Arab Airlines Project $4.3 Billion Loss for 2026 as Fuel and Conflict Hit Carriers

Arab airlines expect to close 2026 with a combined net loss of about $4.3 billion, the Arab Air Carriers' Organization said during its 59th General Assembly in Doha, which opened its working sessions on Tuesday. The organization, which groups major regional carriers including Emirates, Qatar Airways, Etihad and Saudia, attributed the projected loss to regional conflict, higher energy costs and disrupted flight operations.

A tough year for regional carriers

The forecast appeared in the industry report presented to members at the assembly, hosted by Qatar Airways. The same report showed that member airlines grew cargo volumes by 4 percent in 2025, but cargo is projected to fall 5.2 percent in 2026. The setback follows a strong 2025, which the organization's secretary general reviewed in a state of the industry address before delegates turned to the downturn expected this year.

Fuel is central to the squeeze. A presentation by an aviation analyst from Bloomberg Intelligence told delegates that jet fuel prices have nearly doubled since the beginning of 2026, and that the refining margin now accounts for about half the fuel price, making refining a major factor in the final cost. The analyst said the timing of the impact varies by airline depending on hedging policy, and that benchmark markets in Europe and Asia face similar pressure.

Borrowing costs are the second burden. The analyst said the US Treasury yield curve has risen sharply to around 5 percent while the Federal Reserve remains hesitant about further increases, and noted that US GDP grew 3.4 percent in the third quarter, supporting the prospect of rates staying higher for longer. Because aircraft are bought in US dollars and US rates set borrowing costs globally, airlines face an added load. Credit default swap spreads have risen across the industry, with the highest-risk carriers reaching levels suggesting some companies could soon exit the market.

Demand and destinations

Travel demand in the region has weakened. A global travel report issued in London this week estimated that overnight arrivals in the Middle East fell 40 percent this year, with the conflict between the United States and Iran, higher jet fuel prices and living costs weighing most on long-haul trips. Gulf airports accounted for 15 percent of global transit traffic in 2025, so the loss of capacity there has rippled into itineraries far beyond the region.

That report projected a swift rebound, forecasting arrivals growth of 43 percent in 2027 if the conflict is resolved. It also found short-haul travel rising 3 percent, particularly within Europe and Sub-Saharan Africa, as travelers traded long trips for closer destinations. For the aviation workforce, that mix matters: a rebound concentrated in short-haul flying tends to support ground handling, cabin crew and airport services before wide-body long-haul schedules recover.

What to watch next

Delegates also addressed regulation, adopting a resolution rejecting a European Commission proposal to extend the EU Emissions Trading System from 2029 to flights leaving the European Economic Area for destinations within 5,000 kilometers of Frankfurt Airport. The organization called the plan unilateral and said it conflicts with the principle of state sovereignty under the Chicago Convention. It warned of double financial burdens on carriers that pay for sustainable aviation fuel under European and British requirements without recognition of the resulting emissions cuts under the offsetting scheme known as CORSIA, and reaffirmed CORSIA as the agreed global mechanism. A second resolution condemned recent attacks on civil aviation facilities in several Arab countries that caused casualties and destroyed aircraft, while a third focused on sharing knowledge among Arab airlines, including recruitment of employees from other carriers. The assembly decided to hold its 60th meeting in Cairo in November 2027.

For workers, the near-term signals are cost control and cautious capacity planning rather than expansion. Carriers will be watching refining margins, interest rates and the path of the Iran conflict before rebuilding long-haul schedules. The organization's own projections tie the expected recovery to an end to hostilities, so hiring and training plans in ground services, catering and airport operations are likely to stay tied to how quickly that happens.