The airspace opened up and the cost problem did not disappear

After more than three months into the war, airlines have learned how to fly around closed airspace, reroute aircraft, and rebuild schedules — but the pressure test became how can they absorb higher fuel, messy operations, and softer confidence before the model starts cracking.

The economics took over: The core question shifted from “can we fly at all?” to “which routes are worth flying under higher costs and higher operational risk?” Wouter Dewulf, professor of air transport management and economics at the University of Antwerp, tells EnterpriseAM.

Open skies, abnormal operations

Opened in parts, but operations are still being treated as a live risk map. The European Union Aviation Safety Agency’s (EASA) 24 June conflict-zone update still advises operators not to fly through Iranian, Iraqi, and Lebanese airspace, while urging caution over Bahrain, Kuwait, Israel, Jordan, Qatar, Oman, the UAE, and Saudi Arabia. The bulletin is valid until 1 July unless reviewed earlier.

The corridor map has changed: Europe-Asia traffic is still being pushed around the old Iran-Iraq corridor, with flows leaning on southern paths through Egypt, Saudi Arabia, Oman, and the UAE, or northern paths through Caucasus and Afghanistan, Dewulf argues. That keeps aircraft moving, but “on these two routings, air traffic control congestion and ad hoc (re)routing are major operational issues,” he adds.

The demand hit is still regional: The Middle East remains the pressure point as the total passenger demand fell 3.4% y-o-y in April, but demand outside the Middle East rose 1.2%. The regional carriers also took a direct hit, with demand falling 46.6%.

Fuel never left the story

The spike in spot prices is already feeding through airline cost bases, with the sharpest pain falling on carriers with weak hedge covers or no hedge protection at all, Hans Jørgen Elnaes, aviation analyst, tells EnterpriseAM.

The risk delayed, not dead: “Fear of jet fuel shortage has vapored away, at least until September and October in case Hormuz continues to be closed or has very limited export flows by jet fuel sea tankers,” Elnaes argues. The crude supply chain adds another layer of risk as “it takes 10-12 barrels of crude oil to produce/refine 1 barrel jet fuel and not all grades of crude oil are optimal for refining jet fuel,” he adds.

Hedge cover and premium cabins are giving some long-haul carriers room to push back against the fuel shock. Airlines with 60-80% hedge positions and strong premium demand have been able to recover part of the higher fuel bill through fare increases, Elnaes says. Lufthansa Group expected to recapture up to 60% of higher fuel costs in 2Q, mainly through premium fares and stronger premium demand, he adds.

Short-haul has less cover: The fuel shock is harder to pass through on short-and medium-haul routes, where competition is tighter and booking behavior is shifting, Elnaes tells us. That limits how far airlines can raise fares before demand pushes back, leaving less room to offset higher fuel expenses.

The old route map no longer clears

Scale is not the whole defense: “In today’s aviation market, agility is proving more valuable than size,” Richard Maslen, head of analysis at CAPA - Center for Aviation, tells EnterpriseAM. The airlines best placed for this phase are not simply the biggest, but those with diversified networks, stronger balance sheets, and the ability to move capacity quickly, he adds.

Capacity gets moved, not just cut: Airlines are already trimming monthly flights production by around 2-5%, mostly by reducing frequencies on dense routes, consolidating some services with partners and only selectively dropping loss-making routes, Elnaes says. The shift also includes moving aircraft out of weaker Middle East-linked operations and into more lucrative nonstop markets, while older widebody and narrowbody aircraft are being parked first because their fuel burn no longer clears the cost test, he adds.

The booking window matters now: The return of non-Gulf airlines in the region is likely to be slower because most carriers have already committed aircraft elsewhere and are deep into the summer booking window, Garth Lund, aviation consultant, tells EnterpriseAM. Airlines from South Asia and the Middle East are likely to be the most proactive in restoring Gulf capacity, while European and North American carriers may largely sit out the summer and return in earnest from autumn, he adds.

Stressed, not broken

“Full-service hub carriers are hit hardest operationally because their networks are built around connectivity. Emirates, Qatar Airways, and Etihad do not just fly passengers from A to B, they orchestrate global connection flows through Dubai, Doha, and Abu Dhabi as super connectors. When airspace access becomes uncertain, the hub wave structure becomes fragile,” Dewulf tells us.

Exposure is not fragility: Gulf carriers still have scale, modern fleets, cargo revenue, premium demand, state support, and deep operating experience, Dewulf highlights. “The Gulf hub model is being stress-tested, but not destroyed. The real question is how much cost and uncertainty these airlines can absorb before they need to structurally reduce, postpone, or redesign parts of their networks,” he adds.

Maslen takes a similar view — that Emirates, Qatar Airways, and Etihad remain relatively well positioned, given their geographic reach, strong brands, and diversified revenue streams, even as operating costs rise.

Riyadh Air: Launching into the storm

“For Riyadh Air, the timing is undoubtedly challenging, but it does not fundamentally alter the long-term [window],” Maslen argues. The timing is harder than planned, but the airline doesn’t have an old network to unwind. As a greenfield carrier, the newly launched carrier can build its fleet deployment, cost base, and product around the market it is launching into, rather than retrofitting a legacy model, Dewulf says.

Starting now may not be a bad call; at least the new carrier can build around the mess. “Riyadh Air has the advantage of being able to design for the future rather than adapt from the past,” Maslen says. Also, Saudi Arabia is less affected than other regional markets, has a larger domestic base, and Riyadh Air is likely to start with a more point-to-point network than the existing Gulf supper-connectors, Dewulf adds.

What if peace starts the next squeeze?

Recovery could become another pressure point for aviation, Sindy Foster, principal managing partner of Avaero Capital partners, tells EnterpriseAM. Even if hostilities ease, airlines may still come out of the war carrying higher fuel bills, elevated premiums, aircraft availability constraints, weaker balance sheets, and more cautious travelers. So, “recovery does not necessarily mean a return to previous conditions,” she adds.

The Gulf’s recovery is a capacity rebuild — not just a margin play: Gulf-based airlines are operating at around 90% of pre-conflict capacity, Lund says. Even with a peace agreement, most regional airlines will need at least a few weeks to fully restore capacity because adding flights requires lead times for sales, crew rostering, and potentially maintenance checks for aircraft grounded during the conflict, he argues.

Peace doesn’t restart every market at the same speed: For non-Gulf airlines, the first relief would be financial — lower fuel costs, better margins, and stronger cashflow — rather than a dramatic capacity rebound, Lund says. For Gulf carriers, the recovery is more operational, with flights, crews, aircraft, and confidence needing to be rebuilt in sequence.