Gulf airlines are rebuilding networks after the Gulf war ceasefire — will it tip the industry into a price war?

The 60-day ceasefire extension signed on 17 June gave Gulf aviation its clearest path to recovery since the war began. Emirates is back to 96% of its network, and its departures are at 80% of pre-war levels, while Qatar Airways has restored 85% of pre-crisis coverage. That suggests the region’s biggest carriers are rebuilding fast.

The catch is that the operational recovery masks what could be a deeper problem, according to five aviation experts who spoke with EnterpriseAM. The planes are flying again, but the economics that made them profitable remain elusive.

They agree on the diagnosis: The Gulf hub model is being stress-tested, not destroyed. Where they differ is on how much lasting damage has been done — and whether peace, when it comes in full, will provide the stability the carriers need to stage or a new kind of competitive shock.

Trust and recovery economics will be key

The war saw airspace closures, mass cancellations, and stranded passengers. Airlines have moved past that into what Wouter Dewulf, a professor of air transport economics at the University of Antwerp, calls network triage: Every route is being assessed not just for whether it can operate, but for whether its economics still work under a fundamentally different cost structure.

“What we are seeing is not simply disruption, but a reallocation of capacity, capital, and operational focus,” Sindy Foster, principal managing partner of Avaero Capital Partners, tells us. Flexibility will be the differentiator, and the airlines best positioned now are not the largest, but those that can redeploy capacity quickly across diversified networks, says Richard Maslen, head of analysis at CAPA – Centre for Aviation.

The demand picture beneath the rebuilt networks is grim right now. April data from industry global group IATA — the most recent available — shows Middle East carrier demand down a hair over 48% y-o-y, with capacity falling more than 38% and load factor dropping to just over 70%, some 13 percentage points below the year-ago figure. That collapse was so severe that it dragged global passenger traffic growth negative, down by 3.4% y-o-y, for the first time. Exclude the Middle East, and demand grew 1.2%.

Those numbers predate the ceasefire, and things have clearly improved since, but they set the baseline from which recovery is being measured. Before Tehran and Washington inked an MoU on peace, IATA forecast in June that Middle East carriers would post a collective USD 4.3 bn loss in 2026 — a USD 11.5 bn swing from profits of USD 7.2 bn in 2025 and the only region globally in the red. That forecast assumed Brent crude averaging USD 95 a barrel and jet fuel at USD 152 for the full year, with regional demand falling 11.4% by year-end. Ultimately, it’s a question of whether the war ends or not: The prospect of peace has already brought

REMEMBER- We’ve been tracking this arc since April, when we asked whether the war would force Gulf carriers to rethink the hub-and-spoke model and zoomed in on the premium-segment yield competition, with Turkish Airlines increasingly positioning itself as the principal beneficiary.

Unpredictability complicates recovery planning for carriers: “One day there is hope of a settlement and the next day the situation escalates again… airlines cannot plan on the basis of optimism. They have to plan on the basis of resilience,” Foster says. That’s why airlines are concentrating aircraft on their strongest markets while pulling back from routes where the cost, complexity, or risk no longer adds up, Foster adds.

Trust, not airspace access, is a core issue: “Gulf carriers do not simply move passengers from two points; they orchestrate global connection flows through Dubai, Doha, and Abu Dhabi using precisely timed arrival-and-departure banks,” Dewulf says. “When airspace becomes uncertain, that hub wave structure becomes fragile,” he explains. The result? Connecting passengers lose confidence in the hub and the route underperforms, even if it is technically operational.

SOUND SMART- The “hub wave” is the tightly scheduled cluster of arrivals followed by departures that lets a super-connector like Dubai or Doha offer thousands of connection options daily. A single delayed inbound flight can ripple across an entire connecting bank — which is why hub carriers are structurally more exposed to airspace uncertainty than point-to-point operators.

Can high-margin travellers trust the GCC again? A flight can be flyable, Dewulf argues, but if passengers fear disruption, corporate travel managers hesitate, insurers price in risk, and connecting passengers avoid the hub, it still loses money. Business travel is critical for the Gulf carriers’ profitable model — and, as we previously explained, is likely to be the core travel segment that the GCC carriers will have to defend against competition from rivals like Turkish Airlines.

This is why non-Gulf carriers have yet to come rushing back into the region. KLM has extended its suspension of Dubai, Riyadh, and Dammam flights through 9 August. Lufthansa, Swiss, Austrian, and Brussels Airlines are out of the Dubai route until 24 October, and Aegean and Cathay Pacific plan to return after 31 August. Most carriers have committed aircraft elsewhere and are deep into summer booking windows. Experts we spoke with expect South Asian and regional Middle Eastern airlines will move first, whereas European and North American carriers will come back only when summer high season draws to a close.

