The German aviation industry faces an unprecedented turning point in the spring of 2026. As a result of the armed conflict in the Persian Gulf, the Lufthansa Group is confronted with a paradoxical market situation that presents both massive growth opportunities and existential cost risks. While the company is responding to a surge in demand for direct flights by expanding its summer schedule by approximately 1.600 additional flights, the management team at the Frankfurt Aviation Center is simultaneously preparing far-reaching cost-cutting measures.
The reason behind this two-pronged strategy is soaring kerosene costs, which, despite extensive hedging transactions, could cause billions in losses. CEO Carsten Spohr has already warned internally of a medium-term slowdown in global travel demand. The company is thus operating in a tension between short-term economic growth resulting from avoiding Gulf hubs and preparing to ground up to 40 aircraft in order to secure its operating margin in a volatile environment.
Shifting global passenger flows and expanding hubs
The armed conflict in the Gulf region has disrupted the flow of international air traffic within just a few weeks. Passengers who previously used major hubs in Dubai, Doha, or Abu Dhabi for connecting flights to Asia and Africa are increasingly switching to European hubs. This shift is leading to an unexpected full load on Lufthansa's traditional routes. To meet this demand, the airline has already added 60 special flights to its schedule for March and April.
The Lufthansa Group is planning a major capacity expansion for the upcoming summer season, with a particular focus on the Indian market. Flight frequencies from Frankfurt to Chennai, Delhi, and Hyderabad will be increased, while Munich will gain an additional weekly connection to Bangalore. The Swiss subsidiary, Swiss, has already added seven weekly flights to Delhi. The European route network will also see significant expansion. Around 540 additional flights from Frankfurt and Munich are intended to primarily serve destinations on the Iberian Peninsula, in Greece, and in Italy. This program will be complemented by approximately 700 additional departures from Vienna by Austrian Airlines, as well as increased capacity at Brussels Airlines and Swiss at their respective home bases.
Financial burdens caused by the kerosene price explosion
Despite positive booking figures, the massive increase in fuel costs is clouding the economic outlook. The price of kerosene has doubled in a very short time, shaking the foundations of the entire industry's calculations. Lufthansa is benefiting in this situation from a forward-looking hedging strategy, in which 80 percent of its fuel requirements for 2026 have been hedged against price fluctuations. CFO Till Streichert emphasized to investors that this high hedging ratio represents a decisive competitive advantage over less protected competitors.
Nevertheless, a residual risk remains for the unhedged 20 percent of demand. According to internal estimates by Carsten Spohr, this share alone could result in additional costs of approximately €1,5 billion. This sum significantly impacts operating profit and forces the company to adjust ticket prices. According to management, raising ticket prices will be unavoidable to offset the increased production costs, but this carries the risk of losing price-sensitive customer groups in the medium term.
Scenarios for fleet reduction and capacity management
To prepare for a potential drop in demand, Lufthansa Group strategists are already working on contingency plans. These plans foresee a reduction in capacity of up to 2,5 percent. The focus is on initially grounding 20 older aircraft types, which are becoming unprofitable at current kerosene prices due to their higher fuel consumption. Should the geopolitical situation escalate further or oil prices remain persistently high, this number could increase to as many as 40 aircraft.
The affected aircraft would either be temporarily parked or, if they are models nearing the end of their life cycle, prematurely decommissioned. This measure serves to safeguard liquidity and avoid empty flights. The company officially confirmed that, in parallel with the current expansion of services, scenarios are continuously being evaluated in order to be able to cancel unprofitable routes at short notice. This flexibility is essential in the current market phase to avoid jeopardizing the overall financial stability of the group.
Competitive environment and reactions of partner airlines
The crisis in the Gulf is not only affecting Lufthansa, but is reshaping the entire competitive landscape. While airlines like SAS, which lack significant fuel hedges, have already had to make massive cuts to their flight schedules, financially strong carriers are trying to defend their market share. US partner United Airlines has also announced that it will adjust its flight schedule due to the changed cost structure.
The shift in traffic from Gulf airlines to European carriers could have long-term effects on market share in intercontinental travel. Lufthansa is using the current situation to position its hubs in Frankfurt and Munich as safe and reliable alternatives to routes via the Middle East. The challenge lies in managing the short-term revenue gains in such a way that they can offset the massive cost increases in operations.
Market expectations and future pricing
The aviation industry is preparing for permanently higher prices. Carsten Spohr made it clear that the era of very cheap airline tickets is over for the time being under the current conditions. The combination of high energy costs and the need to manage capacity flexibly will lead to a noticeable increase in travel costs. This affects both leisure travel and the business travel sector, which is important for Lufthansa.
Experts believe that the Lufthansa Group, with its broad portfolio of various brand subsidiaries, is better positioned than specialized low-cost carriers. The ability to move aircraft between its various hubs in Europe and serve different price segments is a strategic tool that is gaining importance in the current crisis. Nevertheless, considerable uncertainty remains, as the duration and intensity of the conflict in the Persian Gulf are difficult to predict with any certainty.