Gulf aviation six months into US-Iran war: What it means for UAE airlines, airports and travellers

Dubai: Six months after the US-Iran war rattled Gulf airspace, the region's aviation sector is bouncing back — but not evenly, and not without cost.

Top aviation analysts Gulf News spoke with say passenger numbers are recovering faster than expected, airport projects remain on track, and confidence is returning.

But full-service carriers, hotels and insurers are still counting the cost of a conflict that hit some markets far harder than others.

Dubai is on course to finish the year close to its pre-war trajectory. André Martins, Partner and Head of Transportation and Advanced Industrials at Oliver Wyman, said: "The recovery has been faster than many expected."

He added: "Assuming there is no further major disruption, and international tourism continues to recover through the remainder of the year, Dubai is on track to finish 2026 close to 100 million passengers — broadly in line with its pre-conflict trajectory. Doha and Abu Dhabi have also rebuilt their networks at remarkable speed."

Transfer traffic — the lifeblood of Gulf hubs — took the sharpest early hit but has come back strongly.

"By the summer peak, connecting passengers were once again accounting for around half of Dubai's traffic," Martins said. Dubai Airports is due to report its H1 passenger traffic figures later this week.

Usman Tahir, Head of Aviation at Roland Berger Middle East, struck a similarly upbeat note: "The Gulf aviation sector's recovery can best be described as resilient; major carriers have progressively restored their schedules, with flight volumes now approaching pre-conflict levels across key international routes."

Not every airline is recovering at the same speed. Virendra Jain, Co-Founder and CEO at VIDEC, said: "It would be wrong to say that all Gulf markets have been hit similarly." He explained that Kuwait and Bahrain were "the most affected, the UAE to a lesser degree," while "Saudi is mostly flat, and even grew in some months."

On low-cost carriers, Jain said: "Low-cost carriers like Air Arabia and flydubai have recovered their capacity and are running at around 90 per cent of their 2025 levels. They fly point-to-point, and regional and intra-Gulf demand is the demand that comes back first. So the LCCs are performing relatively better."

Full-service carriers have had a rougher ride. "The big boys, the full-service network carriers, have seen a much bigger impact. Their capacity is still around 20-25 per cent below 2025 levels," Jain said, adding: "We do not expect their full capacity to return this year."

With Emirates "bigger than the other three UAE carriers combined," Jain said, "an impact there has a meaningful impact on the UAE air market." He expects "for the full-service carriers, 2026 will remain in net deficit against 2025."

Passengers felt the squeeze too. "Fares helped compensate for some of the lost capacity. In the initial months, fares went up 35-45 per cent," Jain said. "They have now started to normalise, but they are still higher than the pre-war levels."

Linus Benjamin Bauer, Founder & Global Managing Partner, BAA & Partners, described the war as "a significant operational and financial stress test, but not a structural setback for Gulf aviation."

He estimated: "UAE carriers likely incurred hundreds of millions of dollars collectively in additional fuel costs, longer flight times, crew expenses and operational disruption." But he said, "their strong balance sheets, global networks and operational flexibility enabled them to absorb the shock far better than many international competitors."

However, Bauer struck an optimistic note on sentiment: "Passenger confidence has largely returned," he said, adding that the episode "reinforced rather than weakened" investor confidence, "demonstrating that Gulf airlines and governments can respond quickly and effectively to geopolitical disruption."

His takeaway for the industry: "Resilience has become as important as efficiency."

The knock-on effect has been visible on the ground. For example, Dubai's hotel occupancy averaged 56 per cent in the first half of 2026, marking a 30 per cent year-on-year decline due to regional conflict and travel.

"ADRs have also declined, so whatever occupancy you have is coming at lower ADRs,” said Jain.

Saudi Arabia, by contrast, has fared better. "Saudi Arabia has held up much better because it has strong domestic demand," Jain said, concluding that "otherwise, Saudi Arabia is broadly net positive YoY."

Despite the turbulence, big-ticket airport projects haven’t slowed.

James Burlumi, Managing Director at Matthews (a development management consultancy) EMEA, said, "We have not seen any meaningful reduction in development activity across the aviation sector as a result of the recent conflict. If anything, the resilience of the sector has reinforced the Middle East's position as a global aviation hub."

On investment, Burlumi said: "Businesses have naturally adopted a more cautious and disciplined financial approach since the conflict, particularly in relation to short-term commitments. However, this has not diminished the Gulf states' ambition to continue investing in the long-term development of the aviation sector."

He added: "We are seeing significant and sustained investment in aviation development programs across the major international gateways (Dubai, Riyadh, Jeddah) as well as regional airports (Madinah, Abha, Al Taif) and emerging markets (Iraq, Syria)."

Behind the scenes, insurers have also been recalibrating.

Prashant Parthasarathy, Head of Aviation at EIRS, said: "As a result of the disruption, the aviation insurance market has become more cautious in its underwriting decisions and more selective in its risk appetite."

He said the focus now is on "deductibles, sub-limits and war-risk protection rather than a simple across-the-board premium increase."

On pricing, Parthasarathy said, "Aviation premium rates in the Middle East were expected to increase sharply following the conflict, even as the wider insurance market moved in the opposite direction."

He noted that "global commercial insurance rates modestly fell in Q2 2026, with the IMEA region recording a steepest decline estimated around 15 per cent."

Analysts agree the real test is still to come. Martins pointed to the global supply crunch as a cushion for Gulf carriers: "With a global aircraft backlog exceeding 17,000 aircraft, competitors have limited spare capacity with which to permanently absorb displaced traffic."

He said the winter season "will therefore give us a much clearer indication of whether bookings have returned at full strength."

Tahir cited the wider forecast weighing on the sector, noting that "IATA forecasts global airline profits to reduce by nearly 50 per cent, net profit margins shrinking from 4.2 to 2 per cent," and that Middle East airlines are projected to swing "from a $7.2 billion net profit in 2025 to a $4.3 billion net loss in 2026, making the region the only part of the global industry expected to fall into the red this year."

Even so, Tahir remained confident on the fundamentals: "The structural drivers that made Gulf aviation one of the most compelling growth stories in global transport remain intact: geographic positioning at the intersection of Europe, Asia and Africa; world-class infrastructure; strong sovereign backing; and an established track record of executing at scale."

Looking further out, he said Gulf carriers "will return to growth and in some respects may emerge from this period with competitive advantages."

Jain closed on a similar theme, pointing to regional coordination as the key to recovery: "Whenever there was a problem, the UAE and the wider Gulf worked together... That created an overall sense of safety, coherence, and coordination. That needs to sustain."