British Airways owner International Consolidated Airlines Group SA (LSE:IAG) may be better placed than some European rivals as Middle East aviation capacity remains under pressure, according to UBS.
The bank said geopolitics was still influencing how airlines deploy capacity, with scheduled seats between Europe and the Middle East continuing to contract rather than rebound.
July capacity on Middle East-Europe routes is now expected to be down 6.2%, a little worse than the 5.7% decline shown a week earlier, while August has also deteriorated to a 4.0% fall from 3.6%.
UBS said this could be both positive and negative for European airlines, as lower capacity can support fares but disruption can also affect demand and route planning.
Across Europe, long-haul and short-haul capacity growth is also moderating, with third-quarter long-haul growth at 3.4% and short-haul at 4.7%.
IAG's exposure to the Middle East is only around 1%.
UBS also noted that jet kerosene pressures have eased, with prices now up around 35% year to date compared with a peak increase of more than 160%, as crude prices and crack spreads have fallen back.
