Airlines are bracing for years of hardship as concerns grow that customers will not accept new price increases needed to offset soaring fuel costs.
Executives told the Financial Times that rising jet fuel costs after the war in Iran were a "new normal" that would force the industry to raise tariffs again, scale back long-term growth plans and shrink fleets.
The warnings indicate growing pessimism among airlines, which had expected energy costs to start falling after the initial spike triggered by the closure of the Strait of Hormuz. Industry leaders now believe fuel will remain more expensive for longer — putting pressure on the industry if consumer demand starts to weaken.
"I think we will have to face a difficult period of three to five years," said Luís Rodrigues, CEO of TAP Air Portugal. "The demand is [still] there... but there's a limit to what we can do."
Several airline executives said they expect a reduction in long-term growth plans, amid fears that higher inflation stemming from geopolitical turmoil could erode the demand currently underpinning the sector.
Current data shows that passengers are flying more, not less, despite the closure of Gulf airspace, which has caused months of travel disruption. Data group OAG estimates that 2.3 billion reservations were made in the first half of the year, 1% more than in the same period the previous year. This is despite tariffs registering double-digit annual increases in almost every month of 2026.
"Thank God for the customers," said Rodrigues, during the World Aviation Festival, held this week in Lisbon.
Executives have been positively surprised by the strength of consumer demand so far — Delta Air Lines said this month that it has seen virtually no decline despite raising prices by an average of 20% this year.
But most are preparing to raise tariffs even further, anticipating the end of contracts that protected them from the worst impact of this year's energy shock.
Italy's ITA Airways bought about 80% of its fuel before the Iran crisis but did not take out new protections, leaving it more exposed to global price volatility next year, CEO Joerg Eberhart said. "Like others, we will try to increase prices."
Roberto Alvo, CEO of Latam, South America's largest airline, said the sector doesn't "have a demand problem. We have a cost problem, which is probably easier to manage."
However, executives said they were concerned that customers' appetite for travel could soon begin to wane. "At some point there will be demand destruction; at some point all this inflation will make people poor," said the CEO of a major airline.
Alvo added: "The important question is whether [higher] energy prices will hurt the broader economy. If that happens, we could see a slowdown in demand."
If this occurs while fuel prices remain high, "the equation changes for everyone."
In general, airlines react to weaker demand by reducing prices. But with costs rising and profitability already under pressure, this option would send the sector into a downward spiral.
"This does affect growth plans," said Adrian Neuhauser, CEO of Grupo Abra, a South American aviation giant formed by the mergers of Gol and Avianca. "I think the sector will be smaller than it would be under other circumstances," he told the FT.
He added: "Airlines go through phases: they get happy and get fat; then they enter a phase of cost discipline. We're back to the days of cost discipline."
As they seek to reduce expenses in the short term, some companies must choose between investing in new aircraft and spending on AI products that they are told are necessary to stay ahead in a fiercely competitive industry.
"You have to decide where to invest," said Marcus Schnabel, from SunExpress, an airline based in Türkiye and partly controlled by Lufthansa and Turkish Airlines. AI “doesn’t come for free,” he added.
At the same time, airlines that planned to use long-awaited aircraft deliveries from Boeing and Airbus to expand their fleets will instead be forced to retire older, less fuel-efficient planes to cut costs. SunExpress will decide "year by year" whether to keep older models as it receives new aircraft, Schnabel said.
Latam Airlines, which has nearly 400 planes, is already using some of its older aircraft on less frequent routes to save fuel but avoids the costly step of formally taking them out of service, CEO Alvo said.
Still, he, like many others, remains "cautiously optimistic" about the industry's ability to cope.
“Airlines need to be more agile,” he added. "We just have to be quicker, quicker to change, more adaptable. We need to think about how to reorganize things faster, because the world is spinning faster."
