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IATA forecast in December that the world’s airlines as a collective would post a net profit of $41 billion in 2026, up from $39.5 billion in 2025 and setting a new record, and that a contributing factor would be lower oil costs. By early March, December seemed a distant era.
Joint US-Israel strikes on Iran had a direct impact on airlines and airports in the Gulf region. The three major Gulf hub airlines—Emirates Airline, Etihad Airways and Qatar Airways—all suspended flights, and airspace over the region was mostly closed to commercial airlines. Downtown areas in Bahrain, Dubai, Doha and elsewhere were bombed; Abu Dhabi Zayed and Dubai International airports each bore direct strikes. Airlines from far outside the region cancelled flights for days in a row if they were destined for or connecting through the Gulf.
Those were some of the immediate impacts on the global air transport industry—and they were costly. What remains unclear are the long-term effects and costs to airlines and airports.
The answer, of course, depends mostly on how long the war continues and whether it spreads. No one has a definitive answer to the length, breadth or outcome of any war, least of all airline managers, although anyone hoping for a short war would not have been encouraged by US President Donald Trump’s statement on March 2: “Right from the beginning we projected four to five weeks, but we have the capability to go far longer than that.”
Regardless of the length of this war, there are some factors relating to the profitability or otherwise of airlines that might be assumed.
First, wars are in general bad for airlines and airports—particularly when airports themselves become targets. If airlines can’t operate, they can’t sell tickets or carry cargo and they lose revenue. If they are forced to cancel flights, they may need to compensate passengers or arrange alternative flights, which is a costly endeavor. Restoring networks is expensive. Aircraft and crews are dispersed. Flight schedules must be re-coordinated so that airport slots, gates and runways are not overwhelmed by the catchup. People and corporations lose confidence in the safety of flying and/or are concerned about getting stranded—as thousands of people were in the early days of this war. So they cancel or postpone travel, which means more lost revenue for airlines and airports.
Second, a war like this one has a direct negative effect on one of airlines’ biggest costs—oil. In IATA’s December forecast, a significant contributing factor to the assumption of profitability was that fuel costs were expected to decline slightly and the consensus forecast was for Brent crude oil prices to decline to $62/barrel from $70/barrel in 2025. In early March, Brent crude jumped to well north of $100/barrel.
Many airlines no longer hedge, which is essentially an insurance or a bet. Airlines and insurers agree on a locked-in price for jet fuel. After years of hedging being an established strategy of most airlines, the tide turned when several of them saw the price of hedging premiums outweighing the benefits. Airlines decided instead to ride with the market, but those that are not hedged are exposed by this war’s effects on oil costs and there’s no sure way to know when or if prices will go down. Exacerbating the effect of higher oil prices on airlines is that many of them still do not have or cannot operate the new, more fuel-efficient aircraft they expected to have by now and which have been affected by the supply chain crisis and engine technology issues.
Still, airspace closures and network disruptions are the bigger near-term concerns. Matt Borie, co-founder and chief intelligence officer at Osprey Flight Solutions, a security risk management consultancy, told this editor in ATW’s Window Seat podcast, “On the airspace side, we have closures, which essentially means in certain areas you simply can't fly … you have aircraft stuck on the ground that can't fly out because the airspace is closed. In locations like the UAE, they put an emergency plan in place for managing the airspace. To avoid any type of civil-military deconfliction issues, when there is drone or missile activity identified, the airspace is being cleared. Aircraft are being sent to holding patterns in specific designated areas,” Borie said.
The key words there are “emergency plan.” It’s critical that airlines and airports have crisis management plans in place that can be activated rapidly. For the most part, the Iran war is demonstrating that airlines and airports everywhere did have plans. That is a small but important silver lining and cause for optimism. Agility and the need for crisis plans were hard won lessons of the COVID pandemic, but they seem to have been learned.
“You don't want to have to use emergency response plans. Typically, emergency response plans are going to be used during aviation safety events, mechanical issues, diversions due to weather that could lead to a mishap, a runway excursion type event, etc. Unfortunately, this is a conflict zone type scenario, but the principle remains the same,” Borie said.
And looking at the multiple crises that the air transport industry has endured, the one common factor is that it has survived. That 2026 $41 billion profit forecast may look less certain, but airlines can take some comfort in one historical constant: demand for air travel has always returned.
Listen to Matt Borie and Karen Walker discuss the Iran war crisis on the ATW Window Seat podcast at https://aviationweek.com/podcasts/window-seat-podcast/podcast-airlines-airports-war-zones
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