The fuel shock complicates the math

The fuel shock is repricing the entire industry, but the pain is unevenly distributed. Fuel as a percentage of operating costs has leapt to 31% from 25.4% — an extra USD 100 bn on the global industry’s collective bill. Airlines hedged at 60-80% of fuel needs and operating premium long-haul routes have been able to recapture up to 60% of the higher costs through fare increases in 2Q — mainly via demand from high-end segments, Hans Jørgen Elnaes, an aviation analyst, us, citing Lufthansa Group's 1Q presentation.

Short-haul carriers have far less room: Competition is fiercer, booking windows are shorter, and passengers push back faster on fare hikes, Elnaes adds.

Low-cost carriers face a disproportionate hit. Fuel represents a larger share of total spending for low-cost carriers precisely because their overall cost base is lower, Dewulf explains — so a fuel spike has a proportionally stronger impact on their margins than on full-service carriers. Regional budget airlines including Flynas, Air Arabia, and Flydubai are all exposed: their model depends on high aircraft utilization, short turnarounds, and predictable rotations, all of which the current environment undermines, Dewulf adds.

All about liquidity

Gulf super-connectors entered the crisis with unusually strong balance sheets, and that — along with state backing — is what separates them from the rest of the industry. If the war continues for months, financial results will be heavily impacted, Dewulf says, but he does not see business continuity risk for Emirates, Qatar Airways, or Etihad given their government backing.

It’s all about access to capital: “Resilience is ultimately a function of cashflow and access to capital,” Foster says. “Airlines with strong cash generation, supportive shareholders, and financing access have more options… The longer uncertainty persists, the wider the gap is likely to become between carriers with strong balance sheets and those operating with limited financial flexibility,” she adds.

Weaker airlines have already failed, restructured, sought new capital, abandoned growth plans, and withdrawn from markets as a result of the combined operational, financial, and economic pressures, she explains.

That’s why the first casualties will definitely not be the Gulf heavyweights. Dewulf names specific carriers he considers at risk in Europe: Tarom, airBaltic, and Norse Atlantic. Spirit is the example in the US, as an already financially fragile player before the fuel shock hit. The war does not need to be the sole cause of failure, Dewulf argues. It can be the final blow that exposes a business model that was already cracking.

Crises rarely create novel weaknesses as much as they reveal them, Foster tells us. The airlines with the least flexibility are the most exposed: smaller carriers, highly leveraged operators, those with weak balance sheets, and low-cost carriers whose economics require tight cost control.

The paradox of peace

Most outsiders figure that the war ends, flights come back, and everything returns to normal for the airline industry. The experts argue that the sequencing is more complicated — and potentially more disruptive — than that.

Dewulf’s scenario is a post-war supply shock. Once Gulf carriers put large amounts of capacity back into the market — particularly on Europe-Asia, Europe-Africa, and Asia-Africa routes — the result could be a price war that pressures margins across the board.

Why? Carriers will be looking to lure back the type of passenger that shifted to direct services or alternative hubs — and they’re going to be attracted by cheaper fares and restored connectivity through Dubai, Doha, and Abu Dhabi. That’s a margin hit in the near term for Gulf carriers — and would put a squeeze on European and Asian carriers that temporarily benefited from reduced Gulf competition, Dewulf says.

Foster arrives at the same conclusion, but from a slightly different angle. Even after hostilities ease, airlines will still be dealing with elevated fuel costs, higher insurance premiums, aircraft availability constraints, weakened balance sheets, and more cautious travelers, she tells us. In many cases, carriers will be rebuilding networks and restoring confidence while still bearing the financial consequences of a prolonged disruption.

And some wartime adaptations may outlast the war itself. Foster points to shifts already underway in fuel supply chains — Nigeria emerging as a supplier of Jet A1, for instance — as examples of how markets respond when operators seek supply security and reduced Gulf dependence. What begins as a temporary adjustment can become a permanent change in sourcing, logistics, and supply-chain strategy, she argues. The question, applied to aviation, is how much of the traffic, routing patterns, and corporate travel policies that shifted during the war will revert, and how much has been permanently rerouted.

Garth Lund, founder and CEO of Switzerland-based Alpcor Aviation, doesn’t see a supply shock or long-term high costs — and predicts the recovery sequencing will be uneven by carrier geography. For Gulf airlines, recovery is operational: flights, crews, aircraft, and confidence need to be rebuilt in sequence, with outbound Gulf demand and transit traffic likely to recover first. Inbound leisure demand will take longer. Summer is already the low season for inbound Gulf leisure, which gives the region a narrow window to rebuild, he explains. For non-Gulf carriers, the first benefit will be financial — lower fuel costs, better margins, stronger cash flow — rather than a dramatic capacity rebound, he tells us.

And if the war continues? The real pain for the broader industry could begin in 4Q and deepen into 1H 2027, Elnaes argues. The chain: Continued undersupply of jet fuel pushes spot prices higher, drives prices up, erodes consumer and corporate spending power, and eventually triggers stagnation or outright decline in demand. That’s when the weaker carriers would face a true survival test.