Asian carriers that benefited from higher load factors and the ability to charge elevated fares on routes between Asia and Europe after the Iran conflict began are now seeing those gains reduce as Gulf airlines restore flights and offer lower-priced options, industry sources and data show.
Before the conflict, Emirates, Qatar Airways and Etihad together carried nearly one-third of passengers on routes from Asia to Europe and more than half of those flying from Australia and New Zealand to Europe, according to Cirium data cited by industry observers. That dynamic shifted when Gulf hub airports were temporarily closed after drone and missile attacks on February 28, but by mid-June Flightradar24 data indicates the three carriers had brought flights back to about 90% of typical levels.
Nathan Gee, head of Asia-Pacific transportation research at BofA Global Research, said the peak of the load-factor gains that Asian carriers enjoyed has passed. "It is clear that we have passed the peak of the load factor gains for the Asian carriers," he said. He also pointed out that long-haul bookings are typically made within a six-month booking window, which means the strongest contribution to flown revenues from that temporary shift will appear in upcoming quarters.
Industry-wide figures show an improvement in passenger numbers for Middle Eastern carriers between March and May. International Air Transport Association data tracked a recovery from a year-on-year decline approaching 60% to a decline of about 28% for that period. Non-stop passenger traffic from Asia to Europe also contracted its year-on-year gain: it climbed by nearly 30% in March but narrowed to a 15% increase by May.
Flight Centre Travel Group reported a sharp uptick in bookings with Emirates, Qatar and Etihad after Australia lifted a "do not travel" warning for Gulf hubs in June. The travel agency said bookings on those carriers rose by 36% in the week following the change.
Some travellers who originally held bookings on Gulf carriers had purchased refundable backup flights with Asian airlines while assessing security conditions, said Michael Schischka, a senior adviser at Mary Rossi Travel in Sydney who works with luxury European itineraries. "Not all clients, but I'd say the majority are now feeling more comfortable and safe and secure in flying through the Middle East," he said. Schischka added that heavy demand on Asian flights and the lack of cheaper fares earlier in the disruption were factors driving customers back to Middle Eastern carriers as those airlines resumed normal service.
Individual carrier data and comments reflect the broader trend. A Korean Air spokesperson said the airline experienced year-on-year increases in load factors on its European routes between March and May, but that transfer traffic demand softened over the course of the second quarter as Gulf carriers resumed operations. ANA reported a decline in its European load factor from 93.1% in March to 86.9% in April; despite the drop, ANA remained up 8.7 percentage points year-on-year over that period. Cathay Pacific said its overall network load factor in May rose 2 percentage points year-on-year to 86.8%, compared with a 9.5-point gain to 92.2% in March.
Independent aviation analyst Brendan Sobie described the change as gradual rather than sudden. He used Singapore Airlines as an example: the carrier's Europe load factor jumped 13.8 percentage points in March, but the increase narrowed to 4.9 points in April and to just 1.1 points in May. "In May the load factors for both Europe and Australia normalised," he 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."
Travel agents report a mixed near-term sentiment among customers. Cherie Lavin of Travel My Dear in Brisbane said clients planning travel in the next one to three months still show reluctance to book Middle Eastern carriers, though she sees no reservations about quoting those airlines for trips farther in the future. "But I think for next year there’s no qualms in quoting it," she said. "And it’s being received well."
What this means
- Asian airlines captured incremental passengers and commanded higher fares after Gulf hubs closed, but that advantage has been reduced as Gulf carriers restored most flights by mid-June.
- Recovery in Gulf carrier passenger counts moved from an almost 60% year-on-year decline to about a 28% decline between March and May, contracting the net gain Asian carriers had posted earlier in the disruption.
- Because long-haul bookings are often made on a six-month horizon, Asian carriers are likely to see the remaining benefit in flown revenues over the next few quarters rather than in immediate ticket-sales trends.