Iran War Has Airlines Reviewing Growth Plans as Fuel Costs Surge

(Bloomberg) -- Until last month, airlines couldn’t get new aircraft fast enough, with both Airbus SE and Boeing Co. struggling to keep up with surging demand. 

The 10-day war in Iran has upended that outlook, as carriers weigh the implications on travel demand, the cost of fuel and their ability to navigate hostile skies. Planemakers and aircraft leasing firms are worried that some of their customers may push back deals, according to people familiar with the matter. 

Discussions on future aircraft deals and leasing contracts, which provide airlines with aircraft sooner than outright purchases, have been put on temporary hold as some carriers in the Gulf and farther afield in Asia face operational difficulties, said the people, who asked not to be identified as the talks were private. 

Airlines in the Middle East are waiting to see when they might be able to return to regular operations and assess the financial impact of the war before they make final decisions, according to people familiar with the companies’ thinking. Some Asian carriers, including Lion Air, Garuda Indonesia and AirAsia, are also reviewing timelines for large jet purchases, the people said.

Some of the airlines are also considering pausing deliveries, wrong-footed by the Iran conflict that’s triggering a sharp spike in jet-fuel prices, said the people. 

Emirates, Lion Air and Garuda Indonesia did not immediately respond to a request for comment. Boeing said it defers to customers on the matter and Airbus said it is communicating with airlines on specific needs and the talks remain confidential.

Flydubai said it could not confirm any halt in talks or deliveries. Etihad said it would maintain its orderbook and not delay deliveries, while Qatar Airways said its “decision-making throughout this period is guided first and foremost by safety considerations.”

AirAsia said it recently made temporary adjustments to fare and fuel surcharges across its network, following the recent increase in global jet fuel prices. 

Because getting out of delivery contracts is difficult, deferrals are one tool that airlines consider to spread out the financial burden of expanding their fleet.

While carriers would normally need to pay penalties for delaying when they take aircraft, they might in this case declare force majeure, a clause that allows them to halt contracted deliveries without facing a fine, the people said. 

About 14% of Boeing’s backlog is from Middle Eastern airlines, according to Jefferies’ analyst Sheila Kahyaoglu. The US planemaker is especially exposed to the Middle East with its widebody order book with almost half of the orders for the upcoming 777X jet and a third of the 787 Dreamliner purchases from carriers in the region.

“Given the ongoing conflict, Middle East carriers may not be able to take deliveries of on order aircraft in the near term,” Kahyaoglu wrote in a note. 

The aviation industry had entered the year with an upbeat outlook. Global airlines stood to earn a record $41 billion this year, with an estimated 5.2 billion passengers taking to the skies, the International Air Transport Association said in December in its annual forecast. But profit margins at airlines have historically been thin amid high costs, cut-throat competition and geopolitical dislocations.

The spike in fuel prices will have a “meaningful” impact on financial results this quarter, United Airlines Holdings Inc. Chief Executive Officer Scott Kirby said at an event last week. If the elevated price persists, then the carrier will also be impacted in the second quarter of the year, he said. 

In the Middle East, low-cost carriers like Air Arabia and Flydubai that fly more frequently to regional routes will see a bigger hit from fuel prices, the people said.  

In the Persian Gulf, air travel remains massively disrupted. While Emirates and Etihad Airways have slowly resumed commercial operations, their efforts have been interrupted by missile and drone attacks. Emirates had to briefly suspend flights over the weekend after a second impact close to the airport that narrowly missed a parked airliner. 

As a result, carriers in the region are trying to move more of their planes out of harm’s way, or keep them in far-flung airports where they’ve been parked since hostilities started over a week ago. Besides concerns of physical damage, any aircraft parked in a country that has been targeted will have to pay a war premium on the insurance for the asset. 

Emirates’ massive fleet of A380 jumbos remains dispersed across the globe. Lebanon’s national carrier, an airline that has always had to fly in times of war, has opted several times over the past two years to scatter aircraft across different international airports to avoid the higher insurance costs and to protect the assets. 

Fuel is the single biggest expense for carriers, and the aviation industry faces a moment of reckoning, particularly if the conflict drags out for weeks or months. At risk is the crucial summer travel season, when airlines make a significant portion of their revenue.

Airline stocks around the world continued to slide Monday as oil prices surged, raising concerns that higher fuel costs will squeeze profits and potentially weaken travel demand.  

Shares of major US carriers fell sharply, with United dropping as much as 6.4%, American Airlines Group Inc. sliding 5.6% and Delta Air Lines Inc. falling 4.5%. 

“We assume the airlines are able to recapture a portion of the spike in fuel prices, but it’s hard to envision margin expansion this year barring a rapid decline in energy prices,” said TD Cowen analyst Tom Fitzgerald. It’s possible that carriers will revise or pull guidance next week, he wrote in a note Monday. 

Some airlines may be able to withstand the fallout better than others, in particular those with a large domestic market — like Indian carriers — or European majors that are positioning themselves to absorb some of the traffic flows being given up by carriers in the Middle East. 

Deutsche Lufthansa AG is preparing to offer more flights to Asia and Africa as the war sidelines Middle Eastern rivals who’ve had a stronghold on the transit traffic between the continents. 

Air France said it is deploying larger-capacity aircraft and adding routes to destinations including Thailand, India, Singapore, and Japan in response to strong demand from Asia after massive cancellations in the Middle East. 

©2026 Bloomberg L.P.