Global airlines have been warned of a wave of bankruptcies as international oil prices surge on the back of the Middle East war.
Gediminas Ziemelis, chairman of Avia Solutions Group, the world's largest aircraft leasing and outsourced operations company based in Dubai, said in an interview with Bloomberg that "if the Iran war lasts more than a month longer, we could see the first bankruptcy among airlines worldwide." Ziemelis also said the nightmare of six years ago during the COVID-19 pandemic is being replayed.
That is because airspace in the Middle East is currently blocked, sharply increasing flight times on routes connecting Europe and Asia, and international oil prices have soared due to the war's fallout. As fuel expense, which accounts for 25% of airline operating costs, has jumped by about 50%, profitability is said to have reached its limit.
In particular, airlines in the Middle East are said to have taken a heavy hit. Thousands of flights have been canceled due to Iran's missile and drone attacks, and some carriers still have not normalized operations. Major airlines such as Qatar Airways, Gulf Air, flydubai, and Air Arabia have entered emergency management, logging daily losses in the millions of dollars.
Exploding insurance premiums are also holding them back. According to Ziemelis, when operating near conflict zones, the war-risk insurance surcharge levied per flight can reach as high as $50,000 (about 75.48 million won). He said "the insurance market is going crazy," adding that Avia Solutions is redeploying a significant number of its 145 jets from Europe to Asia and Brazil, among other regions. Of the six aircraft leased in the Middle East, only one is actually in operation.
Credit rater Fitch Ratings also revised Avia Solutions' credit outlook last month to "negative" from "stable." Fitch noted that "the Middle East conflict could weigh on 2026 revenue and liquidity."
Still, Ziemelis emphasized opportunity amid crisis. He said, "Just as corporations that survived the pandemic later posted record profits, those that prepare thoroughly will survive this upheaval," adding that he will maintain an aggressive investment stance, including expanding the Dubai headquarters.