European airline stocks slide after IATA halves profit forecast

European Airline Stocks Fall After IATA Halves 2026 Profit Forecast

European airline shares dropped on Monday morning after the International Air Transport Association slashed its 2026 global profit forecast nearly in half, citing soaring fuel costs and disruptions from the ongoing conflict in the Middle East.

Market Reaction

Shares of IAG, Air France-KLM, Deutsche Lufthansa, Wizz Air, and Ryanair fell between 1.47% and 2.1% in early London trade, with easyJet faring relatively better among the group. The selloff followed IATA’s announcement on Sunday at its annual meeting in Rio de Janeiro that net profit for the global airline industry would reach just $23 billion in 2026 — roughly half the $41 billion previously forecast and about half the $45 billion earned in 2025.reuters

The Fuel Shock

The downgrade was driven primarily by a near-70% surge in jet fuel prices, which IATA expects to average $152 per barrel in 2026, up from $90 last year. Fuel costs are projected to rise by nearly 40%, from $252 billion in 2025 to $350 billion this year, lifting fuel’s share of total operating expenses to 31.4%.iata

“Airlines are bearing the brunt of the fuel price shock,” said Willie Walsh, IATA’s director general. “Net profit per passenger is expected to fall to $4.50, half of what it was last year. Under the circumstances, that shows resilience. But it won’t even buy you a hot dog at most of the FIFA World Cup venues.”iata

European carriers specifically face a reduction in net profit from $13 billion in 2025 to $9.6 billion in 2026, with net margins shrinking from 4.5% to 3.1%. IATA noted that European airlines entered the crisis with roughly 70% of fuel needs hedged, which has provided a buffer, though higher costs will feed through as those hedges roll off.iata

Broader Industry Pressure

The outlook extends beyond Europe. North American carriers are expected to see profits fall from $12.4 billion to $9.4 billion, while Middle Eastern airlines face a collective $4.3 billion net loss after earning $7.2 billion in profit last year. US airline stocks including Delta Air Lines, United Airlines, American Airlines, and Southwest Airlines also declined in response to the forecast.investing

IATA projects global industry revenues will still grow 9.4% to $1.165 trillion, but operating expenses are rising faster at 13%, squeezing margins across the sector. The industry’s return on invested capital is expected to fall to 4.3%, well below the 8.5% weighted average cost of capital — underscoring what Walsh called the “structural weakness” of an industry where profitability shocks quickly erode capital efficiency.iata