Mena airlines brace for tougher test in drawn-out conflict

• Smaller carriers feeling the strain
• Biggest airlines managing better
• Full-year results will be the real test

Middle East airlines entered the Iran conflict in the healthiest financial position in their history. The question analysts are now asking is how long the industry can withstand disruption, higher fuel costs and fragile passenger confidence from a position of strength.

The first wave of airline earnings has exposed fault lines across the region’s aviation sector. While the Gulf’s biggest players such as Emirates continue to post record profits, smaller and low-cost carriers (LCCs) are feeling the strain from airspace closures, rerouted flights and weaker regional demand.

Qatar Airways last week posted lower annual profits and passenger numbers for 2025-26, after reporting record results the previous year. CEO Hamad Al-Khater praised the company’s performance during the conflict, which shut Qatari airspace and grounded aircraft.

Kuwait-listed Jazeera Airways swung to a first-quarter loss after revenue fell following the 57-day closure of Kuwait International Airport, the longest shutdown of any airport in the region after an Iranian drone struck the radar system in March.

Royal Jordanian also reported deeper quarterly losses after higher fuel costs linked to rerouted flights hit earnings, while Saudi budget airline Flynas said profits fell 20 percent because of rising fuel and maintenance expenses.

By contrast, Turkish Airlines returned to profitability as passenger volumes climbed, while Oman Air narrowed losses as part of a broader restructuring.

The standout result came from Emirates, which posted record annual profits of AED22.8 billion ($6.2 billion).

Linus Bauer, founder of aviation consultancy BAA & Partners, warned that the latest earnings only partially reflect the impact of the conflict because most carriers enjoyed a strong start to the financial year before disruption intensified in late February.

“The real test will be the 2026-27 financial year,” Bauer said. “Capacity is back to roughly 80 percent across the Gulf as of May, but full normality – meaning pre-disruption yields, load factors and network density operating simultaneously – is likely a Q4 2026 story at the earliest, assuming no further escalation.”

According to Bauer, long-haul network carriers are recovering more quickly than regional low-cost airlines because international transfer traffic rebounds faster once airspace restrictions ease.

“The slog sits with the regional LCCs,” he said. “Short-haul leisure demand is more sentiment-driven – and sentiment lags capacity.”

That divergence could leave smaller state-backed airlines under mounting pressure. Bauer said carriers such as Gulf Air, Kuwait Airways and Oman Air may require further government support if disruption continues, although he dismissed the prospect of full-blown mergers.

“Gulf governments treat aviation as sovereign infrastructure, not a commercial asset to be consolidated,” he said.

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Former Etihad Airways CEO James Hogan told AGBI in May that the industry’s recovery may take up to two years.

“We’re talking more about the reset – how to bring back confidence,” he said.

Saj Ahmad, chief analyst at StrategicAero Research, a UK-based consultancy, echoed the view that the industry’s hardest days still lie in the future.

“As it stands, the real financial impact will come in the months ahead,” Ahmad said. “Results we have seen so far haven’t really incorporated the effects of curtailed flights and capacity reductions.”

He said uncertainty over relations between Iran and the US continues to hang over the sector, leaving airlines unable to fully plan for the second half of the year while the risk of renewed conflict remains.