Lufthansa expects challenging second half of 2026 but sees growth in Asia Pacific

SINGAPORE: Lufthansa expects the second half of 2026 to remain challenging for airlines despite easing oil prices, but says it continues to see growth opportunities in Asia Pacific as demand for air travel remains strong.

Speaking to CNA on Wednesday (Jul 1), Lufthansa Group's vice president for Asia Pacific and joint ventures East Felipe Bonifatti said geopolitical uncertainty, higher costs and sustainability pressures would continue to weigh on the industry.

"We're not expecting an easy second half, to be honest," he said.

RISKS REMAIN FOR AIRLINES

The first half of 2026 was marked by significant disruption for the aviation industry.

The war on Iran – which began at the end of February – forced airlines to suspend or reroute flights to avoid large parts of Middle Eastern airspace. At the same time, disruptions to oil shipments through the Strait of Hormuz pushed up crude oil and jet fuel prices.

In June, the International Air Transport Association (IATA) nearly halved its global airline profit forecast for the year, citing war-related disruptions and higher fuel costs.

Although a ceasefire between the United States and Iran has eased tensions and oil prices have retreated from recent highs, Mr Bonifatti said airlines remain cautious about resuming normal operations in the region.

"The end of the conflict might not be the end of the risks," he said, noting that airlines would need to carefully assess when and how services can safely resume in the Middle East.

DISRUPTIONS SHIFT CAPACITY TO ASIA

With much of its Middle East network suspended until late October, Lufthansa has redeployed aircraft to other markets, including Asia Pacific, where it has added capacity to meet strong demand.

"Whenever we take an aircraft out of production in terms of not flying to the Middle East, that airplane has to go somewhere else," Mr Bonifatti said.

He also described India as one of Lufthansa Group's most important long-haul markets, citing the country's expanding middle class, growing international travel demand and large diaspora as key drivers of growth.

According to IATA data, India is now the world's third-largest air transport market by passenger traffic after the US and China.

Lufthansa Group has served India for more than six decades and currently operates over 70 weekly flights between Europe and five Indian cities.

FOCUS ON PARTNERSHIPS

The Lufthansa executive also played down the impact of Asiana Airlines' departure from Star Alliance following its merger with Korean Air. Asiana is set to leave the alliance in December.

Lufthansa was one of the five founding members of Star Alliance, the world's first global airline network, launched in 1997.

While acknowledging it was "always sad" to lose an alliance partner, Mr Bonifatti said Lufthansa had prepared for the change over several years by strengthening its own services and building new partnerships.

Star Alliance welcomed ITA Airways in April, following Lufthansa Group's investment in the Italian carrier.

Mr Bonifatti said partnerships remain fundamental to Lufthansa's long-term strategy.

The group already operates major joint ventures with United Airlines and Air Canada across the North Atlantic, as well as with Singapore Airlines, Air China and All Nippon Airways in Asia.

"Airlines cannot do it alone," he said.

He added that Lufthansa had also signed a memorandum of understanding with Air India earlier this year to explore ways to strengthen connectivity between India and Europe.

RISING SUSTAINABILITY COSTS

While geopolitical tensions remain an immediate concern, Mr Bonifatti said airlines are also preparing for higher costs from measures aimed at reducing aviation emissions.

These include the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), a global aviation emissions scheme, and Singapore's planned sustainable aviation fuel (SAF) levy.

"Clearly decarbonisation is an important topic and is increasing costs. That's the reality,” said Mr Bonifatti.

He added that Lufthansa is responding by investing in newer aircraft, fuel-saving technologies and SAF.

Even amid global uncertainty, he said sustainability has not slipped down the airline's list of priorities.

"As a European airline group, sustainability is something which is part of our DNA,” he said.

"We believe it's the right thing to do and flying more sustainably is the way forward."

As the Lufthansa brand marks its 100th anniversary this year, Mr Bonifatti said the milestone offers an opportunity to look ahead, with aviation continuing to play a vital role in connecting people and economies.

"Aviation has been fascinating generations, and we hope to keep fascinating generations in a safe and more sustainable way in the future,” he said.