December 22, 2025 • 53 mins
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In this episode, Amber Elias is joined by Lewis Harper, Alfred Chua and Howard Hardee.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:07):
Welcome to Flag Global Focus. My name is Amber Elias and
joining me for this Airline Focus episode is Lewis Harper in
London. Hi Amber Alfred Choir in
Singapore. Hi, Amber.
And Howard Hardy in the US. Hello.
Let's take a look back at the notable airline developments in
(00:29):
2025. Outside factors have
historically hit European airlines quite hard, but this
year they have claimed a new found resilience to market wind
shifting. Lewis What do the European
airlines have to say about it? Yeah, the mention of resilience
has been quite common on the dozens of airline earnings calls
I've joined this year and, and talking to people in the
(00:51):
industry as well. So, so the idea I think is that
and cast and Spore of, of Lufthansa Group is a a big
advocate of this idea is that, you know, historically European
airlines and not not unique to European airlines, but they have
been vulnerable to, to outside factors most recently, of
course, COVID. But I think partly because I
(01:12):
think COVID has has informed businesses on how to respond to
these types of challenges. You know, a lot of the airlines
are claiming that they have a new found resilience and that
they've shown that this year, not least to some of the
geopolitical developments we've we've had.
We can talk a bit more about them in a bit, but certainly
the, the tariffs in the US, for example.
(01:34):
And you know, it's as I say, it's not just Carson sport
saying this. I've heard it on a number of
calls. And I was at the IATA global
media day in Geneva a few days ago.
And Willie Walsh also talked about this, the DG of of IARTA
and the former CEO of BA and IAG.
So he knows quite a lot about the European airline industry.
(01:55):
He said a similar thing. It's an abstract idea.
I think what you can broadly sayis that despite some of the
challenges this year, airlines in Europe have kind of been on a
profitable trend. And again, obviously, I'm
talking about the industry as a whole in Europe, not there are
individual challenges out there.But yeah, it's it's
profitability despite some of the outside challenges faced.
(02:20):
And one of the big factors in that when we look back at the
developments in in 2025 for network carriers is the
travelling premium cabins has been strong.
So going into COVID, obviously business travel was a huge deal
for a lot of network carriers. It brought in a lot of the
profits coming out of COVID. It's not uncommon to to be an
(02:43):
airline that's still seeing in terms of passenger traffic that
corporate travel is, is still a long way down on where it was
before COVID. And obviously if you're told
people that an airline executivethat, that in 2025 your, your
corporate travel will be 2030% down on where it was in 20-19,
that would be pretty terrifying.But what's happened is that
(03:04):
premium Ledger travel has reallytaken off in the the post COVID
period. So that's really offset that
loss of corporate travel. And it's been been a real
positive this year. Listen to Air France KLM, for
example, they keep talking aboutpremiumisation, this idea of, of
adding more premium products to their cabins, improving them,
(03:25):
you know, and that is offsettingany weakness that there has been
in the main economy cabins. Now that there's important
context to that, one of the mainthings being the tight capacity
we've got in Europe and globally.
But of course, what this means is that airlines are way down on
capacity versus where they mighthave been without the COVID
crisis. So, so all of this talk of these
(03:48):
really kind of encouraging developments is fair enough, but
I think a lot of it does come back to the fact that, you know,
airlines globally according to IATA are about 5340 aircraft
short versus where they might have been without the COVID
crisis. And that's, you know, a
significant proportion of of theglobal fleet of what it is
(04:11):
probably around 30,000 or something.
So there's a backlog of 17,000 aircraft for delivery, which is
about 60% of the current active fleet.
Historically, that number would have been around 40%.
So when we talk about resilience, I think some of it
is baked in by that. It's the fact that if you're an
incumbent in the market, you've got premium cabins, you are
(04:34):
operating way down in terms of capacity terms on where you
might have been otherwise. And that means you are able to
to fill those premium cabins with with leisure travellers in
a way that if you were operating, you know, 100 more
aircraft might, might not look so rosy, but that's where we
are. So that that resilience, you
(04:54):
know, as I say, is reflected in the financial performance of
European airlines. And it's worth noting that I
also pointed out in the Global Media Day that European airlines
will be the leading contributorsto to global profits this year
and next year according to theirforecasts.
Both are forecast at this stage.Obviously, the 2025 number is
much more informed by having 3/4of worth of data at this point.
(05:18):
So collectively, European airlines expected to deliver $13
billion of net profits this yearout of a global total of around
38 billion and 14 billion next year out of a global total of
around 40 billion. So yeah, that all looks pretty
good really. I think IATA will always stress
(05:40):
that margins are really tight and that does apply to European
airlines as well. In most cases there are like in
a case of IAG, you know, talk ofmargins, we're about potentially
above 10% in some cases. But it's pretty unusual in the
in the airline airline sector tobe achieving that.
And you know, profit per passenger.
Willie Walsh pointed out certainly among European
(06:01):
airlines is not much more than Apple gets from selling a single
iPhone case. We talked about the premium
cabins. Generally demand I'd say in 2025
has held up pretty well. There's still a narrative, I
think that people learnt what itwas like not to have airline
travel during COVID and they're still enjoying it.
(06:21):
So yeah, passenger demand is pretty good.
There has been some weakness I think in the transatlantic,
which we'll talk about in a bit,but but generally pretty decent
and airlines feel they can rely on that to a point.
And I guess that does feed into that, that idea of resilience,
although I would point out, of course they don't have that much
control over that factor, but but it certainly does seem to be
(06:41):
holding up and it looked particularly good.
So in the case of Ryanair, so inthe first half of 2025, their
performance looked particularly strong because they had a wobble
in early 2024 around blocking sales through online travel
agents, which meant they had to stimulate the market more and
then meant other low cost carriers in the region felt they
had to lower prices to compete. But certainly in, in, in the
(07:04):
first half of 2025, that kind ofwas recovered and and it looks
pretty positive. So I'd say in broad terms, a
positive year in that regard. We've also had pretty helpful
fuel prices, some, you know, upsand downs, but generally when
you look at the long term trend,it's the been pretty helpful for
European carriers this year. And another factor that's been
(07:25):
quite helpful is the weaker dollar against the euro.
So obviously airlines have a lotof costs in dollars.
And when you look at recent profitability, I I think a
degree of that when you convert the EUR profits into dollars,
they, they look much healthier and that's because of that
trend. And it means that obviously the
euros are going further when it comes to paying for things like
(07:47):
fuel leases, whatever airlines pay for in dollars.
So, you know, I, I touched on the, the tariff issue.
I think when you look at cargo demand and passenger demand,
there was a concern at the startof 2025 that with, with the
developments in the US that bothwould be quite significantly
impacted by the actions of the US government.
But I think it mostly has not turned out that way.
(08:10):
I think when we talk about potential risks looking into
next year particularly, I think there's more to say on that.
But certainly what's happened sofar is not being catastrophic.
It's generally been pretty good.I think yields have been pretty
flat. So there's not been any kind of
disastrous developments in that regard.
I would say cargo as well has done particularly well against
(08:31):
that backdrop. No, it's not gone gangbusters
like it did during COVID, but I think people have been quite
surprised how quickly cargo is pivoted away from the markets,
you know, strongly affected by by the developments in terms of
tariffs and obviously China, US being one example and into other
markets. I think air cargo has an
advantage in being a relatively small part of the global freight
(08:53):
market, which means it can respond quite quickly to
changes. It's not so sort of such a
structural part of the market. It tends to do better when when
there's disruption in shipping, for example.
So it it's much more used to picking up on, on advantages,
where they where they lie and moving, moving towards them.
So, so yeah, that, that has beena boost, I think compared with
(09:16):
where airlines thought they might be.
So yeah, I think it's a a broadly positive year in that
regard. And just other themes really.
There's some progress on consolidation in Europe that
again when you talk about resilience kind of they're,
they're still a mid tier of kindof smallish network carriers in
Europe. And I think when I talk about
(09:36):
exceptions to the, the rule whenit comes to a strong financial
performance this year, that is often them that, that struggle
the most and are most impacted by some of these outside
factors. But in that regard, we've got
Turkish obviously a huge carrierinvesting in yeah, Europa.
And again, I would on that topic, I'd say Latin America has
been a a big theme among the network carriers in terms of
(09:57):
markets that have really performed well for them this
year. And I Turkish are clearly seeing
that in a Europa who are big connectors from Madrid into
Latin America. In the last few days we've had
Pegasus taking on smart wings, really interesting development
in the low cost market. I won't say too much on that
because it's got to go through all of the the usual process.
And I think we know from the example of a Europa, for
(10:19):
example, that these things don'talways happen.
But that's really interesting. You know, Pegasus being another
Turkish carrier and looking further into Europe, I guess for
for its growth, that will be 1 to watch if it goes through.
And of course talking about those mid tier network carriers,
we've got TAP Air Portugal's privatisation process under way
(10:40):
and the big three kind of European groups interested
there. So again, I guess that does feed
into resilience. I think these bigger kind of
airline groups that emerge from from these processes are
naturally going to be stronger when they look to the
competition they face from NorthAmerica and obviously looking to
Asia as well. And yeah, when you look at
growth levels as well talking about capacity, I think they're
(11:02):
pretty much down to organic levels.
Obviously in the post COVID period we had some pretty eye
watering capacity growth figuresin passenger and cargo side, but
they're now kind of moderating back down to you know, 4-5
percent sort of level particularly looking into 2026.
So when we put that against the backdrop of the whole global
industry being thousands of aircraft short of where it, it
(11:24):
would have been, that kind of structural advantage of having
lower capacity in the market is going to continue to be a factor
in 2026. And as I said before, that is a
big benefit to the incumbent carriers who have the the little
capacity that's available. So yeah, I think a better than
expected year. I'd sum it up as and you know,
(11:47):
some challenges going into 2026.As it stands, I think there's
not too much concern if things stay as they are.
And that is obviously a huge if in in today's world.
But you know, that's what I'd say today.
Howard, going back to January, with the announcement of tariffs
by President Trump, what sort ofimpact do they have on travel
within the Americas and did theyslow demand for air travel?
