[Yanolja Research Brief] Vol.15 Changes in South Korea’s International Aviation Market Following the Middle East Conflict

How South Korea’s International Aviation Market Is Shifting Amid Middle East Uncertainty

Geopolitical uncertainty in the Middle East has added new pressure to the global aviation market. Rising fuel costs, higher passenger surcharges, and changing route economics are influencing how airlines allocate capacity.

In South Korea, however, the emerging picture is not one of broad market contraction. Instead, growth is becoming increasingly differentiated across airlines, routes, and regions.

Fuel Costs Rose Quickly. Aviation Supply Is Adjusting More Gradually.

Restrictions affecting the Strait of Hormuz drove a sharp increase in jet fuel prices. Prices rose approximately 83% in just three weeks, from USD 2.43 per gallon to USD 4.45. Six months later, prices remained around 44% above the pre-conflict level.

The impact subsequently reached travelers:

• International fuel surcharges increased to roughly three times their March level in April.

• Surcharges rose again in May before declining from June.

• Despite the decline, they remain above pre-conflict levels.

Airline networks do not respond as quickly as fuel prices. Aircraft allocation, airport slots, traffic rights, existing bookings, and other operational considerations mean that capacity changes can take several months to become visible.

The Market Is Still Growing — but at a Slower Pace

South Korea’s international aviation market continued to expand year on year. The notable change is the pace of that growth.

International flight growth peaked at 9.2% in April, before slowing to 7.3% in May and 3.9% in June. Passenger growth followed a similar pattern, declining from 14.3% in March to 4.0% in June.

Key takeaway: the market has not shifted into broad contraction. Rather, expansion in both supply and demand has moderated.

Korean and Foreign Carriers Are Moving Differently

One of the clearest changes is the divergence between Korean and foreign airlines.

Korean carriers maintained relatively stable capacity expansion. Available-seat growth moved only slightly, from 7.4% before the conflict to 7.1% afterward, while flight growth remained at 8.6%. Passenger growth increased from 10.0% to 10.9%.

Foreign carriers showed a different trajectory:

• Available-seat growth slowed from 8.8% to 5.4%.

• Flight growth slowed from 9.7% to 5.8%.

• Passenger growth declined from 12.7% to 7.6%.

This divergence highlights an important area to watch: whether slower foreign-carrier capacity expansion could eventually affect accessibility in specific inbound markets.

A More Divided Regional Landscape Is Emerging

The headline numbers mask significant differences between routes.

Relatively resilient markets include:

• Japan and China, where passenger volumes remained in double-digit year-on-year growth.

• Northeast Asia, which maintained comparatively stable growth.

• The Americas and Europe, where long-haul routes recorded stronger growth after the conflict.
  Meanwhile, Southeast Asia, Oceania, and the Middle East showed greater weakness. Oceania moved from modest growth to double-digit declines in both flights and passenger volumes, while Middle Eastern routes experienced particularly sharp disruption.

The result is an aviation market increasingly defined by regional divergence rather than uniform decline.

Could Incheon Gain a Bigger Role as a Transfer Hub?

Changes in transfer traffic provide another signal worth watching.

In the first half of the year, transfer passengers on Middle Eastern routes declined 41.9%, while transfer passengers on European routes increased 63.2%. Total transfer passengers at Incheon International Airport also recorded year-on-year growth of around 30% over the same period.

This raises the possibility that some transfer demand affected by weaker Middle Eastern connectivity may be shifting toward Northeast Asian hubs, including Incheon.

There is not yet enough information to determine whether Incheon directly replaced traffic previously handled by Middle Eastern hubs. But the changing transfer landscape creates opportunities to strengthen hub competitiveness and potentially convert more transfer passengers into stopover visitors.

What Comes Next?

The most important development is not a simple decline in international aviation. It is a reconfiguration of growth across airlines, routes, and regions.

Several indicators will be critical to watch:

• Jet fuel prices and fuel surcharges

• Foreign-carrier capacity

• Route-level load factors

• Regional accessibility

• Transfer passenger demand

Whether the changes seen so far are temporary adjustments or the beginning of a more structural shift will become clearer as additional data emerge.

Explore the full analysis, detailed regional comparisons, and aviation data on the Yanolja Research website.

]Yanolja Research Brief Vol.15] Changes in South Korea’s International Aviation Market Following the Middle East Conflict