Iran conflict reshapes the global aviation industry.

Emirates, Qatar Airways and Etihad Airways have become major competitors on international routes by leveraging the Gulf region’s geographic position between Europe, Africa and Asia. For years, US and European carriers have watched Middle Eastern airlines expand by attracting passengers who prefer layovers in Dubai and Doha, supported by competitive fares and next-generation aircraft.

That balance shifted rapidly after the Iran conflict erupted. A number of airspaces were closed, many aircraft were unable to depart, and regional operations were disrupted. The resulting decline in Middle Eastern airline capacity reduced global long-haul capacity and created opportunities for Western carriers to add routes and regain market share.

Western carriers move to capture demand

As Middle Eastern carriers weakened, Western aviation executives moved quickly to take advantage of the disruption. Deutsche Lufthansa Group, British Airways and Air France-KLM redeployed aircraft to markets including India, Thailand and Singapore in an effort to capture demand from travelers seeking alternative flight options.

However, Bloomberg’s analysis—using Flightradar24 data covering 21 major carriers in the month before and after the conflict began—suggests wide-body flights were significantly disrupted. The key question is whether the change proves temporary or becomes a longer-term shift as previously “safe” hubs are affected by military conflict.

Capacity and route adjustments face constraints

While some gains have been recorded, turning a short-term window into durable growth is difficult. European carriers not only need to win passengers, but also manage rising costs. Fuel prices have increased due to the conflict, forcing airlines to either raise ticket prices or absorb higher operating expenses to attract customers.

In the United States, the largest capacity gains to date reflect preexisting plans. Flightradar24 data show United Airlines and Delta Air Lines increasing long-haul capacity on wide-body aircraft by about 11% and 12%, respectively. Both airlines have added flights to existing European destinations and launched new routes aimed at high-spending American travelers.

Network changes are not straightforward, particularly when fleets are not optimized for longer sectors. A narrow-body aircraft used on Europe–Gulf routes is unlikely to efficiently support longer services to Asia. New fuel-efficient wide-body aircraft also require long lead times, and launching a route typically takes months of preparation, including securing take-off and landing slots and arranging schedules and staffing.

Cost pressures show up in airline stocks

Market moves have reflected the pressure on airline earnings. Since the conflict began, Lufthansa shares have fallen about 17%, IAG SA about 13%, and Air France-KLM about 27%. Morgan Stanley and UBS have also lowered price targets for several European airlines, citing higher fuel costs and operating pressures.

Potential window for European airlines, but uncertainty remains

Gulf carriers are expected to return to the market with the goal of reclaiming market share, likely using attractive fares to draw travelers back to their hubs. That raises the prospect that European airlines may have only a limited window to capture current demand and elevated fare levels.

Rob Walker, an aviation analyst at ICF, told Bloomberg that Gulf carriers have not abandoned their ambition to become global transfer hubs, and that European airlines can use the current favorable moment to broaden their presence and gain market share.

Background: Gulf hub growth and competitive debate

The Gulf hub model has driven Emirates and Etihad’s growth over recent decades. In 2025, Emirates carried 55.6 million passengers—more than four times the level two decades earlier—and Dubai International has become the world’s busiest international airport. Some rivals argue that Gulf expansion has benefited from subsidies that are not fully fair.

Ben Smith, CEO of Air France-KLM, said he does not agree with praising Gulf carriers simply for owning new fleets and operating modern airports. In a Bloomberg interview last month, he argued that advantages are not solely self-made and that the competitive edge can emerge when the environment is not fully fair.

Asia–Europe competition and airspace constraints

Several Asian carriers are also expanding long-haul services. Singapore Airlines is increasing flights to London and Melbourne, while Cathay Pacific has added flights to Paris, Zurich and London. Air India has added flights, and Qantas is seeking to bolster capacity on Europe routes.

Asia–Europe operations have faced hurdles for years, including Western carriers’ avoidance of Russian airspace since Moscow’s 2022 invasion of Ukraine. The Iran conflict adds further complications, with Iranian and Iraqi airspaces closed and flights forced to reroute through narrower corridors over Georgia, Azerbaijan and Central Asia.

Conroy of Bloomberg Intelligence said the challenge for European airlines on Asia routes is not only airspace constraints but also competition from Asian carriers with stronger advantages that can still fly over Russia. Bloomberg Intelligence also notes that capacity may continue shifting toward transatlantic routes, though there are concerns that demand may not be large enough to absorb the growth.

Overall, the sector is moving into crisis mode as higher fuel costs intensify pressure across airline business models, underscoring the need for risk management and strategic fleet planning.