The earnings of the two European airlines reflect a lucrative segment that Air India and IndiGo are pursuing though the latter two have a long way to go
European airlines Air France-KLM and Lufthansa recently declared their Q2-CY26 results, which were impacted by the West Asia war and the subsequent increase in fuel prices. Air France-KLM posted Q2 2026 revenues of €9.28 billion (a 9.9 per cent increase year-over-year) and an adjusted operating profit of €484 million. The Lufthansa Group also beat analyst expectations with a revenue of €11.1 billion, though net profit fell significantly to €123 million compared to €1.01 billion a year prior.
For both the Air France-KLM and Lufthansa groups, the difference was the premium cabins. Air France-KLM said premium cabins continued to perform strongly, accounting for 38.5 per cent of total passenger revenue, while Lufthansa saw ticket yields in premium cabins increase by 6.7 per cent year-over-year, which was significantly higher than the 1.6 per cent yield growth seen in Economy class.
This isn’t a one-quarter phenomenon. Premium leisure and premium business travel demand has been the standout growth pocket across global aviation since the pandemic recovery began, and full-service carriers with a genuine long-haul premium product have consistently captured a disproportionate share of it.
Premium revenue elusive to Indian airlines
Airlines that could offer a differentiated business or first product, backed by lounges, loyalty recognition, and reliable long-haul schedules, have been able to price well above economy inflation even when overall demand growth has moderated.
More from BusinessThe Gulf carriers built an entire hub strategy around this insight two decades ago, and Air France-KLM and Lufthansa’s Q2 numbers are simply the latest data point confirming that the strategy still works, war-time fuel spikes or not.
However, one significant addition that came from both the large airline groups is the Asia focus in general and the India focus in particular. Lufthansa said this demand strength was driven by the Asian routes, with yields being more than 13 per cent above the prior-year level on Asian routes. Air France-KLM has called out India-specific growth in revenue with the group, recording an 11 per cent growth overall in business and first-class cabins, with India leading the growth at 21 per cent. In the Premium Economy segment, the overall revenue growth was 13 per cent, while India recorded 26 per cent growth.
India sits in an unusual position relative to this trend. It is one of the largest sources of long-haul premium demand in the world, driven by a large and growing outbound business travel market, a wealthy NRI diaspora that flies home multiple times a year, and rising corporate travel budgets as Indian companies expand internationally.
Yet almost none of that premium revenue has historically been captured by Indian carriers. It has gone to the Gulf players, to European majors routing passengers through their hubs, and increasingly to a handful of Asian carriers offering superior connections onwards from India. The European carriers benefitted from the Indian corporates and markets skipping the Gulf as tensions continued for the entire quarter and capacity was not back to February levels in many cases.
However, this once again shows what Indian carriers have time and again lacked. Both IndiGo and Air India cancelled multiple destinations due to the increased price of oil being one of the factors. Both airlines also recorded a loss in the April to June quarter, even when the domestic flights saw ATF prices being capped by the government.
Where Air India and IndiGo actually stand
Air India has been moving towards premiumisation after privatisation. The airline’s retrofit program sees the legacy dual-class 787s converted to three classes, and the factory-fresh planes being delivered in three classes, with some yet to be inducted planned to have four classes of service. Yet, a significant capacity remains on the legacy planes, and commanding a premium in the market is difficult due to frequent swaps leading to uncertainty for passengers, which eventually sees erosion of trust.
While Air India invests in lounges, upgrades and more, the real problem is the pace. Retrofits have slipped, the fleet induction has been slower than announced, and Air India is still flying a mixed fleet with inconsistent cabin standards across routes that are meant to be premium-facing. A flyer choosing between Air India and a Gulf carrier on a Europe or North America sector today is still, in a meaningful number of cases, choosing based on which airline has the newer aircraft on that particular day, not which airline has the better product on paper.
Much of this is beyond Air India’s control as the slippages are on account of supply chain constraints globally. IndiGo’s situation is different but points to the same gap. The airline’s ambition to move into widebody international flying, first through wet-leased aircraft and eventually its own metal, was always going to be the slower, harder half of its growth story compared to its narrowbody domestic dominance. IndiGo sells the front cabin of Norse Atlantic 787s as its business-class product, IndiGoStretch. The non-lie-flat seats are sold as premium economy by Norse Atlantic.
What both Indian carriers are missing, more than aircraft, is the demonstrated ability to sustain a premium product at scale over multiple years, the kind of track record that lets a corporate travel manager or a frequent premium flyer default to the home carrier instead of routing through Dubai, Abu Dhabi, Doha, Paris, Amsterdam or Frankfurt. Lufthansa and Air France-KLM aren’t winning premium revenue because their aircraft are newer; in many cases, they aren’t.
They’re winning it because decades of consistent premium delivery have built a customer base that pays up without thinking twice and the ability to be present when passengers were looking for alternatives by avoiding the Middle East.
Tail Note
The opportunity for Air India and IndiGo is real, and it is large, arguably larger than what these European legacy carriers are working with, because India’s own outbound premium demand is growing faster than Western Europe’s. But the Q2 results from Air France-KLM and Lufthansa should be read less as validation that the strategy works and more as a reminder of how long it takes to build the trust that makes premium cabins profitable in the first place.
Air India is struggling with the retrofit and fleet consistency promises, while IndiGo’s early induction experiment has all but failed. The geopolitical situation and airspace closures do not help, especially from India’s largest market, Delhi, where Indian carriers have to take a long, circuitous route while foreign carriers can overfly Pakistan.
Both airlines know exactly what the prize looks like now; the harder question is whether either can close the execution gap before the next big fuel or geopolitical shock arrives and be in a position to make the most of it, unlike this time.
Ameya Joshi is an aviation analyst.
