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Conflict duration will determine impact on aviation sector

6 March 2026

The Middle East’s aviation and travel sectors are grappling with the fallout following the 28 February military actions involving the US, Israel and Iran, and subsequent retaliatory strikes.

According to a 5 March report by Fitch Ratings, the duration of this disruption will be the key factor in determining the financial and operational impact on airlines, airports and the broader hospitality industry. While the current baseline suggests the conflict may last less than a month – limiting the damage to rated issuers – the scale of the immediate disruption is unprecedented for the region’s aviation hubs.

Between 28 February and 5 March, more than 15,000 flights were cancelled across seven major regional airports, affecting over 1.5 million passengers. Major international hubs, including Dubai, Abu Dhabi and Doha, have faced significant congestion and scheduling challenges as carriers scramble to reroute or divert services.

The impact is most acute for carriers whose primary hubs are located within the affected corridor. “Flight operations over the UAE and Qatar appear particularly constrained, which is important given the scale of the region’s hub carriers’ operations,” said Fitch.

Airlines are facing a sharp spike in operating costs. Rerouting around restricted airspace often requires longer flight paths, additional technical stops, and increased expenses for crew overtime and passenger handling. While passenger compensation may be limited because the conflict is classified as an event outside the airlines’ control, the cost of issuing refunds, vouchers and accommodation remains a burden on balance sheets.

Another challenge is higher fuel prices, which is a perennial risk for the industry during Middle East instability. Fitch said most of the region’s carriers have maintained a disciplined approach to risk management with hedge levels for the next three months ranging from 50% to over 80%, providing a significant buffer against immediate price volatility.

The insurance market is also seeing shifts. Aviation policies typically grant insurers the right to cancel cover during active conflict. “War cover would typically relate to aircraft damage, although business interruption policies usually exclude war risks,” said Fitch.

The broader outlook for regional travel remains resilient. Global lodging companies with exposure to the Middle East are generally well-diversified enough to absorb the impact of travel disruptions. Similarly, aircraft lessors – supported by globally diversified fleets and long-term, fixed-rate lease contracts – face very limited credit risk.

For the region’s major aviation players, the focus now is on how quickly the safe haven status of the Gulf’s primary hubs can be restored. If the conflict remains short-lived, the impact on annual growth and profitability is expected to be temporary.

A prolonged period of airspace instability would test the flexibility of the region’s transport infrastructure at a time when aviation remains a central pillar of the GCC’s economic diversification strategy.

READ THE MARCH 2026 MEED BUSINESS REVIEW – click here to view PDF

Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
To see previous issues of MEED Business Review, please click here
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Colin Foreman

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