European airlines’ Asia tailwind has hazy horizon
BREAKINGVIEWS-European airlines’ Asia tailwind has hazy horizon The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to add product codes.
By Oliver Taslic
LONDON, Sept 3 (Reuters Breakingviews) - The Iran crisis has, overall, been a negative for European carriers. The STOXX Europe Airlines Index is down 9% since the conflict started. Yet some, like $11 billion Deutsche Lufthansa LHAG.DE and $1 billion Finnair FIA1S.HE, have felt tailwinds. Gulf disruption saw Europe-Asia travellers swerve Middle East hubs like Dubai and Qatar, opting to transfer in Frankfurt or Helsinki instead. The problem, however, is that it’s unclear how long this lift will last.
Finnair exemplifies the trend. The group, which is publicly listed but majority owned by Finland’s government, has built an efficient transfer hub to and from Asia. Asia routes accounted for almost two-fifths of its total capacity last year.
The obvious competition on many of these routes includes major Middle Eastern airlines like Emirates and Etihad, which suffered when parts of the Gulf became a war zone. Finnair benefited: revenue from Asia routes grew 20% year-on-year in the second quarter, indicating strong demand. Finnair shares have risen over 30% since the Iran conflict began.
It isn’t alone. Shares in British Airways owner IAG ICAG.L, Air France-KLM AIRF.PA and Deutsche Lufthansa have also outperformed short-haul rivals this year, in part thanks to higher demand for flights to and from Asia. Cargo is another bright spot. The Middle East is a major air freight hub, accounting for 13% of global cargo tonne-kilometres in 2025, according to the International Air Transport Association (IATA). Gulf disruption sharply increased demand on alternative routes, helping operating profit at Lufthansa’s cargo unit jump almost 60% year-on-year in the second quarter.
It’s not all smooth flying. Take Turkish Airlines THYAO.IS. The carrier and its mega-hub in Istanbul – at the crossroads of Europe and Asia – looked early on like potential beneficiaries from Gulf airlines’ issues. Istanbul recently nabbed the title of Europe’s busiest airport from London’s Heathrow. Still, Turkish Airlines last month pegged the net negative impact of the war at around $900 million in the first half, as increased passenger and cargo sales were unable to fully offset the likes of higher fuel costs and disruption to its Middle East routes.
There’s also the question of how long this will last. Emirates President Tim Clark told Reuters on the sidelines of this summer’s Farnborough Airshow that the airline was flying at 90% capacity, and that premium cabins were full. Barclays analysts have also expressed scepticism at the windfall’s longevity, arguing in early July that “short memories” and the high quality of Gulf services would bring fliers back. Notably, Finnair opted not to raise operating profit guidance at its half-year results, despite raising its revenue forecast.
On the other hand, IATA data released on Monday showed passenger traffic between Europe and Asia grew 12.1% year-on-year in July, the strongest expansion of any major international corridor. For now at least, Europe’s airlines can enjoy an Asia updraft.
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CONTEXT NEWS
The International Air Transport Association said on August 31 that global air passenger traffic grew 0.2% year-on-year in July. Excluding the Middle East, there was a 1.2% increase, IATA said.
The airline trade association added that passenger traffic between Europe and Asia grew 12.1%, representing the strongest expansion of any major international corridor.
(Editing by Liam Proud; Production by Varun H K)
((For previous columns by the author, Reuters customers can click on TASLIC/oliver.taslic@thomsonreuters.com))