Airlines Face Fuel Crisis as 2050 Net-Zero Goal Slips Away

The global aviation industry is facing significant challenges due to soaring jet fuel prices driven by the war in Iran, which threaten both financial stability and environmental goals. According to multiple reports, achieving the industry's net-zero emissions target by 2050 is now deemed unlikely because of insufficient progress in sustainable aviation fuels (SAF) and global emissions trading programs.

Willie Walsh, director general of the International Air Transport Association (IATA), stated that 'hope was fading fast' for meeting the net-zero goal. He blamed fuel suppliers, governments, and aircraft manufacturers for the likely failure to hit the target. More than half of planned decarbonization efforts depend on SAF, with annual production expected to reach only 2.4 million tonnes by 2026—just 0.8% of airline fuel needs.

The financial outlook is equally grim. IATA nearly halved its 2026 profit forecast to $23 billion, down from a previous projection of about $41 billion. This downturn is attributed to significant increases in jet fuel prices and disruptions to airlines in the Gulf region due to conflict in the Middle East. Walsh expects some smaller airlines to go bankrupt or be taken over by bigger carriers this year and next as higher fuel costs bite.

Roberto Alvo, CEO of LATAM Airlines, warned that further capacity cuts may be necessary if elevated fuel prices persist into 2027. Air New Zealand has already imposed two rounds of fare increases and is planning around $150 per barrel jet fuel going into its 2027 financial year. Walsh also noted that high oil prices will inevitably lead to higher ticket prices, with no way to avoid it.

The industry's challenges are compounded by supply-chain problems affecting aircraft and engine availability, forcing airlines to keep older planes in service longer. A Deloitte survey of 21 global airline CEOs found that fuel price volatility and inflation sit at the top of the industry's risk agenda. Brazilian airline Azul is planning to trim more flights to meet demand due to higher jet fuel prices.

At the IATA summit, executives discussed high fuel costs, sharply lower profits, engine reliability issues, and elusive emission reduction goals. Fuel costs have more than doubled in some places since the beginning of the Iran war as the Strait of Hormuz has been effectively closed for much of the time. Airlines globally are absorbing a $100 billion increase in their fuel costs this year, which will likely halve airline profits.

Despite fare increases, airlines haven't been able to cover the full fuel bill this year, leading to profit hits. However, customer bookings remain resilient. United Airlines CEO Scott Kirby noted that customers continue to book even with fares up about 20%. Summer bookings are strong, and airlines are managing capacity better by cutting unprofitable routes.

Airline CEOs expressed frustration with engine manufacturers over reliability issues with new-generation engines. While these engines promise fuel savings of around 15%, they require unscheduled maintenance more frequently than expected. Companies like GE Aerospace and Rolls-Royce have been busy addressing these problems, adding overhaul capacity to meet demand.