North America to lose position as most profitable region for airlines

Europe to overtake the region as travel in the US faces stagnating demand

IATA director general Willie Walsh. 

North America is set to lose its position as the most profitable region for airlines to Europe as travel, particularly in the US, stagnates and the domestic market contracts, a new report for the International Air Transport Association (IATA) has found.

According to the IATA’s latest global outlook report, overall passenger traffic is forecasted to grow by 4.9% next year, led by the Asia-Pacific region’s expansion by 7.3%.

The IATA said this was a “marginal deceleration” compared to this year, which was mainly due to “persistent supply-side constraints, including limited aircraft availability, and labour shortages".

It is forecasting global industry revenue to hit $1trn this year, and a “record high” profit of $41bn in 2026. The airline industry is expecting total costs to reach $981bn next year — a year-on-year increase of 4.2%.

Fuel is set to account for 25.7% of total operating expenses, with total spend projected at $252bn.

“However, fuel efficiency gains have stalled. Average fuel burn per available tonne kilometer (ATK) is now nearly flat, diverging from the long-term trend of 2.2% annual improvement. The slowdown is driven by aircraft delivery delays and aging fleets, which are limiting the pace of renewal,” the report said.

The IATA is also expecting a slight uptick in airplane deliveries in 2026, which might lead to a slight improvement in this area.

Non-fuel costs are forecast to rise by 5.8%, reaching $729bn, with labour remaining the largest component, “with wage growth continuing to outpace inflation”.

The report noted Europe is set to deliver the highest net profit, "very much thanks to Turkey’s stellar performance". 

"The Middle East is the region with the highest profit margins. Asia Pacific is where growth is the most rapid, and Latin America shows signs of structural improvement,” the IATA said.

However, North America faces new headwinds, “including stagnating domestic demand and operational constraints”.

In Europe, the aviation industry is expected to generate $14bn in profit this year as “European airlines show disciplined capacity management and strong load factors”.

“Low-cost carriers are performing particularly well, expanding at double-digit rates and outperforming full-service carriers on net profit margin,” the report said.

However, the report noted North America was set to lose its position as “the most profitable region”, with net profits projected at $10.8bn in 2025 and $11.3bn in 2026.

It said this year proved difficult for aviation in the US, in particular as revenue per passenger growth “stagnated, and the domestic market contracted”.

“A series of headwinds weighed on demand: policy uncertainty around tariffs, and tighter immigration rules dampened both inbound and domestic travel. The situation worsened with the longest government shutdown in history, which amplified air traffic controller shortages.” 

The IATA said there was cause for “more optimism” in the North American market during 2026, as it would likely benefit from easing operational difficulties and a gradual increase in demand.

In terms of sustainability, the IATA said the industry was “firmly committed” to achieving net zero CO2 emissions by 2050.

However, it said key solutions for the industry’s decarbonisation were “not coming to market fast enough”.

“Sustainable aviation fuel is projected to cover less than 1% of total fuel consumption in 2026, in an unambiguous verdict on how ineffective the current policy environment is,” the report said.

“This unfortunately extends to the lack of harmonisation between Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and a multitude of other regional and national initiatives that causes fragmentation, raises costs, and curtails actual emissions reductions.”