European airlines slow capacity plans as fuel prices stay high
Europe's big three legacy airline groups have all shaved back their capacity growth plans for 2026. High fuel prices are forcing a tighter focus on routes than have sufficient pricing power to be profitable in spite of the additional cost.
Air France-KLM, IAG and Lufthansa Group each reported faster growth in fuel costs than in revenues in 1H2026, although healthy demand for air travel helped to soften the impact on profits.
Their unit revenues were boosted by enforced capacity cuts at the Gulf hub airlines, driving more traffic into the Asia networks of the European groups. The durability of this factor over 2H2026 will be closely watched and will influenced by the pace and extent of capacity recovery by Gulf competitors.
Either way, fuel prices are set to remain well above their levels of before the Iran conflict. Meanwhile, capacity growth in Europe as a whole is set to slow to just 1% in the latter weeks of 2026 (source: CAPA - Centre for Aviation/OAG), an illustration of the cautious mood adopted by airlines in this market.
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