Arab Air Carriers’ Organization Projects $4.3 Billion Loss After $11 Billion Profit

Arab Air Carriers’ Organization members are projected to move from an approximately $11 billion net profit in 2025 to a $4.3 billion net loss in 2026. The reversal, detailed in outcomes released by the organization on November 3, combines falling traffic with regional disruption, higher energy costs and persistent shortages of aircraft, engines and spare parts.

The comparison is unusually sharp. Member airlines reported a 10.8% net margin in 2025, when passenger traffic grew 7.6% and offered capacity rose 5.8%. For 2026, the organization expects the operating margin to fall from 11.8% to negative 2.7%. The figures measure different layers of airline performance net margin includes expenses beyond operations but both point to a broad deterioration rather than an isolated traffic dip.

Demand is falling faster than airlines can remove seats

Passenger traffic among member airlines is forecast to decline 10.3% in 2026. Offered capacity is expected to contract by a smaller 4.7%, indicating that airlines are reducing seats but not as quickly as passenger demand is falling.

That imbalance is projected to pull the passenger load factor the proportion of available seating capacity filled by paying traffic down to 77%. Lower utilization spreads the cost of operating an aircraft across fewer passenger kilometres. Airlines can respond by cutting frequencies, changing aircraft size or adjusting routes, but each move has network consequences: fewer departure choices for passengers, less connecting capacity at hubs and reduced flexibility when operations are disrupted.

The regional figures are also substantially weaker than the global outlook. AACO expects worldwide passenger demand to grow 2.1% in 2026, with global capacity rising 1.6% and load factor reaching 83.9%. September data from the International Air Transport Association had already shown the imbalance: Middle Eastern airline demand fell 7.5% from a year earlier while capacity declined 3.3%, leaving load factor 3.6 percentage points lower at 78.3%.

Cargo adds another operational pressure. AACO members recorded 4% cargo-traffic growth in 2025, but the organization projects a 5.2% decline in 2026. Passenger and freight networks share aircraft, airport capacity and connecting infrastructure, so weakness in both markets reduces the options available to carriers seeking to rebalance their schedules.

Aircraft shortages make fleet adjustment harder

The traffic decline alone does not explain the scale of the financial reversal. AACO also identifies delayed deliveries of aircraft, engines and spare parts as constraints on fleet renewal and as sources of higher operating costs. Its members operated 1,587 aircraft as of July 31, 2025, received 121 aircraft during that year and held a combined backlog of 1,734 aircraft.

Delivery delays can force an airline to retain older aircraft, extend leases or put additional maintenance resources into existing fleets. They can also prevent a carrier from matching an aircraft’s size and efficiency to a changed route network. That is particularly costly when energy prices are rising, because delayed replacement postpones access to newer aircraft intended to use less fuel.

The bottleneck extends well beyond the region. AACO put the global aircraft backlog at 17,250 in 2025 and expects it to exceed 18,000 by the end of 2026. The large queue limits how quickly individual airlines can solve a capacity or efficiency problem by obtaining new equipment, even when weaker traffic might otherwise create an opportunity to accelerate fleet renewal.

Parts availability presents a related systems-integration problem. An aircraft can be technically suitable for service yet remain unavailable because a required approved component, engine or maintenance slot is delayed. Reduced dispatchable capacity then raises the workload on the remaining fleet and leaves less schedule margin for routine maintenance or unexpected disruptions.

Parts cooperation remains under study

AACO’s Executive Committee has directed the formation of a working group to study jointly managed spare-parts inventories, with possible cooperation on procurement. It is not yet an operating regional parts pool.

If implemented, shared inventory could reduce the need for every airline to hold the same expensive, infrequently used components. The engineering and regulatory burden would remain substantial: participating carriers would need compatible part specifications, traceability records, airworthiness documentation, storage controls and logistics capable of moving approved components where they are needed.

The outlook follows a strong 2025, when Arab airports handled more than 500 million passengers, an 8.1% increase. The projected 2026 reversal therefore reflects both a sudden demand contraction and a fleet system with limited room to adapt. Airlines can reduce scheduled capacity, but delayed aircraft, engines and parts make it harder to lower the cost of operating what remains.

By Thomas Caldwell — AMI’s senior editor for mechanical and mobility engineering, covering vehicle electronics, systems integration, electrification, chassis systems, propulsion, and safety policy.