Asian airlines' windfall from Europe flights erode as Gulf carriers start to rebound

HONG KONG/SYDNEY — Asian airlines that benefited from higher passenger volumes and elevated fares on Europe-bound routes following the outbreak of the Iran conflict are now seeing those gains fade as Gulf carriers restore capacity and reintroduce lower fares, according to industry data.

The shift has been gradual, but it is raising questions about whether carriers such as Singapore Airlines, Cathay Pacific Airways, Korean Air Lines, and ANA Holdings can sustain the market share they captured during the disruption.

“It is clear that we have passed the peak of the load factor gains for the Asian carriers,” said Nathan Gee, head of Asia-Pacific transportation research at BofA Global Research, referring to the percentage of seats filled. “But long-haul bookings tend to be on a six-month window, suggesting the strongest contribution to flown revenues will be seen in the upcoming quarters.”

Before the conflict, Emirates, Qatar Airways, and Etihad Airways accounted for nearly one-third of passengers traveling from Asia to Europe, and more than half of those flying from Australia and New Zealand to Europe, according to Cirium data.

At the start of the Iran conflict on February 28, operations at Gulf hub airports were disrupted due to drone and missile activity. However, by mid-June, flights had recovered to about 90% of normal levels, according to Flightradar24 data.

Between March and May, Middle Eastern carriers reduced their year-on-year passenger decline from nearly 60% to 28%, according to the International Air Transport Association. Over the same period, nonstop traffic from Asia to Europe rose nearly 30% year-on-year in March, before easing to 15% in May.

ASIAN FLIGHTS FULL

In June, Australia lifted its “do not travel” advisory, which had previously affected travel insurance coverage for Gulf transit hubs. Following the change, Flight Centre Travel Group reported a 36% increase in bookings on Emirates, Qatar Airways, and Etihad within a week.

Travel agents also noted that some passengers who had initially booked flights before the conflict purchased refundable backup tickets on Asian carriers while assessing the security situation.

“Not all clients, but I’d say the majority are now feeling more comfortable and safe and secure in flying through the Middle East,” said Michael Schischka, senior adviser at Mary Rossi Travel in Sydney. “A lot of the Asian flights were very full and the cheaper fares weren’t available. So that’s driven people back to looking at the Middle East airlines again as well.”

A Korean Air spokesperson said the airline recorded higher year-on-year load factors on European routes between March and May, though transfer traffic demand softened as Gulf carriers resumed full operations during the second quarter.

ANA Holdings, which has yet to report May figures, said its European load factor fell from 93.1% in March to 86.9% in April, though this remained 8.7 percentage points higher than a year earlier. Cathay Pacific reported a network-wide load factor of 86.8% in May, up 2 percentage points year-on-year, compared with a 9.5-point increase to 92.2% in March.

Independent aviation analyst Brendan Sobie said the data reflects a gradual rebalancing of demand rather than a sudden shift, with Singapore Airlines showing a similar pattern.

The airline’s Europe load factor rose 13.8 percentage points in March, but gains narrowed to 4.9 points in April and just 1.1 points in May.

“In May, the load factors for both Europe and Australia normalized,” Sobie said. “They had a big uptick in March, a smaller uptick in April, and in May even smaller. To me it’s more gradual, not overnight.”

Cherie Lavin, a travel agent at Travel My Dear in Brisbane, said customers planning trips within the next one to three months remain cautious about booking Middle Eastern carriers.

“But I think for next year there’s no qualms in quoting it,” she said. “And it’s being received well.”

— Reporting by Julie Zhu in Hong Kong and Christine Chen in Sydney; Editing by Jamie Freed/Reuters