Air France-KLM cuts capacity growth forecast amid expected $2.4bn fuel bill rise

Air France-KLM has cut its capacity growth forecasts for this year as the Iran war drives up its fuel costs by billions of dollars.

The French-Dutch airline expects its fuel bill to increase by $2.4bn (£1.8bn) this year as a result of the surge in costs since the Middle East conflict began. In response, it has trimmed its expectations for capacity growth to between 2% and 4% this year, down from 3% to 5% previously.

The Air France-KLM chief executive, Ben Smith, said in a statement that fuel price increases were “expected to weigh on the coming quarters”, after the company reported a smaller loss than expected for the first three months of the year. Smith added that the operating environment remained “uncertain”.

Air France-KLM operates a “rolling fuel hedging policy”, which will save the airline $1.5bn. Despite that, the airline’s total fuel bill for 2026 is expected to be $9.3bn, an increase of $2.4bn compared with 2025. It expects to spend $1.1bn more on fuel in the April-June quarter.

The airline reported a first-quarter operating loss of €27m (23.4m), better than the €389m loss projected by analysts.

It said there had been an initial boost after the Iran war broke out as more travellers favoured European carriers for flights to Asia, and that it had raised ticket prices in response to the increase in fuel costs.

Earlier this week, Europe’s airport trade body warned that the regions smaller airports may not survive if jet fuel shortages lead to widespread route cancellations.

Concerns that the blockage of the strait of Hormuz may last for months pushed Brent crude up to a four-year high of $126 a barrel on Thursday.

Despite the geopolitical uncertainty, UK jet engine maker Rolls-Royce is sticking with its profit guidance for this year. The company’s chief executive, Tufan Erginbilgiç, will tell shareholders at it’s annual general meeting on Thursday that the engineering group is “taking the necessary actions to support our employees, customers, and suppliers.

“We expect to fully mitigate the current financial impact of the disruption to our business. We continue to monitor the situation for any future direct and indirect impacts and will take the necessary actions to mitigate them.”