(12:09):
Yeah, so the tariffs have definitely been a big deal in
the Americas. The Trump administration has
been pretty openly hostile to certain countries, including our
closest neighbours. His rhetoric toward Canada,
threatening to make it the 51st state and calling former
President Trudeau governor thesethreats to annex the second
largest country in the world, those words have definitely
(12:31):
mattered for airline businesses in the Americas in particular.
Travelled from Canada to the US,dropped pretty remarkably at the
beginning of the year when Trumpwas really focused on Canada and
Greenland. So carriers like an Air Canada
and West Shed and Porter Airlines and Flair, their low
(12:51):
cost carrier, they all said thattraffic to the US was suffering
and the numbers show that maybe that has eased up a bit.
Capacity from Canada to the US has rebounded somewhat, but it
is still lower than all those carriers expected when the year
began. This has been a big drag for for
those airlines, but it has been pretty interesting.
(13:13):
We have seen Canadian airlines look elsewhere.
Over the summer, Air Canada and WestJet went really big on
transatlantic flights and also to a lesser extent, flights to
Asia Pacific. More recently, with the colder
mutts kind of setting in, they have gone pretty hard after sun
destinations in the Caribbean and Central America and South
(13:36):
America. So they've sort of pivoted away
from the classic US vacation spots.
They're flying fewer flights to Florida and Vegas and and
they've focused resources farther South.
The story is pretty much the same in Mexico.
Carriers such as Aeromexico and Volaris and Viva have all said
(13:56):
that the visiting friends and relatives market, which
concentrates on Mexico to US travel.
That has been down throughout 2025, though again there has
been a little bit of a rebound compared with earlier in the
year. In recent months, Mexican
airline executives have directlycited the Trump administration's
rhetoric on immigration and his deportation scheme as the likely
(14:20):
cause for the dip in demand. Elsewhere in the Americas, Latin
American carriers generally say that demand for international
flights to the US has been a little bit softer than usual,
though not dramatically so, while flights to Europe have
been totally gangbusters, just really high demand there.
(14:40):
And this is without even mentioning how travel within the
USA has been suppressed. Domestic demand has been lower
throughout the year, with a bit of an uptick in the past couple
of months. It was really big drag on major
US carriers through April and May.
Now we just had the the highest number of air travellers on a
single day in the US the Sunday after Thanksgiving.
(15:02):
So obviously people are still moving around during those peak
periods of travel. What we're seeing is that in the
off peak periods, times where demand traditionally isn't very
high, people aren't flying nearly as much.
And this is particularly showingup in the main cabin of airlines
with economy seat sales. So it seems like people who
(15:23):
don't have as much money as the business travellers, basically a
lot of those people have stayed home in 2025 or minimise their
optional leisure travel. This has been a big deal for the
low cost carriers in particular.Basically none of them have had
a great 2025 from a financial standpoint and the sagging
(15:43):
domestic demand has been a big factor.
Airlines on their Q3 calls were talking about an Inflexion point
where it seemed like some consumers were purchasing
tickets again. But overall, carriers like
American and Southwest, which have a lot of exposure to the
domestic U.S. market, they felt this dip pretty dramatically.
(16:03):
And for the ULCCS like Spirit and Frontier and Allegiant, this
has been a really difficult period.
So Spirits struggles, of course,have been a top airline
storyline of the year, though their struggles do extend beyond
this recent demand dip. All of those carriers are
reworking their networks and sort of repositioning themselves
(16:24):
as a result of the new demand environment.
And I will say it's kind of unclear if lower domestic demand
in the US is really the result of anything Trump has said or is
saying. It seems more likely that people
with lower incomes are generallystruggling to afford everyday
things and air travel is seen asless of a necessity.
But when you take a look around North and South America, I'd say
(16:47):
the town coming from DC has definitely had a big impact on
airline businesses this year. And Alfred, what was the impact
of the tariffs in Asia Pacific? In Asia Pacific, it's a, it's a
little bit of a different story here.
I mean, initially when Trump announced the tariff policy,
there definitely was a lot of concern and you know, not just
because the fact that most or quite a number of Asia Pacific
(17:08):
nations here are among the otherstates by the tariffs.
I think there was a lot of concern that, you know, this
impact travel demand, especiallyto and from the US.
That was the concern of the North Asian carriers like you're
in Japan Airlines in a Korean Air.
But then as as the months went on, you know, we were starting
to see that that was not really the case for many of the
operators. And this is kind of reflected
(17:29):
also in their financial, in the financial results that you have
operators like Japan Airlines onupon Airways, Korean Air,
Singapore Airlines, they all have noted that they were
cautious and they were concernedthat the tariffs would impact
travel demand. Then their results, I mean they,
they turned the profit I think in the first two quarters of
this year. So in some ways the tariffs
(17:51):
didn't really quite impact travel demand.
However, there is still quite a large degree of caution from
from the airlines in this region, especially so when you
look at China, US, the trans Pacific market between mainland
China and the US. Now that's kind of the only spot
in the region that still remainsquite weak.
And that's a mix of slower international recovery from
(18:14):
China, but also geopolitics, youknow, with Trump's rhetoric
about China and his toughest stance on immigration.
However, having said that, it's not really the case for
operators in countries around orregions around China.
So for example, just recently, Cathay Pacific was telling me
that transit traffic between mainland China and the US via
(18:36):
Hong Kong is still in very high demand. 2 reasons #1 There's
still quite a bit of travel demand.
And also, and it's also a resultof the fact that Chinese
carriers and to some extent the US carriers are not mounting as
much flights as they used to prepandemic direct flights between
the US and China. So I mean, in, in sort of a
nutshell, the impact of the terrorists on the Asia Pacific
(18:58):
airline sector has not been as severe as they feel that it
might be. But there is definitely a lot of
caution. And given the kind of
uncertainty that, you know, President Trump is known to
have, I'm I'm sure the airlines are closely watching what's
coming up next. And they would definitely be
sure to respond in whatever way they can.
So we know that the supply chainis still recovering post COVID.
(19:21):
Alfred, have we seen delivery delays curbing capacity growth
in Asia Pacific? Yes, Amber.
So I mean, among Asia Pacific carriers, you know, one of the
key things that sort of triggersa lot of airline leadership in
this region is supply chain issues.
And if you ask, you know, any ofthe major operators, this is
probably one of the biggest challenges that they'll tell
you. And you know, you have airlines
(19:42):
from all the way from Australia,New Zealand, all the way up to
Japan and even into India as well.
They've all publicly reflected these the supply chain
challenges, not just in terms ofdelivery training, but also in
terms of like engine reliabilityissues, a longer MRO times and
all that. These these issues have sort of
impacted the rate at which they intend to grow.
(20:04):
One example that I can cite, I mean is the civil Pacific from
the Philippines. I mean their airline leadership
has been very public about the engine reliability issues that
they based on their Airbus AP thinking new.
Aircraft that are powered of course by the Front and Whitney
PW1100G Turbo fans. So they've been quite public
about those issues. And they most recently said, I
(20:26):
think in the earnings call that the number of aircraft that is
on ground awaiting maintenance or awaiting cheques and all that
is much higher than the forecast.
And I think on previous occasions they've also spoken
about the frustration of having clarity as to when this engine
reliability issue or when this entire issue is going to be
resolved. I think the latest timeline that
(20:47):
they they mentioned I think is 2028.
So that's, you know, still at least another two more years to
go before this entirely sort of clears itself.
And then of course, another carrier being quite a big
impact. I think financial impact even is
here in New Zealand, in New Zealand, I think in October they
said that they forecast their full year earnings.
That's the year to June 2026. They expect to report their
(21:13):
first loss since 2021. So and that's a mixture of
issues. But I think one of the the key
issues that they that they talk about was that of engine
reliability issues. Now they also have issues with
the part of mini engines plus they also have engine issues
with the Rolls Royce trend that's on their Boeing 787
fleet. So that's kind of like a double
whammy that they have. And I think they're taking I
(21:33):
think a quite a big financial hit on the number of acre
they're being grounded. I think it's up to 11 at a time.
And like Civil Pacific, they're also saying that they're not
getting any kind of clarity in terms of when this issue is
going to be resolved. And you know, for airlines, not
having that sense of clarity effects forward planning.
And you can't sort of anticipatethe amount of capacity that
(21:54):
you're going to be putting into your system, say for the next
quarter or two quarters down theroad because you're not sure
when this aircraft is going to be back from grounding and all
that. So I think that's a challenge.
That's quite a key challenge, I think.
So that's one reliability issues.
And then on delivery delays, youknow, you have major players in
this region like separate airlines, A&E all facing delays
in terms of getting new aircraft.
(22:16):
One of the biggest I guess delays they're facing is the
cost in Boeing's 777X programme on you.
The programme has quite a numberof major customers in Asia.
So you have all the Porn Airways, Cathay Pacific,
Singapore Airlines, These are some of the major customers in
this region. And that's been sort of quite a
growing quiet frustration, if you, if I can put it that way,
(22:38):
that the delivery timeline of the service entry of the 777X is
constantly getting delayed. So Singapore Airlines in the
past had said that they would beintroducing sort of brand new 7
products for first business, premium economy and economy on
the 777X. And that was, of course, working
on the assumption that 777X willbe kind of entering service
around from this period of time.Now we know that the 777X is
(22:59):
simply for I think at least so 2627.
And so that's sort of impacting the the service entry of their
new cabin products, which is then sort of forced them to read
the design of that new cabin product and retrofit their
existing a 350 fleet with this new long haul cabin products.
Of course, at the end of the day, the long haul cabin
(23:19):
products will still go in the service through the 777X.
But you know, if you have sort of planned up to this point that
you wanted to debut your new products on brand new act of
time, having a delivery delay like that is not exactly kind of
the best look. So I guess these are sort of the
supply chain issues that have been in a way haunting the Asia
(23:39):
Pacific region. And of course, these are not
new. These these issues have been
raised again and again year after year.
When I speak to like airline CE OS and all that, they constantly
say that, you know, it's taking too long.
The aircraft in the MRO shops were too long.
I'm waiting too long for new aircraft and, and all that.
So that's kind of the extent of what the supply chain is for
(24:00):
Asia Pacific carriers. And Lois, what were the biggest
challenges that emerged in Europe this year?
