Airline Industry Net Profit Forecast Falls to $23 Billion

The International Air Transport Association projects airline net profit will fall to $23 billion this year from $45 billion in 2025. Net margins are expected to drop to 2 percent, less than half the 4.2 percent recorded last year. The decline stems from the Iran conflict, now in its fourth month.

Airlines have rerouted flights around conflict zones, increasing fuel consumption, while Iran's actions have restricted oil shipments through the Strait of Hormuz.

Fuel prices are projected to rise 70 percent year over year, adding $100 billion to the industry's collective fuel bill. The Strait of Hormuz previously carried 20 million barrels of oil per day before the conflict began. Airlines with weaker balance sheets and those serving the Persian Gulf region face the largest exposure. Carriers have increased fares by an average of 20 percent this year.

Passenger traffic has held steady despite higher ticket prices. The trade group forecasts a strong summer travel season. United Airlines' chief executive told Bloomberg that demand has been less price-sensitive than expected. About half of travelers anticipate spending more on flights this year.

The trade group noted that the duration of higher costs remains uncertain. Its outgoing director general said the long-term impact on travelers and shippers is the main unknown. The same report stated that artificial intelligence tools could improve efficiency and customer service over the next five to ten years.