The IATA's warning highlights the severe financial pressures facing global airlines, with average jet fuel prices expected to rise by 70% year-on-year, adding an estimated $100 billion to the industry's fuel expenses this year. This increase is largely attributed to the U.S.-Iran conflict, which has caused oil prices to surge above $100 a barrel.
As a result, airlines are compelled to raise ticket prices, but the IATA's outgoing director general, Willie Walsh, cautioned that this will lead to slower growth in travel demand. The forecasted halving of net profit margins from 4.2% to 2.0% indicates a challenging environment, particularly for airlines still recovering from the impacts of the Covid-19 pandemic.
Walsh noted that airlines with weaker balance sheets and those operating in the Gulf region will be most vulnerable. The report also reflects consumer sentiment, with 86% of travelers anticipating fare increases in line with oil prices.
Specific airlines are already feeling the impact; EasyJet reported a pre-tax loss of £552 million for the first half of its financial year, while Lufthansa expects an additional €1.7 billion in fuel costs. Ryanair's CEO, Michael O'Leary, warned that prolonged high fuel prices could lead to failures among European carriers, potentially benefiting Ryanair in the long run