I mean including and beyond the collapse of some airlines,
including play quite recently. Yeah.
So as you say, there have been closures, there have been
challenges at individual airlines.
I think when we look over the year, this isn't a new thing,
but I talk about the supply chain effect on aircraft
(24:22):
availability. Now that is a real double edged
sword. Of course, it does mean that
incumbents are facing less competition, but it is a
headache and it obviously it doesn't just affect new aircraft
deliveries. It's a huge theme.
IATA flagged it again at the global media day as Willie Walsh
said that every airline CEO is complaining about it.
(24:42):
It obviously is affecting the availability of engines, the
need for engines to be on the ground for longer.
And we've been over a lot of these, I think in previous
podcasts, MRO being slow, not having enough spare aircraft and
all these things make planning more difficult, obviously
because they create unpredictability which no
(25:04):
executive enjoys. For all the talk of obviously
Europe being the global leader of profitability etcetera.
And that doesn't mean everything's rosy.
As I say that supply chain challenge I think has got has
got years to run. I think you do hear some people
saying it's getting better, but I think for every time I hear
that, I then join a call or speak to someone who has a new
complaint about something not quite developing as positively
(25:26):
as they hoped. Whether that's the Pratt and
Whitney groundings, for example,or some of the kind of less than
optimal time on wing of of the newer engines, whether they're
from Pratt and Whitney CFM, etcetera, they're all very
widely covered. And obviously again on wide body
aircraft as well, they've been similar issues.
So the supply chain challenge, as I say, broadly supports
airlines to a degree if you're an incumbent, but it does also
(25:49):
create a lot of headaches and itwill be something that I think
that's got years left to run. I touched on sustainability
there as well. When we talk about European
airlines, this is I, I guess, globally, probably the region
that faces probably the most scrutiny in this regard from
governments and regulators. IATA is really clear and that
(26:10):
obviously they're speaking for airlines when they say this,
that they do not like the European Union's approach of
what they would say is stick rather than carrot regarding the
use of mandates for for SAF. Their argument is there's not
enough SAF for airlines to to meet these targets and that the
lack of development of the industry means that the SAF that
(26:31):
is available is expensive. And that's something to watch.
Obviously at the same time airlines in Europe face from the
emissions trading system in Europe face additional charges
there and obviously UK carriers face some charges from the UK
equivalent. There is a sense still in Europe
and if you go along to the airlines for Europe meetings
that that happen, which is kind of like the the lobby group for
(26:52):
the European airlines. They're very big on saying that
all of these these costs make them uncompetitive globally.
And as I say, obviously, broadly, they look very
profitable European airlines. But at an individual level,
these challenges do show up. And I think there's a feeling
that these costs are only going to go up because airlines are
going to use more SAF, the ETS requirement ramps up, etcetera,
(27:14):
etcetera. At the same time, you've got
CORSIA coming in as a global offsetting scheme and that
again, if you're already paying for ETS, for example, that's
more costs there. So that that's something to keep
an eye on. And it's started to affect
European allies more this year. As I say, it's something that
will only ramp up as it stands. And I think the the political
(27:35):
climate makes it even more interesting.
Obviously the US government has kind of gone a bit kind of full
climate denial, which really doesn't help, I guess with the
European airlines feeling a bit picked on by governments in
their region and kind of adds tothe their their argument that
they're being unfairly burdened.Yeah, when they see governments
(27:56):
elsewhere kind of rowing back a bit on the the climate stuff.
When I after a pressed on this, I think there's a general
feeling that the world is still trending towards addressing
climate change, thank goodness, and that airlines do need to
continue to take it seriously. So it may be the case that US
air to catch up eventually. You touched on some of the
(28:17):
challenges that airlines we knowplay failed in ice and we did a
whole podcast about that. I think there were some factors
that were unique to Iceland there.
It's not not an easy place to bea second carrier.
Some factors relating to the very fact that being a start up
carrier in Europe is difficult. You're up against some pretty
formidable competition. So yeah, they failed there.
(28:38):
We've also seen some issues likein the UK, we've seen Eastern
Airways Blue Island fail in in recent weeks in in the regional
kind of domestic carrier front. I think that's UK is known for
having some of the highest aviation taxes.
The APD being very high doesn't help the kind of regional
carriers in that regard. So that that's an interesting
(29:01):
trend in terms of some of the bigger carriers we've seen.
Whiz Air had a quite a tough year for a multitude of reasons.
It came out of COVID with groundplans to grow really quickly,
but that has kind of been derailed partly because of some
of the Middle East tensions and other factors.
And they keep saying they've turned the corner, but they
continue to have challenges. They were particularly hard hit
(29:23):
by the Pratt and Whitney engine issues as one of the early
adopters of that engine type, They had a particularly high
proportion of their fleet was affected by it.
So they've been, they've been hit by a number of of challenges
and you know, are operating in amarket where they go up against
Ryanair, which has been pretty bullish and enjoying some pretty
decent financials this year. So they've had a tough time.
(29:45):
They keep, as I say they keep saying, saying they've turned
the corner. I don't think anyone's thinking
this is existential for them. I think underlying there is a is
a strong business model with, with some of the better costs in
terms of the locals carriers in Europe.
So but one to watch. And again, this isn't from any
sort of knowledge I've gained anywhere, but I think the, when
we talk about consolidation in Europe, I think looking into
(30:07):
next year, I think it's worth keeping an eye on some of these,
the low cost carriers. We obviously in recent weeks or
so there were stories linking EasyJet with a sale.
So it's just something to keep an eye on I think next year.
But as I say, a tough one for Whizzair, but I think they,
they're, they're hoping they, they can look forward in 2026.
(30:27):
As I, I mentioned the transatlantic market as a
positive in the sense it wasn't the impact of some of the
actions of the Trump administration.
Some of the rhetoric was not as significant as expected, but we
have also seen in recent weeks and more recently US talking of
tightening entry requirements, potentially involving searching
(30:48):
your social media use etcetera. And IATA will often say they're
against anything that makes travelling harder, that kind of
makes it harder to cross borders.
And I think that would firmly fall within that.
So as I said, there has been some weakness in the economy
cast clabbing on transatlantic and I think if the US continues
to kind of introduce things likethat.
(31:10):
And also this general rhetoric towards Europe in recent weeks
would suggest it doesn't necessarily see European
countries as close to allies as it has in the past.
And all of this kind of feeds into the the idea that maybe not
as many people will want to travel from Europe to the US as
much so. And I think there is some data
(31:32):
backing that up. So I think we need to keep a
close eye on that. As I say, as much as there was a
sigh of relief that the early year impact of some of these
things wasn't great, I do think it continues to be a concern.
And also the US has introduced some travel bans recently, not
directly affecting Europe, but on travel for some countries,
again, you know, European carriers connect people from
(31:52):
Africa, Middle East, Asia into into the US, North America.
So that will have an impact. So again, I think the broad
trend on transatlantic travel isone of concern.
Regarding trends, even as I said, as I mentioned before, the
premium travel is holding up pretty well.
So a trend to watch. We'll also be keeping a close
eye on what's going on in Ukraine.
(32:13):
Clearly, European airlines have been significantly affected by
that. Obviously some very directly,
not least Ukrainian carriers, any airlines operating in the
vicinity. Russian carriers as well,
obviously stopped connecting to Europe, well, most of Europe
anyway. So the constrained airspace is
an issue that that conflict has created.
(32:35):
And not least obviously access to Asia is now much harder
because a lot of European carriers won't overfly, can't
overfly Russia. And also the airspace that is
still open gets gets a lot busier.
And then to the conflicts in Ukraine would would certainly
potentially bring some benefits when we look into next year.
But at the same time, it will beinteresting to see if there is
(32:55):
any kind of ceasefire. The obvious question is how
comfortable European carriers going to be overflying Russia if
peace is achieved. Yeah.
So it's a it's a theme, a theme to watch.
So, you know, there have been some vaguely positive noises
coming out of both sides about apotential agreement.
But at the moment it does continue to weigh on the region
(33:16):
quite a lot. So if there is no resolution, it
will continue to be a a quite a negative factor.
Obviously that carries always carries the risk of an
escalation as well. And we've also seen obviously
some drone activity around European airports that has
caused some disruption. So the longer this kind of
conflict goes on, the more likely we are to see things like
that as well. So it's a thing that could go
(33:38):
either way, I think. And yeah, when we just more
broadly looking at the the challenges facing European
airlines this year, we know Europe is a pretty mature market
in terms of most of it anyway. In terms of airlines, a lot of
the countries in Europe are seeing fairly anaemic GDP growth
and the airline industry's growth tends to track GDP.
(33:59):
It's quite a reliable indicator of where demand is heading.
So yeah, a lot of these airlinesaren't operating in markets
where there is kind of a lot of organic growth happening in in
the economies. So you know that that means the
opportunities for growth for airlines are somewhat
restricted. We know the consumer spending
power is concerned against that backdrop.
(34:21):
I don't think even though inflation has come down, it's
still quite high in a lot of markets.
So there was the initial kind ofburst of really high inflation
after the Russian invasion of Ukraine and that's fed through
to prices that inflation's come down, but it's still pretty high
in a lot of cases. So already high prices are going
up. Now a lot of airlines have tried
(34:41):
to reassure themselves that people still want to pay for air
travel. There's been some evidence that
people were prioritising in Europe are prioritising air
travel even when they've got less money for other things
because they kind of partly because they see some the more
value in it than they did beforeCOVID when they lost the ability
to fly for some for a period. But equally, I think some people
(35:03):
will say that economic reality will catch up with with airlines
in the end and with that demand in the end.
I don't think you know, something somewhat of a miracle.
I think if, if airlines could continue to to kind of work
counter to, to the economic trend so that that's something
to look out for, you know, equally a better economic
outlook, if that emerged then then we could see the opposite.
(35:24):
But yeah, certainly something that is, is, is of concern as we
head towards the end of the year.
And again, what is helping airlines so much is that
constrained capacity in that environment.
So no one's going to be adding, you know, 10s of percent to
European capacity next year. So there is some reassurance
there. And as I go back to, I think
that's where the degree of this so-called resilience is coming
(35:47):
from as well. So yeah, there are, I'm sure
there are more risks as well andmore negative developments this
year, but I would kind of put them into as the, as the main
ones. I it's not been a calamitous
year. It's not been a particularly
great year for some of these headwinds.
