In January 2025 the air transport industry was facing significant headwinds, and none more so than the threat of tariffs and the potential retaliation they might provoke.
In this challenging context, airlines nevertheless earned a record net profit of US$39.5 billion. It must be pointed out though that in one year a single oil company can make as much profit as our whole airline industry does.
Looking at net margins, the picture appears even more fragile. At an expected 3.9% in 2026, the airline industry remains one of the lowest-margin industries, having never seen a net profit margin above 5%. In per-passenger and US dollar terms, the industry’s anticipated net profit equates to $7.90, which is less than Apple earns from selling one iPhone cover.
5 key factors in the risk landscape
Risks abound in 2026. Having a view of what these risks might entail is important for planning and decision-making and the impact they may have on airlines. Five areas loom particularly large in the year ahead.
1. Policy fragmentation
The post-World War II multilateral system is weakened, with perhaps the most visible fragmentation occurring in international trade. ‘Me-first’ policies are being enacted with little concern for their impact on global networks, whether it is supply chains or single industries such as air transport.
International institutions are also being sidestepped, threatening to undo the International Civil Aviation Organization’s (ICAO) 80 years of global harmonisation. Different frameworks now compete to determine how to address CO₂ emissions from air transport.
Fragmented tax policies introduce severe competitive distortions that ripple across the global network, even though the policy may appear locally focused. Such policies raise little money for governments, have little or no impact on emissions, and make air transport more expensive.
2. Supply chain disruptions
There is a persistent and record-high backlog of aircraft orders. While things have started to improve, the mismatch between airline requirements and production is not expected to unwind before 2031-2034. This delay negatively caps growth in the industry, yet protects yields as aircraft load factors reach the highest level in aviation history.
More dramatically, the situation has halted progress in improving fuel efficiency across the global fleet and slows the industry’s decarbonisation.
3. Climate change-related disruptions
Disruptions such as extreme weather and commodity price swings can affect agriculture, infrastructure, global trade, and investment flows. A successful energy transition for airlines pursuing net-zero carbon emissions by 2050 requires stable policies and reliable financing. The reduced commitment to addressing climate issues in a coordinated manner across the world will undoubtedly slow progress on all these fronts.
Associated risks include greater food and water insecurity, and therefore increased migration. Yet the world has turned more hostile towards immigration. The decision by nations to welcome, or not welcome, migrants will put pressure on borders and support systems, impacting international air passengers.
4. Cyber threats and artificial intelligence
Cyber threats are growing in both frequency and importance. We also see a convergence of risks and vulnerabilities, with artificial intelligence (AI) enhancing attackers’ capabilities, geopolitical instability providing a fertile breeding ground, and digital dependence exposing supply chains and organisations to greater risks.
The airline industry’s reliance on critical infrastructure makes the global air transport network particularly exposed, along with all other network industries. AI adds risks related to misinformation, loss of privacy and erosion of trust, on top of those that might generate economic disruption, job displacement, and greater inequality. Proof of AI generating substantial profits and increased productivity are scarce and may take years to materialise.
5. Macro-economic outlook
The external value of the US dollar is important to the global economy because of its dominant share in cross-border payments. Over the very long term, the US dollar is a trend-depreciating currency. Currently, the Federal Reserve is in rate-cutting mode, and global uncertainty has rather uniquely favoured other safe havens, such as gold and the Swiss franc.
Adding the lack of fizz in the US economy, persistent budget and current account deficits, and potentially greater reservations about US stock market valuations, the US dollar appears most likely to pursue its depreciation in 2026.
A weaker US dollar tends to benefit all non-USD-based countries, who will pay less in local currency for their USD-denominated debt and trade. This is of course important for air transport, where over 50% of the cost base is invoiced in US dollars.
At the same time, the oil market is undergoing major structural change as demand is shifting in response to electrification and to greater use of liquefied natural gas (LNG) in road transport. Geopolitical changes will also play a role. Supply is expanding even as demand slows, leading to inventory build-up and putting downward pressure on prices – which is again good news for airlines.
The risk of a severe economic slowdown in 2026 seems limited unless we have underestimated the potential combined effect of the above converging risks and vulnerabilities, or because of unforeseen events. Nevertheless, this is not a particularly growth-friendly environment, and global GDP growth is unlikely to accelerate. Moreover, given this risk convergence, the margin to manoeuvre is reduced, which makes policy mistakes more likely.
Championing the value of aviation
In the context of limited policy flexibility, good growth and welfare-increasing strategies are hard to come by. Yet it so happens that the energy transition and air transport combine to deliver a uniquely promising growth strategy that can enhance agriculture, restore natural habitats, build energy independence, strengthen local communities, broaden the tax base, promote international trade, connect people, support innovation, and lift productivity.
All of these benefits have a dynamic and positive impact on each other. This is way more than what traditional economic policy can muster through policy, interest rate cuts, or tax reductions.
Even without quantifying all those dynamic effects, the airline industry supports 87 million jobs and 4% of global GDP. Air transport is not just about flying – it is about driving progress. Let it lead the way.
