When the Middle East conflict broke out earlier this year, the capacity of major cargo-carrying Gulf airlines, Emirates, Qatar Airways and Eithad nosedived.
With their transhipment hubs in Dubai, Doha and Abu Dhabi fully or partially-closed for a time or at best regularly disrupted by the hostilities, rivals filled the gap, taking advantage of the lucrative opportunities to offer direct services on the key, high-demand air cargo routes between Europe and Asia and the Far East.
‘Business Gained Momentum’
German aviation group Lufthansa’s logistics division, whose main component is Lufthansa Cargo, reported an adjusted operating profit for the three months (April-June 2026) of €116 million, up 58% year over year (YoY). Revenue rose 27% to just over €1 billion.
The Group said that “in the context of the significantly changed market environment due to the conflict in the Middle East and the corresponding reduction in competitors’ capacities in the region, Lufthansa Cargo’s freight business gained momentum in overall terms.”
With the addition of the strong rise in fuel costs, the result was a significant increase in yields compared to previous quarters. Demand driven by continued strong business in the Asia/Pacific region in particular.
Turning to the Air France-KLM Group, in an interim report it noted that “global air cargo capacity had started to normalize towards the end of Q2, as disruption in the Middle East eased, Gulf hub capacity was restored and operational pressure reduced. However, demand continued to outpace capacity growth on several key lanes, keeping the market relatively tight.”
Such factors enabled Air France-KLM Martinair Cargo to post Q2 traffic and revenue growth of 11.3% and 27.6% respectively.
India Something of ‘A Trade Hotspot’
Cathay Pacific Cargo also produced a strong performance in the first of half of the year which it attributed to adapting to new trade patterns arising from the conflict in the Middle East.
The Hong Kong-based carrier’s total tonnage carried increased by 9% year on year (YoY) while June’s YoY figures also showed growth of 9%.
With the Middle East market currently constrained, India in particular has become something of “a trade hotspot,” head of Cargo, Chinese Mainland, Wendy Ge, explained.
Despite the geopolitical developments in the Middle East and the significant pressure on global air cargo capacity, Turkish Airlines Cargo also delivered stand-out results in the second quarter, “responding effectively to demand through its strong infrastructure and strategic geographical position”, the airline group noted. Turkish Cargo’s volumes increased by 11.3%, while revenues were up by 58% to nearly $1.3 billion.
Having taken on the role of an ‘alternative’ hub to those in the Middle East, Istanbul Airport was Europe’s busiest for cargo in the first half of the year, handling just over one million tonnes and dethroning Frankfurt from first place.
Air Freight Outlook
So, what of Q3 and the remainder of 2026?
Approached by AJOT, Lufthansa Cargo said that in keeping with Group policy it “couldn’t share any developments” on how the current quarter was playing out and would reserve comments until the publication of its Q3 results in November.
Cathay Pacific Cargo was more forthcoming, anticipating “continued healthy flows across its network, still led by the urgent demand for server racks and chips to fuel AI,” Wendy Ge noted.
“At the same time, we will keep an eye on the potential impact on e-commerce flows following the introduction of new customs duties on low-value imports into Europe that could affect volumes from the Chinese Mainland.”
Xeneta’s chief airfreight officer, Niall van de Wouw, recently pointed out, the major Gulf hubs are around 90% of pre-crisis levels. Doha is effectively back to full capacity, with Dubai and Abu Dhabi close behind. “The recovery is even more impressive given it has continued despite continued flashpoints in the conflict. So, unless there is a major deterioration in the security situation, I believe the worst is behind us in terms of the impact on the air freight market. Rates spiked sharply but they are coming down gradually as we anticipated, so it’s a step-by-step path back to business as usual.”
In an air cargo update at the end of August, Airgroup, part of US 3PL Radiant Logistics, said the Middle East market was showing signs of stabilization, but recovery remained uneven across the region.
It went on to note that Emirates, Etihad, and Qatar Airways are maintaining substantially more normal operations, providing improved access to the region, and restoring some of the capacity lost during the initial disruption.
“The recovery is even more impressive given it has continued despite continued flashpoints in the conflict. So, unless there is a major deterioration in the security situation, I believe the worst is behind us in terms of the impact on the air freight market. Rates spiked sharply but they are coming down gradually as we anticipated, so it’s a step-by-step path back to business as usual.”
However, freighter capacity remains below pre-US-Iran conflict levels. The resumption of Cathay Pacific’s freighter service to Riyadh, in Saudi Arabia, continues to be under review.
Cargolux’s planned return to Dubai/DWC, and other Middle East destinations also remains on hold, and the Luxembourg-based cargo airline has maintained Muscat, in Oman, as its back-up hub in the region.
Such caution also extends to passenger services which under normal circumstances offer a non-negligible amount of belly space for cargo. Cathay Pacific has deferred the return of its daily passenger flights to Dubai and four-times-weekly flights to Riyadh until late October.
The pax aircraft of Lufthansa, Air France-KLM and Singapore Airlines will not be returning to the Gulf region before the end of October either and in the case of United Airlines and Air Canada flights will not resume ‘until further notice’.
Doubts Over Usual Q4 Demand Surge
In its latest air freight overview, issued in the second half of August, US-based AIT Worldwide Logistics, noted that “demand growth is decelerating, signaling a market that’s beginning to cool rather than tightening. Rate premiums are unwinding, with spot rates falling and year-over-year growth slowing for a third straight month.
The absence of “charter conversations” suggests airlines won’t add meaningful peak-season capacity, which could provide a modest floor for rates if demand climbs, it said.
“Historically, this is an indication that forwarders and airlines aren’t expecting the usual Q4 demand surge.”
Market to Weaken Further, Rates to Ease
Demand growth will likely stay in the low single digits (2 -5% YoY) and capacity additions should keep pace with or slightly exceed demand, nudging load factors flat to slightly lower.
AIT went on to underline that full-year forecasts were “backward-looking,” in assuming that a further increase in demand was likely given the strong H1 performance, rather than being based on hard evidence which pointed to improved expectations for the second half of the year.
Shippers should therefore expect a modest, uneventful Q4 rather than the typical seasonal rate spike.
“Analysts expect the market to weaken further, and some observers are explicitly forecasting that rates will continue to ease in the final months of the year, reinforcing a cautious atmosphere heading into 2027,” it added.
‘AI and Semicons Carrying the Market’
As for specific trade lanes, the Transpacific remains the strongest, with a fifth consecutive month of growth, driven by AI and semiconductor cargo – which were “carrying the market,” — moving on urgent timelines.
Volumes on the Asia-Europe e-commerce trade, the vast majority of goods shipped being of Chinese origin, have recorded sharp falls, following the EU’s new parcel tax on imports valued at less than €150.
Hong Kong–Europe was down 19% over the summer (24% YoY) and China–Europe declined 3%, with spot rates dropping in tandem.
Europe-Asia, up 7.1% YoY, is “the most durable trend” among major corridors.
Middle East-linked lanes continue to be the weak spot with improvements in hub transfer traffic not yet translating into a broad recovery across all connected routes.