In some ways they've been improvements from what had come
before in the post COVID periods.
But I think in some ways the probably one of the major
(36:09):
concerns will be the the global economy and some of the the
shifting in terms of international relations that's
going on as well. And you know, as I will mention
again, European carriers, network carriers rely quite
heavily on the transatlantic market for a lot of their
profits. And anything that's going on in
in North America that that makestravelling hard or puts people
off travelling is going to goingto hit them.
(36:31):
So so yeah, things to be concerned about and we'll wait
and see what comes in 2026. And Howard, air traffic control
was a major issue in 2025, particularly in the northeast of
the US. Can you tell us about that?
Yeah, absolutely. It definitely has been one of
the main storylines in the United States this year.
(36:52):
Despite having one of the most robust airline industries in the
world, the technology supportingthe country's air traffic
control systems has has been decrepit for years or maybe even
decades. So airlines have been calling
for upgrades for a long time. And in fact the FAA spent about
10 years on an upgrade effort called NextGen.
(37:13):
And really that has just been kind of an ineffective mess.
But the the matter really came to a head with the PSA Airlines
collision with an Army helicopter at Rankin National in
late January. So this was the first fatal
accident involving AUS commercial airliner in more than
15 years, and it was a huge shock for US airlines.
(37:37):
It was not entirely unpredictable, however.
There had been warning signs flashing in the Northeast USA
for several years. The airports in New York and DC
and Boston have been highly congested and ATC staffing
levels have kind of struggled tokeep up with the traffic.
Newark in particular became a flashpoint this year.
(37:58):
They had multiple radar and communications outages that
caught the public's attention. And there were a number of close
calls involving runway incursions at airports
throughout the US. So there was this growing sense
that something could really go wrong, particularly at these
airports in the Northeast. The collision killed 67 people,
(38:18):
everybody on board the CRJ regional jet and the helicopter.
And it kicked off this effort from the Trump administration to
overhaul the country's ATC systems.
His big beautiful bill includes 12 1/2 billion dollars for
equipment upgrades including radar systems and
telecommunications. And his transportation secretary
(38:42):
Sean Duffy has been trying to turbocharge ATC hiring by
shortening the time it takes to become a controller and also
raising wages, along with some other incentives.
Then of course, we had the government shutdown in November
and that came at a really bad time for the whole ATC
recruitment effort. Controllers weren't getting
paid, and the whole thing shineda light on how difficult and
(39:05):
stressful the job can be. In fact, the system was so
strained during the shutdown period that the FAA mandated a
10% capacity reduction at 40 of the biggest airports in the US.
So it's sort of remains to be seen how this all shakes out in
terms of hiring more controllersand upgrading the system.
(39:25):
You know, whether the the ATC attrition of the shutdown period
has a big impact on staffing levels moving forward.
And really, we expect this matter is going to be, you know
it. It will continue being a big
storyline to follow into next year and likely through the end
of Trump's second term. And Howard, how have aircraft
orders and engine issues affected the airlines within the
(39:47):
Americas? Yeah, also a big deal in
Americas. We have seen some impacts from
delivery delays, aircraft delivery delays in in North
America earlier this year, United and Air Canada both sort
of quietly pushed back the expected delivery dates of their
first A 321 XLRS as Airbus has had some supply chain issues of
(40:11):
its own. But it's kind of funny, I would
actually say that for the US carriers in particular, they
haven't necessarily been all that mad about not getting their
jets on time. They were really ticked off when
they couldn't get enough jets and demand was surging in the
post pandemic period. But actually a few carriers have
(40:31):
been purposefully curbing growth.
So like JetBlue and Spirit and Frontier of all deferred
deliveries of Airbus narrow bodies to the end of the decade
and into the 20 thirties. So it's like kind of this
opposite phenomenon where they don't actually want as many jets
as they thought they would before.
In spirits case, they're going through a really dramatic fleet
(40:53):
reduction effort. They were likely going to end up
with half as big of a fleet as they used to have by the time
they're done. JetBlue and Frontier didn't take
the same sort of drastic action,but they have also purposefully
curbed growth as they try to sort of match their networks to
the current demand environment. And that has involved slowing
(41:16):
their fleet growth. So in North America at least, it
seems like they've sort of welcomed delays from the
airframers. Southwest is another example
where they weren't particularly concerned with Boeing delays
with kind of 1 stipulation. They for sure want their hands
on the the Max 7, which is the smallest variant in the 737
(41:38):
family. They've been really hurt by the
delay in FAA certification of that time.
They want to use the Max 7 to replace their older 7377
hundreds, which are good on shorter haul routes where you're
not carrying as many passengers.And that type of aircraft was
sort of critical to Southwest's enormous domestic network and
(42:01):
how they built that up. But of course, it is taking
years longer than expected to get the last two Max variants
certified. So Southwest definitely wants
those Max Sevens, but I don't think Southwest has been
concerned with generally slower growth.
And really this year has been has seen Boeing finally turn a
corner on their 737 programme. Airlines throughout their
(42:24):
Americas have said that they're getting their Max jets on time
or even sooner than promised with early deliveries.
But you know, Southwest has beenkind of been a similar boat as
the low cost carrier's Frontier and Spirit as well as JetBlue,
where they've kind of shrunk their network in order to grow
again. So this is all to say that I
don't think US carriers in particular would say that access
(42:47):
to new jets was a top line problem for them in 2025 like
Alfred was talking about. Really a a big issue for
carriers in the Americas in terms of access to equipment has
been engines. There are several carriers
including Velaris and Vivaaerobus in Mexico that have
really struggled with the GTF engine recall.
(43:10):
They've had dozens of grounded jets.
JetBlue has also felt the Pratt turbofan problems really
acutely, and so has Spirit Airlines.
In fact, they probably had it the worst among US carriers.
And they cited the GTF engines and their poor time on wing
performance as a major factor inboth of their Chapter 11
(43:31):
filings. So the engine recall was a big
part of their bankruptcies. In other words, on the wide body
side like Alfred was mentioning regarding the Trent 1000 engines
that power 787 Dreamliners, we've heard that from Abergroup
as well, which is the parent company of Goal and Avianca.
(43:52):
I had one of their executives tell me that acquiring Wamos
Air, the Spanish wet lease airline, has been a major factor
in their success in 2025 becausethey were able to use their A3
30s to backfill their grounded 787.
So they weren't necessarily expecting to wet lease to
(44:12):
carriers in their own group likeAvianca, but that actually
turned out to be a boon for them.
Latam also reports issues with its wide body fleet with engines
spending a lot of time off weighing, and we hear the same
from Azul in Brazil. So, more so than aircraft
delivery delays, engine durability and reliability have
(44:33):
been greater issues for airlinesin the Americas in 2025.
Alfred, looking ahead to 2026, what should we keep an eye out
for in Asia Pacific? In 2026, I think one of the one
of the continuing trends that we'll see is that travel demand
is going to continue. It's going to continue to be
strong. However, and I think IATA
(44:54):
alludes to this in it's latest outlook, there's going to be a
lot more growth in terms of in interregion but rather intra
region travel. So that's travels within the
Asia Pacific region. And I think that's sort of a
byproduct of #1 growing economicuncertainty.
Therefore people are working shorter grips and the intra
(45:15):
region there's still sort of medical travel demand to go
around with India and China bothleading growth.
So I think travel demand is going to be strong, but it's
going to be LED mainly by intra region, not so much by your
inter regions meaning to like Asia, Europe or Asia, North
America. Another thing I'm looking out
for in the New year is how the Indian market is bearing now.
(45:36):
The Indian market has been seen at least in the past one or two
years as kind of this huge growth engine.
And I think there's a lot of talk about it growing even
faster than perhaps even Chineseairline sector.
I mean, of course, the Indian carriers have massive aircraft
order boats. Now that sort of bullish
sentiment has sort of been heemed down a bit in 2025, you
(45:56):
know, with the very high profilecrash of the air I787, and then
more recently, I think the operational meltdown of Indigo,
which is the first India's largest carrier.
And so these incidents, these two incidents in 2025 sort of
put a dampener in terms of the Indian airline sectors growth
ambitions. And in 2026, I think I'll be
very curious to see, you know, whether or not the bullish
(46:18):
sentiment that we started 335 foot was to carry on or is there
going to be a bit more of a normalisation, Is there going to
be a bit more recalibration in terms of growth sentiment?
And Howard, same for the Americas.
What should we expect in 2026 from that market?
Well, I would say in North America in particular, we'll
probably see a continuation of what we've seen for years from
(46:41):
Delta and United, which has beenwhere they kind of steamroll
everyone else. I've started thinking of this as
kind of a microcosm of the US economy where the biggest
companies are running away with the profits in the market share
while everyone else falls behind.
American and Southwest had another disappointing year this
year just looking at their financial numbers and Delta and
(47:04):
United vacuumed at most of the profits again and I expect that
to continue in 2026 as their advantages seem really deeply
entrenched at this point. I'll also be looking for
acquisitions in the new year. I think the whole US airline
industry is curious what happenswith Spirit.
There are have been some pretty strong indications that they're
(47:26):
exploring an acquisition by another carrier.
Some likely targets include Frontier Airlines, which has
made several attempts to acquireSpirit in the past, maybe even
American Airlines as well, even though they're one of the
biggest US carriers and previousUS administrations might have
looked unfavourably at one of the biggest carriers getting
(47:48):
even bigger, there is some sensethat maybe the Trump
administration would look upon such a deal more favourably.
They also operate a lot of A320 family aircraft.
So there is a bit of a fit thereelsewhere in the Americas.
I'm curious to see whether Abergroup, which I mentioned
before, they they're the parent company of Avianca and Goal and
(48:10):
they are looking to acquire Sky Airline, which is based in Chile
and they also have a, an operation in Peru.
Abra is making an attempt to acquire that airline and kind of
grow their presence in other places in South America.
So I think those two things between a possible Spirit
acquisition and a possible acquisition of Sky Airline are,
(48:33):
are the two biggest things that I'll be watching in early 2026.
