Factbox-Airlines cancel flights amid Middle East conflict

The first-order hit is to Middle East network carriers and the European airlines that rely on hub-and-spoke feed through Gulf and Levant connections. The bigger second-order effect is capacity reallocation: as premium, long-haul seats get pulled out of the region, fare pressure should improve on Europe-bound routes where airlines can redeploy lift, while short-haul Middle East yields remain impaired by rerouting, insurance, and schedule unreliability. That favors carriers with dense Europe/India/Africa networks and hurts those with heavier exposure to Dubai/Doha/Tel Aviv connectivity and weak schedule flexibility.

IAG looks relatively better positioned than the broad airline complex because it can backfill displaced demand into its long-haul and India/Africa franchises, but the near-term benefit is capped by operational drag in the Middle East and the risk of revenue dilution from capacity cuts. LOT is more vulnerable than the market may appreciate: it lacks the scale to absorb disruption, and its exposure to Eastern Europe/Middle East routes makes it more sensitive to war-driven schedule churn and fuel/overflight costs than a pure Europe leisure carrier.

The key catalyst horizon is days to weeks for sentiment, but months for earnings, since schedule changes and route suspensions often convert into lower load factors before they show up as cancellations of growth plans. The main contrarian risk is that investors may be underestimating how quickly capacity gets redeployed into higher-yield corridors; if this becomes a prolonged rerouting regime rather than a short shock, some airlines can offset revenue losses faster than expected. Conversely, if airspace normalization happens suddenly, the market will be caught with too much bearish positioning in airline names.