📈 Middle East Aviation Disruption: Risks to Regional Hubs and Costs

The recent escalation in the Middle East following military actions on February 28 has triggered severe aviation disruptions. While Fitch Ratings maintains a baseline expectation of a conflict lasting less than a month, prolonged instability poses significant risks to regional connectivity and operational costs. • Operational Impact: Between Feb 28 and March 5, over 15,000 flights were cancelled across seven major regional hubs, affecting approximately 1.5 million passengers. Major hubs including Dubai, Abu Dhabi, and Doha are experiencing heavy congestion and schedule volatility. • Sector Vulnerabilities: Airlines: Carriers in the UAE and Qatar face the highest exposure. Revenue losses are compounded by rising operating costs due to rerouting, crew overtime, and additional technical stops. Fuel & Insurance: Although EMEA carriers have 50% to 80% fuel-hedging coverage for the next quarter, prolonged conflict may pressure unhedged costs. War risk insurance may see reduced coverage or hiked premiums for Gulf-heavy portfolios. Tourism & Lodging: Global providers remain diversified, though localized impacts on hospitality and retail spending at airports are expected. • Economic Context: For a diversified economy like Sri Lanka, which relies on these Middle Eastern hubs for apparel & textiles exports and labor migration routes, extended disruptions could increase logistics costs and affect transit efficiency for the ICT/BPM and tea sectors. _Status: Based on Fitch Ratings provisional impact assessment._