And Louis, you've spoken about how the Middle Eastern carriers
are well insulated against some of the geopolitical events in
the world and other economic headwinds that other carriers in
Europe are facing. But it's not perfect for the
Middle Eastern carriers. And what challenges are they
(48:54):
facing going into 2026? Well, I think, yeah, you touched
something there. The geopolitical thing is Middle
East obviously is notorious for tensions between certain
countries and no one would be counting their chickens on that.
You know, it may be a relativelybetter position than we have
been in recent months in the Middle East at the moment in
(49:16):
terms of tensions. But but yeah, it it it certainly
carries the potential for for something else to to happen
there. So, and you know, that said, the
Middle Eastern carriers are wellversed in this and the big
network operators that that willgenerate a lot of the profit in
that region are fully aware of that and are clearly won't be
planning, planning their networks, etcetera, too much
(49:39):
around regions and and airspace where that may come up again.
But it but it certainly is a risk and one that you know, has
gone up and down across 2025. So yeah, no one is going to be
making assumptions about where that's heading.
And I think I did touch on this a bit earlier, but with the the
Saudi carriers growing at a pace, we need to watch out for
(50:02):
the capacity impact there. It's also worth noting that a
lot of so Middle East and the, the big network carriers,
obviously India's a big market for them even though they are
somewhat restricted in how much capacity they can fly into that
market. But with the growth of India's
carriers, for example, that is amarket where you know with
(50:22):
Indigo adding wide body aircraftat the same time as Air India
growing quite aggressively, obviously a narrow bodies, a lot
of narrow bodies coming online at Cassarera as well.
There's quite a lot of local activity in India that could
mean that the local population is more drawn towards using
those carriers, perhaps with more point to point flying
rather than having to fly through the Middle East to get
(50:43):
somewhere. So that's a trend to watch.
That's a potential risk and thatwill ramp up in 2026.
I would just add the caveat thatthe IRTA AGM when, when I was in
Delhi in, in June, it was looking really positive for
India's carriers. I think they'd had a great
period leading up to that. It was all all about growth.
But you know very quickly with the AIR I787 crash not long
(51:07):
after that event and then in more recent weeks we've seen
Indigo having some huge operational challenges around
some of the new regulations around crew rest time, etcetera.
And suddenly I think a lot of the gloss has gone off there.
So again, that that's actually apotential positive for those
Middle Eastern carriers that rely on on that market for quite
(51:27):
a lot of their connections. So, yeah, that there are other
risks obviously for the Middle Eastern carriers, whether that
comes from the local carriers who are able to connect people
direct. But equally, I would say that,
yeah, there was a, a narrative during COVID that that no one
would want to fly through hubs anymore because because it's,
you know, you're doing essentially 2 flights to get
(51:48):
somewhere and just increases thechance of you being exposed to
something. And everyone will want to do
direct point to point flying. But that clearly is not the
case. You know, the big connectors are
doing pretty well generating profits.
As I said, there'll be the envy of so many other carriers.
And that whole narrative I thinkhas has not come to pass.
And I think that the hubs are performing pretty well and
(52:09):
they're still driving a lot of the the global airline industry.
So there's a lot of positive trends there, but there are
risks and ones we'll be keeping a close eye on next year.
Thank you so much for joining me, Howard, Alfred and Lewis on
this episode of Flight Global Focus.
It was a pleasure to chat about the 2025 and airlines.
Thanks so much, Amber. I appreciate it.
(52:30):
Thanks, Amber. Amber.
Flight Global Focus is your essential podcast for trusted
aviation insight. We publish new episodes twice
weekly. Join us on Friday for a concise
news briefing and on Monday for in depth analysis covering
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(52:53):
If you have any questions, comments, suggestions, or for
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(53:15):
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podcasts.
Welcome to Flag Global Focus. My name is Amber Elias and
joining me for this Airline Focus episode is Lewis Harper in
London. Hi Amber Alfred Choir in
Singapore. Hi, Amber.
And Howard Hardy in the US. Hello.
Let's take a look back at the notable airline developments in
(00:29):
2025. Outside factors have
historically hit European airlines quite hard, but this
year they have claimed a new found resilience to market wind
shifting. Lewis What do the European
airlines have to say about it? Yeah, the mention of resilience
has been quite common on the dozens of airline earnings calls
I've joined this year and, and talking to people in the
(00:51):
industry as well. So, so the idea I think is that
and cast and Spore of, of Lufthansa Group is a a big
advocate of this idea is that, you know, historically European
airlines and not not unique to European airlines, but they have
been vulnerable to, to outside factors most recently, of
course, COVID. But I think partly because I
(01:12):
think COVID has has informed businesses on how to respond to
these types of challenges. You know, a lot of the airlines
are claiming that they have a new found resilience and that
they've shown that this year, not least to some of the
geopolitical developments we've we've had.
We can talk a bit more about them in a bit, but certainly
the, the tariffs in the US, for example.
(01:34):
And you know, it's as I say, it's not just Carson sport
saying this. I've heard it on a number of
calls. And I was at the IATA global
media day in Geneva a few days ago.
And Willie Walsh also talked about this, the DG of of IARTA
and the former CEO of BA and IAG.
So he knows quite a lot about the European airline industry.
(01:55):
He said a similar thing. It's an abstract idea.
I think what you can broadly sayis that despite some of the
challenges this year, airlines in Europe have kind of been on a
profitable trend. And again, obviously, I'm
talking about the industry as a whole in Europe, not there are
individual challenges out there.But yeah, it's it's
profitability despite some of the outside challenges faced.
(02:20):
And one of the big factors in that when we look back at the
developments in in 2025 for network carriers is the
travelling premium cabins has been strong.
So going into COVID, obviously business travel was a huge deal
for a lot of network carriers. It brought in a lot of the
profits coming out of COVID. It's not uncommon to to be an
(02:43):
airline that's still seeing in terms of passenger traffic that
corporate travel is, is still a long way down on where it was
before COVID. And obviously if you're told
people that an airline executivethat, that in 2025 your, your
corporate travel will be 2030% down on where it was in 20-19,
that would be pretty terrifying.But what's happened is that
(03:04):
premium Ledger travel has reallytaken off in the the post COVID
period. So that's really offset that
loss of corporate travel. And it's been been a real
positive this year. Listen to Air France KLM, for
example, they keep talking aboutpremiumisation, this idea of, of
adding more premium products to their cabins, improving them,
(03:25):
you know, and that is offsettingany weakness that there has been
in the main economy cabins. Now that there's important
context to that, one of the mainthings being the tight capacity
we've got in Europe and globally.
But of course, what this means is that airlines are way down on
capacity versus where they mighthave been without the COVID
crisis. So, so all of this talk of these
(03:48):
really kind of encouraging developments is fair enough, but
I think a lot of it does come back to the fact that, you know,
airlines globally according to IATA are about 5340 aircraft
short versus where they might have been without the COVID
crisis. And that's, you know, a
significant proportion of of theglobal fleet of what it is
(04:11):
probably around 30,000 or something.
So there's a backlog of 17,000 aircraft for delivery, which is
about 60% of the current active fleet.
Historically, that number would have been around 40%.
So when we talk about resilience, I think some of it
is baked in by that. It's the fact that if you're an
incumbent in the market, you've got premium cabins, you are
(04:34):
operating way down in terms of capacity terms on where you
might have been otherwise. And that means you are able to
to fill those premium cabins with with leisure travellers in
a way that if you were operating, you know, 100 more
aircraft might, might not look so rosy, but that's where we
are. So that that resilience, you
(04:54):
know, as I say, is reflected in the financial performance of
European airlines. And it's worth noting that I
also pointed out in the Global Media Day that European airlines
will be the leading contributorsto to global profits this year
and next year according to theirforecasts.
Both are forecast at this stage.Obviously, the 2025 number is
much more informed by having 3/4of worth of data at this point.
(05:18):
So collectively, European airlines expected to deliver $13
billion of net profits this yearout of a global total of around
38 billion and 14 billion next year out of a global total of
around 40 billion. So yeah, that all looks pretty
good really. I think IATA will always stress
(05:40):
that margins are really tight and that does apply to European
airlines as well. In most cases there are like in
a case of IAG, you know, talk ofmargins, we're about potentially
above 10% in some cases. But it's pretty unusual in the
in the airline airline sector tobe achieving that.
And you know, profit per passenger.
Willie Walsh pointed out certainly among European
(06:01):
airlines is not much more than Apple gets from selling a single
iPhone case. We talked about the premium
cabins. Generally demand I'd say in 2025
has held up pretty well. There's still a narrative, I
think that people learnt what itwas like not to have airline
travel during COVID and they're still enjoying it.
(06:21):
So yeah, passenger demand is pretty good.
There has been some weakness I think in the transatlantic,
which we'll talk about in a bit,but but generally pretty decent
and airlines feel they can rely on that to a point.
And I guess that does feed into that, that idea of resilience,
although I would point out, of course they don't have that much
control over that factor, but but it certainly does seem to be
(06:41):
holding up and it looked particularly good.
So in the case of Ryanair, so inthe first half of 2025, their
performance looked particularly strong because they had a wobble
in early 2024 around blocking sales through online travel
agents, which meant they had to stimulate the market more and
then meant other low cost carriers in the region felt they
had to lower prices to compete. But certainly in, in, in the
(07:04):
first half of 2025, that kind ofwas recovered and and it looks
pretty positive. So I'd say in broad terms, a
positive year in that regard. We've also had pretty helpful
fuel prices, some, you know, upsand downs, but generally when
you look at the long term trend,it's the been pretty helpful for
European carriers this year. And another factor that's been
(07:25):
quite helpful is the weaker dollar against the euro.
So obviously airlines have a lotof costs in dollars.
And when you look at recent profitability, I I think a
degree of that when you convert the EUR profits into dollars,
they, they look much healthier and that's because of that
trend. And it means that obviously the
euros are going further when it comes to paying for things like
(07:47):
fuel leases, whatever airlines pay for in dollars.
So, you know, I, I touched on the, the tariff issue.
I think when you look at cargo demand and passenger demand,
there was a concern at the startof 2025 that with, with the
developments in the US that bothwould be quite significantly
impacted by the actions of the US government.
