Summary of Key Points
Although the three major Middle Eastern airlines (Emirates, Qatar Airways, and Etihad Airways) have resumed operations, their capacity has not yet returned to pre-war levels. Profit forecasts for 2026 have plummeted from a net profit of $7.2 billion in 2025 to a net loss of $4.3 billion (a decrease of $11.5 billion). The primary reason is that the war has impacted their transit hub model, which is the foundation of their business. This is compounded by unstable air traffic, weak cargo demand, high oil prices, and passengers' concerns about safety. Airlines and destinations such as Dubai are taking measures like insurance and free packages to try to recover, but long-term challenges remain.
Detailed Analysis
1. The Transit Hub Model Hit by the War
How do Middle Eastern airlines make money? Through their transit services—they gather passengers from Europe, Asia, and Africa at hub airports in Dubai and Doha before flying them on to other destinations (for example, London → Dubai → Tokyo). However, the war has disrupted this model:
- Direct Flights Compete for Business: The number of direct flights between Europe and Asia has increased by 11%, with many passengers choosing not to transit through the Middle East.
- Soaring Costs: Closed air spaces have forced longer flight routes, increasing fuel costs and aircraft downtime. Aircraft are also less efficiently utilized (for example, being stranded at foreign airports, disrupting the entire network).
- Increased Risks: The more global the transit network, the greater the impact of any disruptions (such as closed air spaces), leading to a cascading effect on costs and delays.
In short, what used to be a geographical advantage (as a bridge connecting Europe and Asia) has become a weakness. The more reliant airlines are on transits, the more they are affected by regional conflicts.
2. Flights Have Resumed, but the Air Network Is Still Impaired
Do you think things have returned to normal just because flights have started again? Not quite:
- Many Airlines Have Not Yet Returned: French Airlines only resumed Middle Eastern services at the end of August; Lufthansa in September; British Airways and Singapore Airlines in October; Air Canada has delayed until 2027.
- Unsafe Air Spaces: The European Union's safety agency advises avoiding flights over Bahrain, Qatar, and other areas until August 2026, limiting flight options (for example, only three Middle Eastern airlines offer direct flights from London to the UAE, and Qatar Airways is the main option for flights from Doha to Tokyo).
- Poor Passenger Experience: Flights have resumed, but with fewer choices and concerns about sudden air space closures, passengers are hesitant to use Middle Eastern transits.
3. Cargo Demand Fails to Benefit from the War
Was it expected that air cargo demand would surge due to disruptions in the Strait of Hormuz? Not at all:
- Slow Growth: Middle Eastern cargo demand has only increased by 5.6%, compared to the global average of 8.5%. Cargo volume from Europe to the Middle East has even decreased by 41%.
- New Demand Cannot Offset Higher Costs: Although there is an increase in urgent cargo shipments, the higher costs (due to detours and fuel) mean that short-term demand cannot cover long-term losses.
- High Market Share, but No Profit: Middle Eastern airlines account for 13% of global cargo traffic, but it remains uncertain whether they can turn this temporary demand into stable revenue.
4. High Oil Prices Add to the Pressure
Fuel costs are a major expense for airlines, and the current situation is problematic:
- Oil Prices Remain High: Although jet fuel prices dropped by 20% in June, they are still 45% higher than last year and are expected to rise another 70% in 2026.
- Fare Hikes Limited: Airlines want to raise fares to cover costs but fear scaring off price-sensitive passengers (such as leisure travelers), so they can only increase prices slightly and bear the rest of the burden.
- Forced Cost Cuts: Airlines are retiring old aircraft, canceling unprofitable routes, and cutting management expenses. Even low-cost carriers (like Spirit Airlines in the US and Air Baltic/Wizz Air) are struggling.
5. Airlines' Self-Help Measures: Using Insurance and Free Packages to Attract Passengers
To encourage passengers to fly, airlines and destinations are taking drastic steps:
- Emirates' Comprehensive Insurance: Offering unprecedented travel insurance covering flight cancellations due to war, even promising to assist passengers in returning home (previous insurance did not cover such situations).
- Dubai's Tourism Incentives: Providing free packages for tourists invited by UAE citizens and free hotel accommodations for those with long transits.
- The Logic is Simple: The focus is no longer on whether flights can operate but on how to make passengers feel safe and willing to travel.
Conclusion
The good times for Middle Eastern airlines have temporarily come to an end. Their past success relied on transits and geographical advantages, but now these factors have become risks. Coupled with high oil prices and air traffic issues, they will need to be more cautious in the coming years. This crisis also serves as a reminder that geopolitical risks cannot be ignored in the global aviation industry.