Iran conflict costs airlines $100B in fuel as industry profits halve

In February, when conflict erupted in Iran and the Strait of Hormuz closed, aviation fuel prices doubled overnight. By June, the global airline industry was tallying the damage: an extra $100 billion in fuel costs this year alone. The numbers were stark enough to command attention at the International Air Transport Association's annual meeting in Rio de Janeiro, where executives gathered to confront a crisis that had already claimed one major casualty and threatened more.

The financial toll was reshaping the entire sector's outlook. Last year, airlines worldwide had posted combined net profits of $43 billion, with a healthy 4.2 percent margin. This year, those profits are expected to collapse to $23 billion—a fifty percent drop—while margins compress to just 2 percent. Willie Walsh, the former British Airways president now leading the IATA, described the situation plainly: margins had become "clearly very tight." The industry had already watched Spirit Airlines fail in 2026. More bankruptcies were coming.

Walsh pointed to a second, compounding crisis that had been building for years. Aircraft manufacturers and engine makers had fallen badly behind on deliveries, leaving airlines flying older, thirstier planes. The average age of the global commercial fleet now exceeded fifteen years—a record high. With 18,000 aircraft still on order and not yet delivered, airlines were stuck burning fuel at rates that newer planes would never tolerate. The math was brutal: flying that aging metal had cost carriers roughly $11 billion in excess fuel expenses during 2025 alone. Now, with fuel prices up 70 percent for the year despite expectations of decline by year's end, those inefficiencies were becoming unbearable.

Walsh's frustration with manufacturers was audible. He told engine makers to "go back to making large engines that work and last," a line that drew applause from the airline executives in the room. "Allowing these failures to extend into the next decade is totally unacceptable," he added. The problem was not abstract: older aircraft meant higher maintenance costs, steeper leasing fees, and fuel bills that grew heavier by the month. Airlines were caught between two forces—a geopolitical shock they could not control and a supply chain failure they had been warning about for years.

Yet demand remained resilient. Passengers were still flying, and many were willing to pay more. The IATA found that 86 percent of travelers expected ticket prices to track with oil prices, and nearly half anticipated spending more on travel this year. Airlines had begun raising fares to offset their climbing costs, and so far, the market had absorbed the increases. Brent crude had spiked to $120 a barrel during the worst of the conflict, though it had since retreated to $93. Even at that lower level, fuel was consuming a far larger share of airline revenue than it had just months before.

The industry's recovery from the pandemic remained incomplete. Walsh noted that some carriers had never fully rebuilt their balance sheets from the COVID years, making them especially vulnerable to the current squeeze. Those airlines faced a grim choice: raise prices further and risk losing passengers, or absorb the fuel costs and watch their already-thin margins disappear. For an industry that had spent years clawing back to profitability, the convergence of geopolitical disruption and manufacturing failure felt like a test it was not prepared to pass.