Lufthansa is considering grounding up to 40 aircraft if the war in Iran continues, as rising fuel prices threaten airline costs and global flight capacity.
The parent of German airline Lufthansa could remove 40 aircraft from its existing fleet if the war in Iran drags on. In remarks to employees on a call, and reported by the German news outlet Handelsblatt, CEO Carsten Spohr said that an internal planning group was working on contingencies for reducing the active fleet due to cost concerns.
The contingency includes a near-term reduction of 20 aircraft, while longer-term plans include reductions of up to 20 aircraft, resulting in a seat capacity reduction of 2.5%. The plan would be implemented across Lufthansa Group, which, in addition to Lufthansa, includes the airlines Eurowings, SWISS, Austrian, Brussels Airlines, and ITA Airways.
Spohr cited rising fuel costs as the impetus for beginning to formulate a crisis plan, which is a contingency plan for reducing costs in the event the war in Iran drags out longer, keeping fuel prices elevated. On the call, he noted that Lufthansa has hedged, or pre-paid around 80% of its fuel purchases, which helps keep the price more stable, but that the increase in fuel costs runs into the billions of euros in the near-term.
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It’s not uncommon for airlines and other businesses to maintain contingency plans as part of their normal planning processes. Spohr also told employees that the temporary grounding would primarily affect aircraft already nearing retirement age. He didn’t give any indication whether the aircraft in question would be narrowbody or widebody aircraft, or whether they would drive seat reductions in markets within the E.U. or throughout the group’s intercontinental route network.
Spohr also did not mention whether the reduction capacity included flights that had already been suspended because of the war. Lufthansa Group carriers operated a significant network in the Middle East, and have suspended flights to Dubai and Tel Aviv through May 31. Flights to Amman, Jordan; Beirut, Lebanon; Dammam and Riyadh, Saudi Arabia; Erbil, Iraq; Muscat, Oman; and Tehran, Iran, are suspended through October 24.
In the U.S., Lufthansa’s Star Alliance partner United said last week that it could also reduce seat capacity, but would also honor its commitments to take delivery of aircraft it has already purchased. United has not given firm plans on aircraft retirements related to any increase in fuel cost. United CEO Scott Kirby estimated that sustained increases in the price of jet fuel could cost United up to $11 billion in 2026.
When airlines reduce seat capacity, it can have a similar effect as increasing fares if demand for air travel remains steady, because the same number of passengers are purchasing fewer seats, which drives the price higher due to scarcity.
European carriers are also absorbing additional demand from the Middle East carriers, which have largely continued suspension of their operations, as airspace availability in the Gulf Region is limited. Emirates, Qatar Airways, Gulf Air, and Etihad Airways are currently operating only limited schedules when the airspace surrounding their airports is opened by local authorities. Many passengers who had planned to fly between Europe and Africa or Australasia via the Middle East have rebooked their flights via Asia or North America on European, American, or Asian carriers, providing a boost in traffic demand.
It’s not only fuel prices that are driving higher costs. Airlines offering flights between Europe and Asia are also burning more fuel to avoid airspace restrictions in the Gulf Region, in addition to the restrictions already in place over Russia and Ukraine, leaving only narrow corridors and longer routings for airlines continuing to fly the routes. That requires more of the now-costlier fuel for each flight. Longer flight times also incur higher crew costs.
Lufthansa Group operates the second-largest aircraft fleet in Europe.