Our 2026 credit outlook on the global airline sector is neutral, where air passenger traffic is set to continue its growth momentum and margins are likely to post modest improvement from current levels. Region-wise, air passenger traffic growth in North America is likely to remain weak (but better than 2025) as airlines rationalize capacity to improve struggling passenger yields along with some macroeconomic pressure. Asia-Pacific is expected to remain the fastest growing market, thanks to strong economic growth in China and India.

Key Highlights:
— Global air traffic volumes are expected to remain resilient in 2026 with mid-single-digit growth despite macroeconomic challenges as consumers continue to prioritize travel.
— Margins are expected to modestly improve as growth in nonfuel operating cost normalizes, fuel costs further decline, and passenger yields improve in some markets.
— Low-cost carriers’ shift towards premium segment is likely to continue, but we expect only a handful of airlines to successfully execute and materially penetrate the market, which will benefit their credit risk profiles.

“We expect credit risk profiles of full-service carriers to remain strong and supportive of their current credit ratings while credit risk profiles of some smaller low-cost carriers, which have been struggling recently due to weak passenger yields and high operating costs, may improve from current weak levels but remain vulnerable” said Rohit Kumar, Assistant Vice President, Corporate Ratings at Morningstar DBRS, “Any additional macroeconomic shocks and/or material weakness in consumer sentiment given uncertain macroeconomic and geopolitical environment remain key risks to the volume of traffic and profitability”