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Why Airfares Could Rise Further While Airline Profits Fall

Higher fares do not guarantee higher airline profits. IATA forecast operating costs to outgrow revenue in 2026, with fuel, timing and fleet constraints squeezing margins.

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Airfares can rise while airline profits fall because higher ticket revenue does not necessarily keep pace with higher costs. The International Air Transport Association (IATA) forecast global airline revenue to grow 9.4% in 2026, while operating expenses grow 13%; it projected net profit of $23 billion, down from $45 billion in 2025. These are forecasts, not completed-year results.

Why can airfare rise while airline profits fall?

A ticket price is revenue for an airline, not profit. Profit is what remains after costs such as fuel, labor, aircraft leases and maintenance are paid. If costs rise faster than revenue, an airline can charge more and still earn less.

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IATA’s June 2026 outlook projected global net margin falling from 4.2% in 2025 to 2.0% in 2026. It forecast $1.165 trillion in total revenue against $1.117 trillion in operating expenses, leaving $23 billion in net profit. The figures describe the worldwide airline industry in aggregate, not every carrier or route. IATA’s June 2026 outlook

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Higher fares are part of the response to higher costs, but they do not make every ticket more expensive by the same amount. IATA forecast passenger ticket yields to rise 7% in 2026 and passenger ticket revenue to reach $839 billion, up 9.2%, while passenger demand measured in revenue passenger kilometers was expected to grow 2.1%. Yield and total ticket revenue are industry measures; neither tells you what a particular traveler will pay on a specific route.

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What changed in IATA’s 2026 forecast?

The June 2026 outlook sharply reduced IATA’s profit forecast after the fuel-price shock and Middle East-related disruption. This is a revision in forecasts, not a comparison of two realized results.

Forecast 2026 net profit 2026 net margin Assumed average jet fuel price
IATA, December 2025 $41 billion 3.9% $88 per barrel
IATA, June 2026 $23 billion 2.0% $152 per barrel

The June forecast also projected 5.1 billion passengers and an 84.0% passenger load factor. The load factor is the share of available seats expected to be occupied; neither figure is a report of actual full-year results. IATA’s December 2025 outlook; IATA’s June 2026 outlook

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Why are airlines’ costs rising faster than fares?

Fuel became a much larger expense

IATA projected global airline fuel costs rising from $252 billion in 2025 to $350 billion in 2026. It expected fuel to account for 31.4% of operating expenses, compared with 25.4% in 2025. The June outlook was based on Brent crude averaging $95 a barrel and jet fuel averaging $152 a barrel—almost 70% above the $90 jet-fuel average it cited for 2025.

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Refining costs matter as well as crude oil. IATA forecast an average jet-fuel crack spread of $57 a barrel. The crack spread is the difference between crude oil and the refined products made from it; a wider spread can keep jet fuel expensive even when crude prices move differently.

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Airlines had hedged roughly one third of expected 2026 fuel consumption, according to IATA. Hedging can soften some near-term price swings, but it does not eliminate exposure to a sustained rise. Some airlines hedge crude rather than jet fuel, leaving them exposed to a widening gap between crude and refined fuel prices. IATA’s June 2026 outlook

Tickets are sold before many costs are known

Airlines plan schedules and capacity months ahead and sell tickets well before departure. When fuel jumps, the carrier cannot change the price of tickets already sold. The Associated Press reported that about 35% of United’s tickets for the final three months of 2026 had been booked by the time fuel prices rose again; United CFO Mike Leskinen said those fares could not be raised retroactively and that recovery would not be immediate. Associated Press reporting on fares and fuel

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Other costs and aircraft constraints add pressure

IATA also pointed to labor, leases, maintenance and other non-fuel expenses. Aircraft delivery shortfalls can keep older aircraft flying longer, adding maintenance and lease costs and delaying expected efficiency improvements. The extent of these pressures varies by airline, including with its fleet, route mix, hedging and financial resilience. IATA’s June 2026 outlook; IATA’s comments on industry conditions

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Why are flights so expensive right now?

For U.S. travelers, reported average fares excluding optional fees rose from $405 in 2025’s fourth quarter to $428 in 2026’s first quarter and $436 in the second quarter, according to Bureau of Transportation Statistics figures reported by AP. These are U.S. averages, not worldwide fares, and they exclude optional fees such as checked-bag charges.

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AP also reported that U.S. airfares in August 2026 were 23% higher than a year earlier, citing the Labor Department. In the week before AP’s report, fare-search company Hopper estimated round-trip domestic Thanksgiving fares at $402 and Christmas fares at $452—31% and 23% above the prior year, respectively. Those holiday estimates are snapshots from that week, not fixed prices or predictions for every itinerary. Associated Press reporting on fares and fuel

These U.S. ticket-price measures should not be conflated with IATA’s global passenger yield forecast. Nor do ticket fares capture every airline charge: optional fees and other ancillary revenue are separate parts of what a traveler may pay and what an airline may earn.

Why don’t fares fall as soon as jet fuel gets cheaper?

Fuel prices can move quickly; fares respond through ticket inventory that was priced and sold at different times. Airlines also adjust schedules and available seats rather than simply changing every fare in step with the latest fuel quote. The result can be a lag, and a lower fuel price does not by itself establish that a particular fare will fall.

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AP reported that the Argus U.S. Jet Fuel Index dropped from an early-April 2026 peak of $4.88 per gallon to a June low of $2.70, while average fares remained elevated; fuel then rose again. Finance professor Stephen Treanor told AP that jet fuel prices need to fall and stay down for airfares to decline on a sustained basis. That is expert commentary, not a guarantee for every route or carrier. Associated Press reporting on fares and fuel

Willie Walsh: Airlines are absorbing part of the fuel shock

“Airlines are bearing the brunt of the fuel price shock. While air fares are rising, airlines are still absorbing part of the hike in their bottom lines,” IATA Director General Willie Walsh said in the June 2026 outlook. Columbia Business School economist Brett House told AP that volatility is a challenge as well as the level of fuel costs. Walsh also said the industry did not know how long travelers and shippers would tolerate higher connectivity costs. IATA’s June 2026 outlook; Associated Press reporting on fares and fuel; IATA’s comments on industry conditions

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