What is the single biggest challenge for low-cost and regional operators in 2027?
Protecting margins as higher costs meet a potentially softer demand environment. IBA analysis indicates fuel bills across a sample of European airlines were around 20% higher in Q1 to Q3 2026, potentially an extra $8 billion to $9 billion across the wider market.
Low-cost carriers have been partly insulated by hedging, but as that unwinds through 2027, more of the higher price will flow through. Profitability is already diverging, with Q3 2026 rolling EBIT margins ranging from around 12% for Ryanair and IndiGo to approximately -6% for easyJet and JetBlue.
Passengers may travel less often, book later or become more price-sensitive, making costs harder to pass on.
Where are the biggest growth opportunities?
In using scarce capacity more effectively rather than simply adding flights. We see potential in secondary cities, underserved regional connections and leisure markets where demand outpaces aircraft supply.
Regional aircraft can open thinner routes without the risk of a larger narrowbody, while the A321LR and A321XLR let low-cost operators serve thinner international markets.
ACMI, capacity purchase and franchise-style arrangements help larger airlines maintain connectivity without carrying full operational or asset risk.
The opportunity is not growth for its own sake, but capacity that stays profitable if demand or costs turn.
How will aircraft supply and MRO capacity shape the sector?
Availability will remain a constraint, though conditions should gradually improve. Years of low deliveries have forced airlines to fly older fleets harder, stretching MRO capacity, spare engines and parts.
That may not be entirely unwelcome: if demand softens, limited supply should help maintain discipline.
Some new aircraft will replace older equipment rather than expand fleets.
For lessors and investors, constrained availability should continue to support lease rates, values and demand for serviceable engines.
What impact will sustainability requirements have?
The burden is material and uneven. IBA estimates CORSIA compliance at around $2.43 per tonne of CO₂, against approximately €90 under the EU ETS, while EU and UK SAF mandates add roughly $7 per tonne on exposed flying, rising significantly towards 2030.
Short-haul European carriers are most exposed. IBA’s 2030 modelling suggests environmental fuel costs could equal 73% of easyJet’s underlying fuel bill, against 53% for Lufthansa, 11% for Emirates and 3% for American Airlines.
Fragmented regulation could reshape competitiveness without creating an equally strong global incentive to cut emissions.
Which technologies will make the biggest difference?
Turning airline data into actionable insight on scheduling, route selection and capacity deployment, including whether a route stays profitable under different fuel and cost scenarios.
Predictive maintenance and AI-supported disruption management will also help. The key is pairing technology with experienced judgement, so better data leads to better decisions rather than more analysis.
What is the industry underestimating?
Beyond fuel, no single problem affects every carrier equally. Smaller airlines or those with less common fleet types may find aircraft, parts and maintenance slots harder and costlier to secure.
We are likely to see further failures and consolidation, but these should be seen as airline and market-specific events, not a failure of the low-cost model.
Dan Taylor is Head of Consulting at IBA. Data: IBA Insight.