But I think it mostly has not turned out that way.
(08:10):
I think when we talk about potential risks looking into
next year particularly, I think there's more to say on that.
But certainly what's happened sofar is not being catastrophic.
It's generally been pretty good.I think yields have been pretty
flat. So there's not been any kind of
disastrous developments in that regard.
I would say cargo as well has done particularly well against
(08:31):
that backdrop. No, it's not gone gangbusters
like it did during COVID, but I think people have been quite
surprised how quickly cargo is pivoted away from the markets,
you know, strongly affected by by the developments in terms of
tariffs and obviously China, US being one example and into other
markets. I think air cargo has an
advantage in being a relatively small part of the global freight
(08:53):
market, which means it can respond quite quickly to
changes. It's not so sort of such a
structural part of the market. It tends to do better when when
there's disruption in shipping, for example.
So it it's much more used to picking up on, on advantages,
where they where they lie and moving, moving towards them.
So, so yeah, that, that has beena boost, I think compared with
(09:16):
where airlines thought they might be.
So yeah, I think it's a a broadly positive year in that
regard. And just other themes really.
There's some progress on consolidation in Europe that
again when you talk about resilience kind of they're,
they're still a mid tier of kindof smallish network carriers in
Europe. And I think when I talk about
(09:36):
exceptions to the, the rule whenit comes to a strong financial
performance this year, that is often them that, that struggle
the most and are most impacted by some of these outside
factors. But in that regard, we've got
Turkish obviously a huge carrierinvesting in yeah, Europa.
And again, I would on that topic, I'd say Latin America has
been a a big theme among the network carriers in terms of
(09:57):
markets that have really performed well for them this
year. And I Turkish are clearly seeing
that in a Europa who are big connectors from Madrid into
Latin America. In the last few days we've had
Pegasus taking on smart wings, really interesting development
in the low cost market. I won't say too much on that
because it's got to go through all of the the usual process.
And I think we know from the example of a Europa, for
(10:19):
example, that these things don'talways happen.
But that's really interesting. You know, Pegasus being another
Turkish carrier and looking further into Europe, I guess for
for its growth, that will be 1 to watch if it goes through.
And of course talking about those mid tier network carriers,
we've got TAP Air Portugal's privatisation process under way
(10:40):
and the big three kind of European groups interested
there. So again, I guess that does feed
into resilience. I think these bigger kind of
airline groups that emerge from from these processes are
naturally going to be stronger when they look to the
competition they face from NorthAmerica and obviously looking to
Asia as well. And yeah, when you look at
growth levels as well talking about capacity, I think they're
(11:02):
pretty much down to organic levels.
Obviously in the post COVID period we had some pretty eye
watering capacity growth figuresin passenger and cargo side, but
they're now kind of moderating back down to you know, 4-5
percent sort of level particularly looking into 2026.
So when we put that against the backdrop of the whole global
industry being thousands of aircraft short of where it, it
(11:24):
would have been, that kind of structural advantage of having
lower capacity in the market is going to continue to be a factor
in 2026. And as I said before, that is a
big benefit to the incumbent carriers who have the the little
capacity that's available. So yeah, I think a better than
expected year. I'd sum it up as and you know,
(11:47):
some challenges going into 2026.As it stands, I think there's
not too much concern if things stay as they are.
And that is obviously a huge if in in today's world.
But you know, that's what I'd say today.
Howard, going back to January, with the announcement of tariffs
by President Trump, what sort ofimpact do they have on travel
within the Americas and did theyslow demand for air travel?
(12:09):
Yeah, so the tariffs have definitely been a big deal in
the Americas. The Trump administration has
been pretty openly hostile to certain countries, including our
closest neighbours. His rhetoric toward Canada,
threatening to make it the 51st state and calling former
President Trudeau governor thesethreats to annex the second
largest country in the world, those words have definitely
(12:31):
mattered for airline businesses in the Americas in particular.
Travelled from Canada to the US,dropped pretty remarkably at the
beginning of the year when Trumpwas really focused on Canada and
Greenland. So carriers like an Air Canada
and West Shed and Porter Airlines and Flair, their low
(12:51):
cost carrier, they all said thattraffic to the US was suffering
and the numbers show that maybe that has eased up a bit.
Capacity from Canada to the US has rebounded somewhat, but it
is still lower than all those carriers expected when the year
began. This has been a big drag for for
those airlines, but it has been pretty interesting.
(13:13):
We have seen Canadian airlines look elsewhere.
Over the summer, Air Canada and WestJet went really big on
transatlantic flights and also to a lesser extent, flights to
Asia Pacific. More recently, with the colder
mutts kind of setting in, they have gone pretty hard after sun
destinations in the Caribbean and Central America and South
(13:36):
America. So they've sort of pivoted away
from the classic US vacation spots.
They're flying fewer flights to Florida and Vegas and and
they've focused resources farther South.
The story is pretty much the same in Mexico.
Carriers such as Aeromexico and Volaris and Viva have all said
(13:56):
that the visiting friends and relatives market, which
concentrates on Mexico to US travel.
That has been down throughout 2025, though again there has
been a little bit of a rebound compared with earlier in the
year. In recent months, Mexican
airline executives have directlycited the Trump administration's
rhetoric on immigration and his deportation scheme as the likely
(14:20):
cause for the dip in demand. Elsewhere in the Americas, Latin
American carriers generally say that demand for international
flights to the US has been a little bit softer than usual,
though not dramatically so, while flights to Europe have
been totally gangbusters, just really high demand there.
(14:40):
And this is without even mentioning how travel within the
USA has been suppressed. Domestic demand has been lower
throughout the year, with a bit of an uptick in the past couple
of months. It was really big drag on major
US carriers through April and May.
Now we just had the the highest number of air travellers on a
single day in the US the Sunday after Thanksgiving.
(15:02):
So obviously people are still moving around during those peak
periods of travel. What we're seeing is that in the
off peak periods, times where demand traditionally isn't very
high, people aren't flying nearly as much.
And this is particularly showingup in the main cabin of airlines
with economy seat sales. So it seems like people who
(15:23):
don't have as much money as the business travellers, basically a
lot of those people have stayed home in 2025 or minimise their
optional leisure travel. This has been a big deal for the
low cost carriers in particular.Basically none of them have had
a great 2025 from a financial standpoint and the sagging
(15:43):
domestic demand has been a big factor.
Airlines on their Q3 calls were talking about an Inflexion point
where it seemed like some consumers were purchasing
tickets again. But overall, carriers like
American and Southwest, which have a lot of exposure to the
domestic U.S. market, they felt this dip pretty dramatically.
(16:03):
And for the ULCCS like Spirit and Frontier and Allegiant, this
has been a really difficult period.
So Spirits struggles, of course,have been a top airline
storyline of the year, though their struggles do extend beyond
this recent demand dip. All of those carriers are
reworking their networks and sort of repositioning themselves
(16:24):
as a result of the new demand environment.
And I will say it's kind of unclear if lower domestic demand
in the US is really the result of anything Trump has said or is
saying. It seems more likely that people
with lower incomes are generallystruggling to afford everyday
things and air travel is seen asless of a necessity.
But when you take a look around North and South America, I'd say
(16:47):
the town coming from DC has definitely had a big impact on
airline businesses this year. And Alfred, what was the impact
of the tariffs in Asia Pacific? In Asia Pacific, it's a, it's a
little bit of a different story here.
I mean, initially when Trump announced the tariff policy,
there definitely was a lot of concern and you know, not just
because the fact that most or quite a number of Asia Pacific
(17:08):
nations here are among the otherstates by the tariffs.
I think there was a lot of concern that, you know, this
impact travel demand, especiallyto and from the US.
That was the concern of the North Asian carriers like you're
in Japan Airlines in a Korean Air.
But then as as the months went on, you know, we were starting
to see that that was not really the case for many of the
operators. And this is kind of reflected
(17:29):
also in their financial, in the financial results that you have
operators like Japan Airlines onupon Airways, Korean Air,
Singapore Airlines, they all have noted that they were
cautious and they were concernedthat the tariffs would impact
travel demand. Then their results, I mean they,
they turned the profit I think in the first two quarters of
this year. So in some ways the tariffs
(17:51):
didn't really quite impact travel demand.
However, there is still quite a large degree of caution from
from the airlines in this region, especially so when you
look at China, US, the trans Pacific market between mainland
China and the US. Now that's kind of the only spot
in the region that still remainsquite weak.
And that's a mix of slower international recovery from
(18:14):
China, but also geopolitics, youknow, with Trump's rhetoric
about China and his toughest stance on immigration.
However, having said that, it's not really the case for
operators in countries around orregions around China.
So for example, just recently, Cathay Pacific was telling me
that transit traffic between mainland China and the US via
(18:36):
Hong Kong is still in very high demand. 2 reasons #1 There's
still quite a bit of travel demand.
And also, and it's also a resultof the fact that Chinese
carriers and to some extent the US carriers are not mounting as
much flights as they used to prepandemic direct flights between
the US and China. So I mean, in, in sort of a
nutshell, the impact of the terrorists on the Asia Pacific
(18:58):
airline sector has not been as severe as they feel that it
might be. But there is definitely a lot of
caution. And given the kind of
uncertainty that, you know, President Trump is known to
have, I'm I'm sure the airlines are closely watching what's
coming up next. And they would definitely be
sure to respond in whatever way they can.
So we know that the supply chainis still recovering post COVID.
(19:21):
Alfred, have we seen delivery delays curbing capacity growth
in Asia Pacific? Yes, Amber.
So I mean, among Asia Pacific carriers, you know, one of the
key things that sort of triggersa lot of airline leadership in
this region is supply chain issues.
And if you ask, you know, any ofthe major operators, this is
probably one of the biggest challenges that they'll tell
you. And you know, you have airlines
(19:42):
from all the way from Australia,New Zealand, all the way up to
Japan and even into India as well.
They've all publicly reflected these the supply chain
challenges, not just in terms ofdelivery training, but also in
terms of like engine reliabilityissues, a longer MRO times and
all that. These these issues have sort of
impacted the rate at which they intend to grow.
(20:04):
One example that I can cite, I mean is the civil Pacific from
the Philippines. I mean their airline leadership
has been very public about the engine reliability issues that
they based on their Airbus AP thinking new.
