Air France-KLM has reduced its capacity growth forecast for this year as the ongoing conflict in Iran drives up its fuel costs by billions of dollars. The French-Dutch airline now expects its fuel bill to increase by $2.4bn (£1.8bn) in 2025, prompting a downward revision of its capacity growth expectations to between 2% and 4%, down from the previously anticipated 3% to 5%.
Fuel Costs and Hedging Strategy
The airline's chief executive, Ben Smith, stated that fuel price increases are expected to weigh on the coming quarters, following a smaller-than-expected loss in the first three months of the year. Air France-KLM employs a rolling fuel hedging policy, which will save the airline $1.5bn. Despite this, the total fuel bill for 2026 is projected to reach $9.3bn, an increase of $2.4bn compared to 2025. The company anticipates spending an additional $1.1bn on fuel in the April-June quarter alone.
Financial Performance
For the first quarter, the airline reported an operating loss of €27m (£23.4m), significantly better than the €389m loss forecast by analysts. The company noted an initial boost in demand following the outbreak of the Iran war, as more travellers opted for European carriers on flights to Asia, and it has raised ticket prices in response to rising fuel costs.
Industry-Wide Impact
Earlier this week, Europe's airport trade body warned that smaller airports in the region may not survive if jet fuel shortages lead to widespread route cancellations. Concerns that the blockage of the Strait of Hormuz could persist for months pushed Brent crude to a four-year high of $126 a barrel on Thursday.
Rolls-Royce Maintains Guidance
Despite the geopolitical uncertainty, UK jet engine manufacturer Rolls-Royce is sticking with its profit guidance for this year. Chief executive Tufan Erginbilgiç will tell shareholders at the annual general meeting that the engineering group is taking necessary actions to support employees, customers, and suppliers, and expects to fully mitigate the current financial impact of the disruption.
