European airlines are establishing alternative routes to capture passengers from flights canceled due to the US and Iran conflict. However, surging consumer demand isn’t counteracting the issue of rising fuel costs.
The war in Iran has altered the trajectory of the aviation sector, with Western carriers stepping in to fill the void created by Middle Eastern operators reducing capacity amid the conflict, according to Bloomberg.
The closure of Iraqi and Iranian airspace, coupled with attacks on regional airports, resulted in the cancellation of over 46,000 flights in those corridors within the first fortnight of hostilities. Travelers who previously routed through Dubai or Doha are now seeking other travel options.
Deutsche Lufthansa AG, British Airways, and Air France-KLM swiftly repositioned aircraft last month onto destinations such as India, Thailand, and Singapore, aiming to attract passengers looking for new flight connections. Lufthansa has already boosted frequencies to Bangkok, Singapore, New Delhi, and Shanghai.
A key question revolves around the longevity of these shifts. ICF aviation analyst Rob Walker points out that Middle Eastern carriers “will not abandon their aspirations to become global hubs,” suggesting European companies should simply “make hay while the sun shines.”
Richard Evans, a senior consultant at Cirium, concurs: “I anticipate Gulf carriers will offer highly competitive fares to re-establish traffic through their hubs, so European airlines might only have a short window to capitalize on high demand and elevated fares.”
As Bloomberg reports, data from Flightradar24 indicates that US carriers United Airlines and Delta Air Lines increased their wide-body long-haul movements by 11% and 12%, respectively. They augmented existing European routes and launched new services targeting affluent American tourists. Nevertheless, the agency notes this growth largely reflects strategies charted before the conflict erupted.
Despite the increase in passenger volume, airlines are confronting significant financial strains. Jet fuel prices have surged due to supply chain disruptions, placing immense pressure on the industry. This compels carriers to raise ticket prices. The report also highlights that American airlines are more susceptible to fuel price spikes as they lack hedging coverage.
Walker suggests that in the current Middle Eastern crisis, non-stop US-to-Asia services and transatlantic routes where US airlines employ codeshares with European counterparts will be the beneficiaries.
Financial markets have also reacted to the aviation sector’s changes since the Middle East conflict began. The Bloomberg World Airlines Index has declined more than 11% since the war started. Lufthansa’s shares dropped 17% over the conflict’s duration, while Britain’s IAG (the parent company of British Airways) saw a 13% loss in the same period.
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