Air France-KLM has trimmed its capacity growth expectations for this year amid a projected $2.4bn (£1.8bn) increase in its fuel bill, driven by the ongoing Iran conflict. The French-Dutch airline now anticipates capacity growth of between 2% and 4%, down from the previously forecast 3% to 5%.
Fuel Costs and Hedging Strategy
The surge in fuel prices since the Middle East crisis began has forced the airline to adjust its outlook. Air France-KLM operates a rolling fuel hedging policy that is expected to save the company $1.5bn. However, the total fuel bill for 2026 is still projected to reach $9.3bn, a $2.4bn increase compared to 2025. The airline expects to spend an additional $1.1bn on fuel in the April-June quarter alone.
Chief Executive Ben Smith stated that fuel price increases were "expected to weigh on the coming quarters," after the company reported a smaller-than-expected loss for the first three months of the year. The operating loss stood at €27m (£23.4m), significantly better than the €389m loss projected by analysts.
Impact of Iran Conflict
The airline noted an initial boost after the Iran war broke out, as more travellers opted for European carriers for flights to Asia. In response to rising fuel costs, Air France-KLM has raised ticket prices. The operating environment remains "uncertain," according to Smith.
Concerns that the blockage of the Strait of Hormuz may persist for months pushed Brent crude to a four-year high of $126 a barrel on Thursday. Earlier this week, Europe's airport trade body warned that smaller airports might not survive if jet fuel shortages lead to widespread route cancellations.
Rolls-Royce Maintains Guidance
Despite the geopolitical uncertainty, UK jet engine maker Rolls-Royce is sticking with its profit guidance for this year. Chief Executive Tufan Erginbilgiç will tell shareholders at the annual general meeting on Thursday that the engineering group is "taking the necessary actions to support our employees, customers, and suppliers."
"We expect to fully mitigate the current financial impact of the disruption to our business. We continue to monitor the situation for any future direct and indirect impacts and will take the necessary actions to mitigate them," Erginbilgiç said.
UK refineries have been asked to maximise jet fuel production amid supply fears, as the aviation industry grapples with the fallout from the conflict.
