(Yicai) Dec. 10 -- Global airlines may notch up record profit next year, mainly thanks to all-time high load factors and fleet usage despite softening fares and cost pressures, according to the latest industry report by the International Air Transport Association.

The civil aviation sector’s combined net profit will likely grow 3.9 percent to USD41 billion in 2026 from this year’s projected USD39.5 billion, the trade group’s Global Outlook for Air Transport report showed yesterday. Revenue will probably climb 4.5 percent to USD1.05 trillion.

“That’s extremely welcome news considering the headwinds that the industry faces -- rising costs from bottlenecks in the aerospace supply chain, geopolitical conflict, sluggish global trade, and growing regulatory burdens among them,” IATA Director-General Willie Walsh said in a press release to accompany the report’s publication.

“Airlines have successfully built shock-absorbing resilience into their businesses that is delivering stable profitability,” said Walsh, who was previously chief executive of Aer Lingus and British Airways.

Global passenger traffic is expected to increase 4.4 percent to 5.2 million in 2026. Despite that, average net profit per passenger will likely remain at USD7.90, the same as this year but lower than the USD8.50 high set in 2023.

“Out of Balance” Margins

“Industry-level margins are still a pittance considering the value that airlines create by connecting people and economies,” Walsh noted. “They stand at the core of a value chain that underpins nearly 4 percent of the global economy and supports 87 million jobs. Yet Apple will earn more selling an iPhone cover than the USD7.90 airlines will make transporting the average passenger. 

“Even within the air transport value chain, airline margins are totally out of balance, particularly when compared to margins of engine and avionics manufacturers and many of our service suppliers,” he added.

“Imagine the additional power that airlines could bring to economies if we could re-balance value chain profitability, reduce regulatory and tax burdens, and alleviate infrastructure inefficiencies,” Walsh noted.

Fuel costs are expected to dip 0.3 percent to USD252 billion, according to the IATA. The market widely forecasts that Brent crude oil prices will drop 11 percent to USD62 per barrel.

Non-fuel costs will probably climb 5.8 percent to USD729 billion, mainly because of rising maintenance costs, driven by an aging fleet and parts shortages caused by supply chain disruptions. Leasing prices have also reached historic highs, further lifting ownership costs. Airport and air navigation fees will rise further.

By region, Asia-Pacific carriers are expected to post a combined profit of USD6.6 billion in 2026, with China and India leading the growth, primarily because of higher intra-regional tourism and the growing ranks of the middle class.

However, the region’s airlines earn the least per passenger at just USD3.20. The highest is the Middle East at USD28.60, followed by Europe at USD10.90 and North America at USD9.80.

Air Freight Outlook

Cargo volume may grow 2.4 percent to 71.6 million metric tons, defying many pessimistic predictions amid drastic changes in the global trade environment.

Despite a decline in China’s exports to the United States, the substitution effect has offset the impact of trade tensions as Chinese goods have found alternative markets. This reflects a shift in global trade flows.

Against a backdrop of tightening capacity and despite an overall slowdown in global trade, cargo yields are expected to remain stable, declining just 0.5 percent to a level about 30 percent higher than pre-pandemic figures.

“The resilience in air cargo has been particularly impressive,” Walsh said. “As trade flows adapt to a protectionist US tariff regime, air cargo has been the hero of global trade, buoyed in part by robust e-commerce and semiconductor shipments to support the boom in artificial intelligence investments.

“Notably, air cargo enabled front-loading to deliver products ahead of tariff deadlines, and it flexibly accommodated demand surges as tariffed goods normally destined for the US found new markets,” he noted. “The critical role of air cargo is front and center as the global economy adjusts to new realities.”

Editor: Futura Costaglione