rhetoric. With industry profits halving and fuel costs soaring, the choice for airlines is stark: raise fares or risk going out of business. For travelers, the summer season may be the last affordable window before prices climb even higher.
The bigger question is whether this crisis will reshape aviation permanently. In 2011–2013, when jet fuel prices hit $130 a barrel, the industry remained profitable. But this time, the combination of geopolitical disruption, supply chain breakdowns, and thinner margins makes the stakes far higher. Walsh’s parting thought at the Rio summit was telling: “It’s going to be very challenging, and for a lot of airlines, the increase in the fuel bill is potentially existential.” The countdown has begun.
