Etihad Airways expects to recover to its pre-war passenger traffic and capacity this summer after the Iran war disrupted travel across the region, with plans to hold air fares steady despite higher jet fuel costs.
The Abu Dhabi airline expects to be flying 10 per cent more capacity than it did a year ago by mid-June and predicts its bookings will recover by August, Antonoaldo Neves, chief executive of Etihad Airways, said in an interview at the International Air Transport Association (Iata) annual gathering in Rio de Janeiro.
The airline is operating 85 per cent of its total capacity, compared to June the same month last year, amid strong demand from corporate travellers and UAE residents, he said.
The summer travel period looks “very good”, with August particularly “promising”, he said. Load factor is still down compared to the pre-war period, by 3 per cent in June and 5 per cent in July, but the gap will close in August.
Demand shifts
Markets are reacting differently to the Iran conflict.
Travel between the US and India through Abu Dhabi is also robust. “The Indians are flying like there is no tomorrow. The traffic flow from India to US and vice versa via the Middle East in our airline is bigger than ever,” Mr Neves said.
Corporate travel to and from Abu Dhabi remains at prewar levels, although some travel advisories have slowed transit business traffic. Strong local demand is helping offset weakness elsewhere, Mr Neves said.
Airfares to hold steady
Mr Neves echoed global airline chiefs’ concerns at the Iata gathering about soaring jet fuel prices driven by the Iran war. “[On] that, I’m not bullish, thank God, we’re hedged.”
He said Etihad's fuel hedging programme has helped cushion the impact of higher jet fuel prices, which comprise 30 per cent of its total costs.
“We have a very good hedging position, it’s not perfect but it’s very good,” he said.
Mr Neves expects jet fuel prices to remain elevated until the end of the year as it will take time for shipments to normalise even after the Strait of Hormuz reopens.
Global airlines will have to absorb $100 billion in additional fuel costs this year as average jet fuel will be 70 per cent higher year-on-year, according to Iata.
Mr Neves said Etihad as of now has no plans to pass on the additional cost to passengers and its airfares will remain similar to prewar average ticket prices, as it operates in a highly competitive market.
Asked how long it can digest the additional costs before raising airfares, Mr Neves said Etihad has a strong balance sheet and enough cash to “sustain" that for a “long period" of time.
“That’s not my concern right now,” he said, adding that the duration of high jet fuel prices and its impact on Etihad’s plans to invest $2 billion annually in new aircraft without raising debt remains a concern.
“The sooner jet fuel comes back, the less debt I need to take to finance. As of now, I’m positive. If I see the jet fuel forward curve, I don’t need to take more debt from now onwards to finance my fleet growth this year and next year,” he said.
Wide-body plane orders
Etihad is doubling down on its growth plans with additional wide-body jet orders, new routes and product investments, despite the war-related challenges.
The airline is buying and leasing new planes in the double digits, including Airbus A350s, A330 Neos, and Boeing 787s, he said. “We buy as we go. We get more confident, we buy more."
The deliveries are expected in 2028, despite long backlogs with the plane manufacturers, after Etihad won earlier slots.
While the war has posed challenges, it has not caused Etihad to change its growth plans, Mr Neves said. “We’re going to do more, quicker and faster of everything,” he said. “We’re so confident in our strategy, we’re going to double the bet. We’re going to do whatever we can to accelerate because its working.”
Still, he acknowledged the challenges posed by the war that has disrupted global travel flows.
“This is a tough year … we’re probably not going to make money, or maybe we break even. It’s too early to tell … let’s see how we’re going to do in the second half.”
That prediction lines up with Iata’s forecast that Middle East airlines will post a loss of $4.3 billion in 2026 due to weak demand and operational disruptions, making it the only region to post a loss due to its highest exposure to the war.
However, Iata’s director general Willie Walsh said Gulf carriers “will regain their position once we see stability in the region". Their hub model was “not undermined" by the war's short-term impact, he said.