Aircraft that are powered of course by the Front and Whitney
PW1100G Turbo fans. So they've been quite public
about those issues. And they most recently said, I
(20:26):
think in the earnings call that the number of aircraft that is
on ground awaiting maintenance or awaiting cheques and all that
is much higher than the forecast.
And I think on previous occasions they've also spoken
about the frustration of having clarity as to when this engine
reliability issue or when this entire issue is going to be
resolved. I think the latest timeline that
(20:47):
they they mentioned I think is 2028.
So that's, you know, still at least another two more years to
go before this entirely sort of clears itself.
And then of course, another carrier being quite a big
impact. I think financial impact even is
here in New Zealand, in New Zealand, I think in October they
said that they forecast their full year earnings.
That's the year to June 2026. They expect to report their
(21:13):
first loss since 2021. So and that's a mixture of
issues. But I think one of the the key
issues that they that they talk about was that of engine
reliability issues. Now they also have issues with
the part of mini engines plus they also have engine issues
with the Rolls Royce trend that's on their Boeing 787
fleet. So that's kind of like a double
whammy that they have. And I think they're taking I
(21:33):
think a quite a big financial hit on the number of acre
they're being grounded. I think it's up to 11 at a time.
And like Civil Pacific, they're also saying that they're not
getting any kind of clarity in terms of when this issue is
going to be resolved. And you know, for airlines, not
having that sense of clarity effects forward planning.
And you can't sort of anticipatethe amount of capacity that
(21:54):
you're going to be putting into your system, say for the next
quarter or two quarters down theroad because you're not sure
when this aircraft is going to be back from grounding and all
that. So I think that's a challenge.
That's quite a key challenge, I think.
So that's one reliability issues.
And then on delivery delays, youknow, you have major players in
this region like separate airlines, A&E all facing delays
in terms of getting new aircraft.
(22:16):
One of the biggest I guess delays they're facing is the
cost in Boeing's 777X programme on you.
The programme has quite a numberof major customers in Asia.
So you have all the Porn Airways, Cathay Pacific,
Singapore Airlines, These are some of the major customers in
this region. And that's been sort of quite a
growing quiet frustration, if you, if I can put it that way,
(22:38):
that the delivery timeline of the service entry of the 777X is
constantly getting delayed. So Singapore Airlines in the
past had said that they would beintroducing sort of brand new 7
products for first business, premium economy and economy on
the 777X. And that was, of course, working
on the assumption that 777X willbe kind of entering service
around from this period of time.Now we know that the 777X is
(22:59):
simply for I think at least so 2627.
And so that's sort of impacting the the service entry of their
new cabin products, which is then sort of forced them to read
the design of that new cabin product and retrofit their
existing a 350 fleet with this new long haul cabin products.
Of course, at the end of the day, the long haul cabin
(23:19):
products will still go in the service through the 777X.
But you know, if you have sort of planned up to this point that
you wanted to debut your new products on brand new act of
time, having a delivery delay like that is not exactly kind of
the best look. So I guess these are sort of the
supply chain issues that have been in a way haunting the Asia
(23:39):
Pacific region. And of course, these are not
new. These these issues have been
raised again and again year after year.
When I speak to like airline CE OS and all that, they constantly
say that, you know, it's taking too long.
The aircraft in the MRO shops were too long.
I'm waiting too long for new aircraft and, and all that.
So that's kind of the extent of what the supply chain is for
(24:00):
Asia Pacific carriers. And Lois, what were the biggest
challenges that emerged in Europe this year?
I mean including and beyond the collapse of some airlines,
including play quite recently. Yeah.
So as you say, there have been closures, there have been
challenges at individual airlines.
I think when we look over the year, this isn't a new thing,
but I talk about the supply chain effect on aircraft
(24:22):
availability. Now that is a real double edged
sword. Of course, it does mean that
incumbents are facing less competition, but it is a
headache and it obviously it doesn't just affect new aircraft
deliveries. It's a huge theme.
IATA flagged it again at the global media day as Willie Walsh
said that every airline CEO is complaining about it.
(24:42):
It obviously is affecting the availability of engines, the
need for engines to be on the ground for longer.
And we've been over a lot of these, I think in previous
podcasts, MRO being slow, not having enough spare aircraft and
all these things make planning more difficult, obviously
because they create unpredictability which no
(25:04):
executive enjoys. For all the talk of obviously
Europe being the global leader of profitability etcetera.
And that doesn't mean everything's rosy.
As I say that supply chain challenge I think has got has
got years to run. I think you do hear some people
saying it's getting better, but I think for every time I hear
that, I then join a call or speak to someone who has a new
complaint about something not quite developing as positively
(25:26):
as they hoped. Whether that's the Pratt and
Whitney groundings, for example,or some of the kind of less than
optimal time on wing of of the newer engines, whether they're
from Pratt and Whitney CFM, etcetera, they're all very
widely covered. And obviously again on wide body
aircraft as well, they've been similar issues.
So the supply chain challenge, as I say, broadly supports
airlines to a degree if you're an incumbent, but it does also
(25:49):
create a lot of headaches and itwill be something that I think
that's got years left to run. I touched on sustainability
there as well. When we talk about European
airlines, this is I, I guess, globally, probably the region
that faces probably the most scrutiny in this regard from
governments and regulators. IATA is really clear and that
(26:10):
obviously they're speaking for airlines when they say this,
that they do not like the European Union's approach of
what they would say is stick rather than carrot regarding the
use of mandates for for SAF. Their argument is there's not
enough SAF for airlines to to meet these targets and that the
lack of development of the industry means that the SAF that
(26:31):
is available is expensive. And that's something to watch.
Obviously at the same time airlines in Europe face from the
emissions trading system in Europe face additional charges
there and obviously UK carriers face some charges from the UK
equivalent. There is a sense still in Europe
and if you go along to the airlines for Europe meetings
that that happen, which is kind of like the the lobby group for
(26:52):
the European airlines. They're very big on saying that
all of these these costs make them uncompetitive globally.
And as I say, obviously, broadly, they look very
profitable European airlines. But at an individual level,
these challenges do show up. And I think there's a feeling
that these costs are only going to go up because airlines are
going to use more SAF, the ETS requirement ramps up, etcetera,
(27:14):
etcetera. At the same time, you've got
CORSIA coming in as a global offsetting scheme and that
again, if you're already paying for ETS, for example, that's
more costs there. So that that's something to keep
an eye on. And it's started to affect
European allies more this year. As I say, it's something that
will only ramp up as it stands. And I think the the political
(27:35):
climate makes it even more interesting.
Obviously the US government has kind of gone a bit kind of full
climate denial, which really doesn't help, I guess with the
European airlines feeling a bit picked on by governments in
their region and kind of adds tothe their their argument that
they're being unfairly burdened.Yeah, when they see governments
(27:56):
elsewhere kind of rowing back a bit on the the climate stuff.
When I after a pressed on this, I think there's a general
feeling that the world is still trending towards addressing
climate change, thank goodness, and that airlines do need to
continue to take it seriously. So it may be the case that US
air to catch up eventually. You touched on some of the
(28:17):
challenges that airlines we knowplay failed in ice and we did a
whole podcast about that. I think there were some factors
that were unique to Iceland there.
It's not not an easy place to bea second carrier.
Some factors relating to the very fact that being a start up
carrier in Europe is difficult. You're up against some pretty
formidable competition. So yeah, they failed there.
(28:38):
We've also seen some issues likein the UK, we've seen Eastern
Airways Blue Island fail in in recent weeks in in the regional
kind of domestic carrier front. I think that's UK is known for
having some of the highest aviation taxes.
The APD being very high doesn't help the kind of regional
carriers in that regard. So that that's an interesting
(29:01):
trend in terms of some of the bigger carriers we've seen.
Whiz Air had a quite a tough year for a multitude of reasons.
It came out of COVID with groundplans to grow really quickly,
but that has kind of been derailed partly because of some
of the Middle East tensions and other factors.
And they keep saying they've turned the corner, but they
continue to have challenges. They were particularly hard hit
(29:23):
by the Pratt and Whitney engine issues as one of the early
adopters of that engine type, They had a particularly high
proportion of their fleet was affected by it.
So they've been, they've been hit by a number of of challenges
and you know, are operating in amarket where they go up against
Ryanair, which has been pretty bullish and enjoying some pretty
decent financials this year. So they've had a tough time.
(29:45):
They keep, as I say they keep saying, saying they've turned
the corner. I don't think anyone's thinking
this is existential for them. I think underlying there is a is
a strong business model with, with some of the better costs in
terms of the locals carriers in Europe.
So but one to watch. And again, this isn't from any
sort of knowledge I've gained anywhere, but I think the, when
we talk about consolidation in Europe, I think looking into
(30:07):
next year, I think it's worth keeping an eye on some of these,
the low cost carriers. We obviously in recent weeks or
so there were stories linking EasyJet with a sale.
So it's just something to keep an eye on I think next year.
But as I say, a tough one for Whizzair, but I think they,
they're, they're hoping they, they can look forward in 2026.
(30:27):
As I, I mentioned the transatlantic market as a
positive in the sense it wasn't the impact of some of the
actions of the Trump administration.
Some of the rhetoric was not as significant as expected, but we
have also seen in recent weeks and more recently US talking of
tightening entry requirements, potentially involving searching
(30:48):
your social media use etcetera. And IATA will often say they're
against anything that makes travelling harder, that kind of
makes it harder to cross borders.
And I think that would firmly fall within that.
So as I said, there has been some weakness in the economy
cast clabbing on transatlantic and I think if the US continues
to kind of introduce things likethat.
(31:10):
And also this general rhetoric towards Europe in recent weeks
would suggest it doesn't necessarily see European
countries as close to allies as it has in the past.
And all of this kind of feeds into the the idea that maybe not
as many people will want to travel from Europe to the US as
much so. And I think there is some data
(31:32):
backing that up. So I think we need to keep a
close eye on that. As I say, as much as there was a
sigh of relief that the early year impact of some of these
things wasn't great, I do think it continues to be a concern.
