European Airlines Step In

SWISS and British Airways are increasing their flight services to India, stepping in to fill the gap left by major Gulf airlines operating with reduced capacity due to the Middle East conflict. This situation is driving demand for direct flights between India and Europe, allowing these European carriers to grow their market share.

Capacity Surge and Market Gains

SWISS, part of the Lufthansa Group, will operate a second daily flight between Delhi and Zurich using an Airbus A330 from April 1 to May 31, 2026. This expansion is attributed to a "corresponding rise in demand for such nonstop services." British Airways is also enhancing its India connections with a third daily flight from Delhi starting April 7 and from Mumbai beginning May 15, both running until May 31. Together, these additions provide over 1,000 extra seats weekly between India and the UK.

Globally, the airline industry faces limited flight availability as passenger traffic is forecast to grow steadily in 2026, while aircraft supply remains tight. Other European airlines, including Air France-KLM, are also increasing capacity or using larger planes on Asian routes in response to shifts in demand and cancellations by Middle Eastern carriers. The Indira Gandhi International Airport in Delhi has supported these changes by allocating additional slots to airlines like KLM and Air Canada.

These capacity increases by European flag carriers are positioned to capture significant market share from Gulf-based airlines like Emirates, Qatar Airways, and Etihad, which have reduced their operations. Air India, currently undergoing a transformation, is also boosting its international flights to Europe and North America to circumvent disruptions. A strategic alliance between Air India and Lufthansa Group aims to strengthen their presence on the India-Europe route, potentially challenging competitors. This is further supported by a recently finalized EU-India Free Trade Agreement.

Financially, Lufthansa Group (LHA) had a P/E ratio around 6.62 and a market capitalization of about €10.92 billion in early 2026. International Airlines Group (IAG), the parent company of British Airways, had a P/E ratio around 5.57 and a market cap of roughly €16.86 billion. Analysts at Bernstein rate IAG as 'Outperform,' citing strong potential from premium cabins and technology. RBC Capital notes IAG's solid margins and its ability to pass on fuel costs, rating Lufthansa as 'Sector Perform'.

Risks and Uncertainties Emerge

The increased European airline capacity in India is heavily reliant on the ongoing geopolitical instability, creating an uncertain basis for sustained growth. While airlines like SWISS and British Airways benefit from the disruption to Gulf carriers, this strategy carries risks. Operational costs are rising, driven by doubled jet fuel prices and longer flight paths due to closed airspace, which puts pressure on airline profit margins. RBC Capital pointed out that Lufthansa and Wizz Air are particularly exposed to these escalating fuel costs.

Moreover, the Middle East conflict's unpredictability means the situation could be resolved, allowing Gulf carriers to quickly regain lost market share. The reliance on temporary geopolitical conditions, rather than fundamental demand shifts, makes future revenue streams uncertain. Although IAG benefits from higher margins and can pass on some costs, the wider airline industry faces challenges including significant aircraft order backlogs that could extend to 2030, limiting fleet upgrades and efficiency improvements.

The sustainability of these expanded routes depends on the continuation of the current geopolitical climate, a factor outside any airline's control, potentially making the gains temporary. The need for regulatory and antitrust approvals for strategic alliances, such as the one between Air India and Lufthansa Group, also introduces execution risks.

Long-Term Prospects Depend on Adaptability

Industry forecasts predict continued global passenger traffic growth in 2026, with India remaining a key high-growth market. European airlines are expected to achieve strong profitability, potentially exceeding that of North American carriers for the first time. However, global net margins, averaging around 3.9%, highlight the industry's sensitivity to cost pressures and unexpected events.

Analysts are closely watching these developments. Bernstein ranks IAG among the top European airlines, while RBC Capital maintains 'Sector Perform' ratings on Lufthansa and Air France-KLM, acknowledging their exposure to higher fuel costs. The long-term success of these expanded India routes will ultimately depend on airlines' ability to manage costs effectively, adapt to geopolitical shifts, and offer compelling direct connectivity benefits to passengers beyond the current crisis period.