Arab Airlines Project Multi-Billion Euro Loss Amid EU Carbon Regulations and Regional Instability
A report by the Arab Air Carriers’ Organization (AACO) indicates that Arab airlines are projected to incur a net loss of **€3.82 billion** in 2026 due to regional uncertainties and EU carbon regulatio
Arab airlines are anticipated to face significant financial challenges in 2026, with a projected net loss of €3.82 billion (approximately $4.3 billion), according to a report from the Arab Air Carriers' Organization (AACO). This forecast comes as the global aviation industry is expected to see its lowest net profit level in 12 years, excluding the COVID-19 period.
During its annual general meeting in Doha, AACO raised concerns regarding the European Union's (EU) proposed Emissions Trading System (ETS). The organization warns that these regulations could infringe upon regional airspace sovereignty and impose unfair additional costs on Arab carriers, exacerbating pressures from high energy costs and operational disruptions.
Highlights
- Arab airlines are projected to record a net loss of €3.82 billion in 2026.
- The EU's Emissions Trading System (ETS) is criticized for potentially violating regional airspace sovereignty and increasing airline costs.
- AACO Secretary General Abdul Wahab Teffaha stated that the EU ETS goes beyond targets agreed upon by the International Civil Aviation Organization (ICAO), raising sovereignty concerns.
- Fuel costs are expected to rise for AACO members, from 27.9% of operating costs in 2025 to 37.3% in 2026.
- Despite challenges, strengthening regional cooperation and European connectivity remains a priority for airlines.
Details
AACO's 2026 annual report highlights that geopolitical uncertainties and fluctuating financial conditions have negatively impacted the balance sheets of regional airlines. Globally, the industry's net profit is expected to fall to around $23 billion, marking the lowest level in 12 years outside the COVID-19 era. The report notes that performance among members is likely to vary significantly based on hub locations and exposure to conflict-affected markets.
Concerns about the EU ETS specifically target the plan to extend its application to flights departing from the European Economic Area (EEA) and landing in third countries within a 5,000-kilometer radius of Frankfurt Airport by 2029. AACO argues that this move constitutes