Airline passengers should brace for higher ticket prices as carriers grapple with an additional $100 billion in jet fuel costs this year, driven by soaring oil prices following the conflict with Iran. The International Air Transport Association (Iata) warned that collective industry profits would halve to $23 billion in 2026, with some airlines facing an existential threat.
Fuel Costs and Fare Hikes
Jet fuel prices are expected to be 70% higher across 2026 compared to previous levels. Willie Walsh, Iata's director general, stated: 'High oil prices will inevitably mean higher ticket prices. There's just no way to avoid that.' He noted that passengers are already anticipating higher fares and are prepared to spend more, but the duration of their tolerance remains uncertain.
Speaking at Iata's summit in Rio de Janeiro, Walsh described the current environment as 'challenging and unpredictable,' with 'wafer-thin margins.' He added: 'It's going to be very challenging and for a lot of airlines the increase in the fuel bill is potentially existential.' However, he dismissed fears of fuel shortages, stating that the situation is not a crisis comparable to the Covid-19 pandemic.
Impact on Different Travel Segments
Long-haul and business passengers are likely to bear the brunt of fare increases, according to British Airways CEO Sean Doyle. 'There's no getting away from it – if fuel goes up, fares have to go up,' he said. However, he suggested that price-sensitive short-haul holiday flights would be the last to see increases, as airlines like BA, with a strong long-haul and corporate focus, can pass on costs more easily than leisure carriers.
Iata research indicates that around half of passengers are willing to spend substantially more on fares if they track oil prices, which Walsh said 'bodes well' for the upcoming northern summer season. Industry data shows more British and European travelers are opting for intra-continental flights, avoiding long-haul routes due to uncertainty surrounding Gulf hubs.
EU Border System Concerns
Iata also raised concerns about the European Union's Entry-Exit System (EES), which could cause significant delays for travelers. The system, set for full implementation by September 7, requires biometric checks for most non-EU citizens, including fingerprinting and photographing. Rafael Schvartsman, Iata's vice-president for Europe, warned that processing times could increase from 20-25 seconds to 90 seconds, leading to long queues.
'For most of the Mediterranean, the British are the No 1 incoming tourist – that is a major concern,' Schvartsman said. He called for Europe to amend legislation to allow flexibility in pausing border controls if needed. While Greece has unilaterally exempted UK nationals from EES checks, Schvartsman noted that this does not resolve the issue for other nationalities, such as US citizens, who also face high demand for European travel.
Outlook for the Industry
Despite the challenges, Walsh emphasized that the industry remains profitable and is forecasting growth, with traffic up 2%. 'If you factor out the impact on the Middle East for the rest of the world, it remains a pretty positive environment,' he said. However, the combination of rising fuel costs and new border procedures will test airlines' resilience in the months ahead.
