IATA Warns of $100 Billion Surge in Airline Fuel Costs; Fares Set to Rise
The International Air Transport Association (IATA) has warned that airlines face an additional $100 billion in jet fuel costs this year, a rise that will “inevitably” lead to higher airfares. The price shock follows the closure of the Strait of Hormuz in March amid heightened tensions with Iran, which has choked off key oil supply routes.
Jet fuel prices are projected to average 70% higher throughout 2026, according to IATA. As a result, the industry’s collective net profit is expected to halve to $23 billion, with some carriers facing an existential threat.
Speaking at IATA’s Annual General Meeting in Rio de Janeiro, Director General Willie Walsh said that higher crude oil prices would leave airlines with no choice but to raise ticket prices.
“High oil prices will inevitably mean higher ticket prices. There’s just no way to avoid that,” Walsh told The Guardian UK.
He noted that passenger polling indicates travellers are bracing for higher fares and appear willing to pay more. However, he added, “The big unknown is how long travellers and shippers can tolerate the higher costs of connectivity.”
Despite the steep cost increase, Walsh said concerns over actual fuel shortages have eased. He contrasted the current situation with the COVID-19 crisis, describing the industry’s outlook as “challenging and unpredictable,” but not a collapse.
“You’re looking at an industry that is still profitable and still forecasting growth. Traffic is up 2%. If you factor out the impact on the Middle East, for the rest of the world it remains a pretty positive environment,” Walsh explained.
Sean Doyle, Chief Executive of British Airways, suggested that long-haul and business-class passengers would likely face the largest fare increases.
“There will be no getting away from it – if fuel goes up, fares have to go up,” Doyle said on the sidelines of the conference. He added that more price-sensitive short-haul leisure routes would be the last to see increases.
“A brand like BA, which has got a lot of long haul, a lot of corporate, a lot of premium; we’d expect maybe to have more pass-through of prices than maybe a carrier who’s solely competing for leisure short haul,” Doyle said.
IATA research indicates that roughly half of all passengers are prepared to pay substantially more if fares track oil prices. Walsh said this “bodes well” for a strong northern summer travel season.
Separately, IATA has again identified Nigeria as one of the most expensive countries in the world for airline operations, citing persistently high costs that undermine the viability of local carriers.
Kamil Al-Awadhi, IATA’s Regional Vice President for Africa and the Middle East, acknowledged ongoing reform efforts by Nigeria’s Minister of Aviation and Aerospace Development, Festus Keyamo. However, he stressed that airlines in the country continue to face significant cost pressures, including excessive taxes, charges, and operational expenses.
“In a recent research conducted, we discovered that the most expensive airport in Africa is Abuja airport, followed by Lagos airport. With all these exorbitant charges, Nigerian airlines can’t compete with their foreign counterparts,” Al-Awadhi said, citing findings presented at a previous African Aviation Conference in Abuja and published by *THISDAY*.
He noted that the Nigerian government imposes at least 27 different charges on airlines, creating a high-cost environment that limits competitiveness and profitability.
To address the issue, Al-Awadhi urged member states of the Economic Community of West African States (ECOWAS) to implement a proposed 25% reduction in aviation taxes and charges. Such a measure, he argued, would lower air travel costs, stimulate passenger traffic, and improve the competitiveness of West African carriers.
“Africa has put itself in a place where it cannot help its own – expensive fuel, excessive charges, leasing and insurance through the roof. The airlines need to be financially viable too. The airlines contribute to the country’s GDP, but Nigeria needs to decide what to do for them to survive,” Al-Awadhi said.