Airlines Worry More About Taxes Than War-Driven Fuel Spike: IATA

Airlines are facing surging fuel costs from the war in the Middle East but executives say they are more concerned about taxes and regulations deemed too restrictive that could further crimp their bottom lines. Despite hand-wringing over the risk that travelers will baulk at paying higher fares, the ongoing war did not appear to ruffle feathers at the International Air Transport Association’s annual conference in Rio, which ends Monday.

“We expect average jet fuel prices to be 70 percent higher year-on-year. That will add $100 billion to our collective fuel bill this year,” IATA director general Willie Walsh told the gathering.

Yet when the CNN journalist Richard Quest asked a roundtable discussion if airlines were frustrated by “an event you have no control over”, the responses were remarkably subdued.

The chief of Turkey’s Pegasus Airlines, Guliz Ozturk, noted wryly that it was standard practice for carriers to predict various scenarios at the beginning of the year, only to see something entirely different happen.

IATA chief economist Marie Owens Thomsen recalled the uncertainty generated at last year’s conference, held in New Delhi just weeks after US President Donald Trump unleashed his tariffs war.

“We thought that it was the end of the world,” she said. But this year, there was hardly any mention of Trump despite the ongoing Mideast war, which has driven up fuel prices and caused profitability to plummet in a sector that was already struggling.

The IATA, which represents 370 member airlines, focused instead on naming and shaming countries that have imposed taxes on tickets—often in the name of reducing carbon emissions or increased regulations on the industry.

The European Union was the most frequent target, with Walsh taking aim at the bloc’s “populist” Parliament for defending higher compensation for passengers impacted by flight delays.

And at a press conference on the shortage of non-fossil fuels needed to decarbonize air travel, EU regulations on the minimum amounts of such fuels required in aircraft tanks came under fire.

Even when pressed on the potential impact of a “quagmire” scenario in the Gulf that would curtail oil and jet fuel exports for several more months, executives did not appear overly alarmed.

When asked about the possibility of the war dragging out for years, research director Eleanor Budds played down the risk.

“Quagmire is a scenario... It doesn’t mean we expect this to happen,” Budds said. A reporter then asked if, in an extreme case, the war would not just drive up prices but also lead to shortages of jet fuel. “In our base case we don’t have shortages,” she responded.

Fuel costs for US airlines jumped 78 percent in April to nearly $6.5 billion compared with the year before, as the Middle East conflict drives up jet fuel prices, the US Transportation Department said Monday. Airlines’ fuel costs were up 26 percent over March and carriers used 2.6 percent less fuel in April over March, USDOT said in a monthly report.

The cost per gallon of fuel in April was $4.11, up $1.81 over April 2025, USDOT added, a trend that has already had an impact on the sector. Spirit Airlines, an ultra low-cost US carrier, ceased operations in May, saying rising fuel prices left it no choice.

Delta Air Lines, United Airlines, American Airlines and Southwest Airlines account for about 80 percent of US domestic flights.

The International Air Transport Association, which represents more than 370 airlines accounting for about 85 percent of global air traffic, said in its annual report Sunday that it expects the industry to post a combined net profit of $23 billion in 2026, well below a previous projection of about $41 billion and down from $45 billion in 2025.

Average fares for flights with a US origin have risen this year by as much as 31 percent for domestic trips and 22 percent for international ones, when compared to the same weeks in 2025, according to KAYAK search data.

The Middle East conflict, triggered by US and Israeli airstrikes on Iran, has also forced airlines to reroute flights around closed or restricted airspace, increasing fuel burn and straining already tight capacity.

Oil prices have surged on fears of supply disruption, pushing jet fuel prices sharply higher and widening refinery margins, leaving airlines facing a steep jump in their largest cost.

IATA expects airlines’ fuel bill to surge to about $350 billion this year from roughly $252 billion in 2025, with fuel accounting for nearly a third of operating costs.