Middle East airlines entered the Iran war in the strongest financial position in their history, but the first wave of earnings has exposed a widening split between the region’s biggest long-haul carriers and its smaller low-cost operators, AGBI reported on June 2.
While Gulf majors such as Emirates continue to post record profits, smaller and low-cost carriers are straining under airspace closures, rerouted flights and weaker regional demand.
Emirates delivered the standout result, with record annual profits of AED22.8bn ($6.2bn). Turkish Airlines returned to profit as passenger volumes climbed, and Oman Air narrowed its losses as part of a broader restructuring.
The picture was weaker elsewhere. Qatar Airways posted lower annual profits and passenger numbers for 2025-26 after record results the previous year, during a period that shut Qatari airspace and grounded aircraft. Kuwait-listed Jazeera Airways swung to a first-quarter loss after the 57-day closure of Kuwait International Airport, the region’s longest shutdown, triggered when an Iranian drone struck the radar system in March. The airport closed again on June 3 after a drone and missile attack that killed one person and caused severe damage to the terminal.
Royal Jordanian reported deeper quarterly losses as higher fuel costs from rerouted flights hit earnings, while Saudi budget carrier Flynas said profits fell 20% on rising fuel and maintenance expenses.
Linus Bauer, founder of aviation consultancy BAA & Partners, said the results only partially captured the impact of the war, since most carriers had 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.”
Bauer said long-haul network carriers were recovering faster than regional low-cost airlines because international transfer traffic rebounds more quickly 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.”
He said carriers such as Gulf Air, Kuwait Airways and Oman Air might need further government support if disruption continued, though he dismissed the prospect of mergers.
“Gulf governments treat aviation as sovereign infrastructure, not a commercial asset to be consolidated,” Bauer said.
Why it matters for the trade
The split is structural, not temporary and certain regional players from smaller airlines are feeling the pressure more than the big boys. Long-haul hub carriers can rebuild revenue the moment airspace reopens, because connecting traffic returns mechanically once routings clear.
However, low-cost carriers depend on leisure demand, which moves with passenger sentiment, and sentiment recovers slowly after airports are struck. For operators and travel sellers, that means Gulf connectivity through Dubai, Doha and Istanbul will stabilise faster than the short-haul point-to-point networks that feed regional leisure markets.
The exposure is concentrated in the state-backed budget airlines. Jazeera’s swing to a loss and the repeated closures at Kuwait show how a single strike on airport infrastructure can wipe out a quarter for a carrier without a long-haul book to fall back on.
Bauer’s point that governments will fund rather than consolidate these airlines matters for the trade: capacity is unlikely to disappear through failure, but fares and schedules on regional routes will stay volatile while the disruption runs, with the real test deferred to the 2026-27 year.