And also the US has introduced some travel bans recently, not
directly affecting Europe, but on travel for some countries,
again, you know, European carriers connect people from
(31:52):
Africa, Middle East, Asia into into the US, North America.
So that will have an impact. So again, I think the broad
trend on transatlantic travel isone of concern.
Regarding trends, even as I said, as I mentioned before, the
premium travel is holding up pretty well.
So a trend to watch. We'll also be keeping a close
eye on what's going on in Ukraine.
(32:13):
Clearly, European airlines have been significantly affected by
that. Obviously some very directly,
not least Ukrainian carriers, any airlines operating in the
vicinity. Russian carriers as well,
obviously stopped connecting to Europe, well, most of Europe
anyway. So the constrained airspace is
an issue that that conflict has created.
(32:35):
And not least obviously access to Asia is now much harder
because a lot of European carriers won't overfly, can't
overfly Russia. And also the airspace that is
still open gets gets a lot busier.
And then to the conflicts in Ukraine would would certainly
potentially bring some benefits when we look into next year.
But at the same time, it will beinteresting to see if there is
(32:55):
any kind of ceasefire. The obvious question is how
comfortable European carriers going to be overflying Russia if
peace is achieved. Yeah.
So it's a it's a theme, a theme to watch.
So, you know, there have been some vaguely positive noises
coming out of both sides about apotential agreement.
But at the moment it does continue to weigh on the region
(33:16):
quite a lot. So if there is no resolution, it
will continue to be a a quite a negative factor.
Obviously that carries always carries the risk of an
escalation as well. And we've also seen obviously
some drone activity around European airports that has
caused some disruption. So the longer this kind of
conflict goes on, the more likely we are to see things like
that as well. So it's a thing that could go
(33:38):
either way, I think. And yeah, when we just more
broadly looking at the the challenges facing European
airlines this year, we know Europe is a pretty mature market
in terms of most of it anyway. In terms of airlines, a lot of
the countries in Europe are seeing fairly anaemic GDP growth
and the airline industry's growth tends to track GDP.
(33:59):
It's quite a reliable indicator of where demand is heading.
So yeah, a lot of these airlinesaren't operating in markets
where there is kind of a lot of organic growth happening in in
the economies. So you know that that means the
opportunities for growth for airlines are somewhat
restricted. We know the consumer spending
power is concerned against that backdrop.
(34:21):
I don't think even though inflation has come down, it's
still quite high in a lot of markets.
So there was the initial kind ofburst of really high inflation
after the Russian invasion of Ukraine and that's fed through
to prices that inflation's come down, but it's still pretty high
in a lot of cases. So already high prices are going
up. Now a lot of airlines have tried
(34:41):
to reassure themselves that people still want to pay for air
travel. There's been some evidence that
people were prioritising in Europe are prioritising air
travel even when they've got less money for other things
because they kind of partly because they see some the more
value in it than they did beforeCOVID when they lost the ability
to fly for some for a period. But equally, I think some people
(35:03):
will say that economic reality will catch up with with airlines
in the end and with that demand in the end.
I don't think you know, something somewhat of a miracle.
I think if, if airlines could continue to to kind of work
counter to, to the economic trend so that that's something
to look out for, you know, equally a better economic
outlook, if that emerged then then we could see the opposite.
(35:24):
But yeah, certainly something that is, is, is of concern as we
head towards the end of the year.
And again, what is helping airlines so much is that
constrained capacity in that environment.
So no one's going to be adding, you know, 10s of percent to
European capacity next year. So there is some reassurance
there. And as I go back to, I think
that's where the degree of this so-called resilience is coming
(35:47):
from as well. So yeah, there are, I'm sure
there are more risks as well andmore negative developments this
year, but I would kind of put them into as the, as the main
ones. I it's not been a calamitous
year. It's not been a particularly
great year for some of these headwinds.
In some ways they've been improvements from what had come
before in the post COVID periods.
But I think in some ways the probably one of the major
(36:09):
concerns will be the the global economy and some of the the
shifting in terms of international relations that's
going on as well. And you know, as I will mention
again, European carriers, network carriers rely quite
heavily on the transatlantic market for a lot of their
profits. And anything that's going on in
in North America that that makestravelling hard or puts people
off travelling is going to goingto hit them.
(36:31):
So so yeah, things to be concerned about and we'll wait
and see what comes in 2026. And Howard, air traffic control
was a major issue in 2025, particularly in the northeast of
the US. Can you tell us about that?
Yeah, absolutely. It definitely has been one of
the main storylines in the United States this year.
(36:52):
Despite having one of the most robust airline industries in the
world, the technology supportingthe country's air traffic
control systems has has been decrepit for years or maybe even
decades. So airlines have been calling
for upgrades for a long time. And in fact the FAA spent about
10 years on an upgrade effort called NextGen.
(37:13):
And really that has just been kind of an ineffective mess.
But the the matter really came to a head with the PSA Airlines
collision with an Army helicopter at Rankin National in
late January. So this was the first fatal
accident involving AUS commercial airliner in more than
15 years, and it was a huge shock for US airlines.
(37:37):
It was not entirely unpredictable, however.
There had been warning signs flashing in the Northeast USA
for several years. The airports in New York and DC
and Boston have been highly congested and ATC staffing
levels have kind of struggled tokeep up with the traffic.
Newark in particular became a flashpoint this year.
(37:58):
They had multiple radar and communications outages that
caught the public's attention. And there were a number of close
calls involving runway incursions at airports
throughout the US. So there was this growing sense
that something could really go wrong, particularly at these
airports in the Northeast. The collision killed 67 people,
(38:18):
everybody on board the CRJ regional jet and the helicopter.
And it kicked off this effort from the Trump administration to
overhaul the country's ATC systems.
His big beautiful bill includes 12 1/2 billion dollars for
equipment upgrades including radar systems and
telecommunications. And his transportation secretary
(38:42):
Sean Duffy has been trying to turbocharge ATC hiring by
shortening the time it takes to become a controller and also
raising wages, along with some other incentives.
Then of course, we had the government shutdown in November
and that came at a really bad time for the whole ATC
recruitment effort. Controllers weren't getting
paid, and the whole thing shineda light on how difficult and
(39:05):
stressful the job can be. In fact, the system was so
strained during the shutdown period that the FAA mandated a
10% capacity reduction at 40 of the biggest airports in the US.
So it's sort of remains to be seen how this all shakes out in
terms of hiring more controllersand upgrading the system.
(39:25):
You know, whether the the ATC attrition of the shutdown period
has a big impact on staffing levels moving forward.
And really, we expect this matter is going to be, you know
it. It will continue being a big
storyline to follow into next year and likely through the end
of Trump's second term. And Howard, how have aircraft
orders and engine issues affected the airlines within the
(39:47):
Americas? Yeah, also a big deal in
Americas. We have seen some impacts from
delivery delays, aircraft delivery delays in in North
America earlier this year, United and Air Canada both sort
of quietly pushed back the expected delivery dates of their
first A 321 XLRS as Airbus has had some supply chain issues of
(40:11):
its own. But it's kind of funny, I would
actually say that for the US carriers in particular, they
haven't necessarily been all that mad about not getting their
jets on time. They were really ticked off when
they couldn't get enough jets and demand was surging in the
post pandemic period. But actually a few carriers have
(40:31):
been purposefully curbing growth.
So like JetBlue and Spirit and Frontier of all deferred
deliveries of Airbus narrow bodies to the end of the decade
and into the 20 thirties. So it's like kind of this
opposite phenomenon where they don't actually want as many jets
as they thought they would before.
In spirits case, they're going through a really dramatic fleet
(40:53):
reduction effort. They were likely going to end up
with half as big of a fleet as they used to have by the time
they're done. JetBlue and Frontier didn't take
the same sort of drastic action,but they have also purposefully
curbed growth as they try to sort of match their networks to
the current demand environment. And that has involved slowing
(41:16):
their fleet growth. So in North America at least, it
seems like they've sort of welcomed delays from the
airframers. Southwest is another example
where they weren't particularly concerned with Boeing delays
with kind of 1 stipulation. They for sure want their hands
on the the Max 7, which is the smallest variant in the 737
(41:38):
family. They've been really hurt by the
delay in FAA certification of that time.
They want to use the Max 7 to replace their older 7377
hundreds, which are good on shorter haul routes where you're
not carrying as many passengers.And that type of aircraft was
sort of critical to Southwest's enormous domestic network and
(42:01):
how they built that up. But of course, it is taking
years longer than expected to get the last two Max variants
certified. So Southwest definitely wants
those Max Sevens, but I don't think Southwest has been
concerned with generally slower growth.
And really this year has been has seen Boeing finally turn a
corner on their 737 programme. Airlines throughout their
(42:24):
Americas have said that they're getting their Max jets on time
or even sooner than promised with early deliveries.
But you know, Southwest has beenkind of been a similar boat as
the low cost carrier's Frontier and Spirit as well as JetBlue,
where they've kind of shrunk their network in order to grow
again. So this is all to say that I
don't think US carriers in particular would say that access
(42:47):
to new jets was a top line problem for them in 2025 like
Alfred was talking about. Really a a big issue for
carriers in the Americas in terms of access to equipment has
been engines. There are several carriers
including Velaris and Vivaaerobus in Mexico that have
really struggled with the GTF engine recall.
(43:10):
They've had dozens of grounded jets.
JetBlue has also felt the Pratt turbofan problems really
acutely, and so has Spirit Airlines.
In fact, they probably had it the worst among US carriers.
And they cited the GTF engines and their poor time on wing
performance as a major factor inboth of their Chapter 11
(43:31):
filings. So the engine recall was a big
part of their bankruptcies. In other words, on the wide body
side like Alfred was mentioning regarding the Trent 1000 engines
that power 787 Dreamliners, we've heard that from Abergroup
as well, which is the parent company of Goal and Avianca.
(43:52):
I had one of their executives tell me that acquiring Wamos
Air, the Spanish wet lease airline, has been a major factor
in their success in 2025 becausethey were able to use their A3
30s to backfill their grounded 787.
So they weren't necessarily expecting to wet lease to
(44:12):
carriers in their own group likeAvianca, but that actually
turned out to be a boon for them.
Latam also reports issues with its wide body fleet with engines
spending a lot of time off weighing, and we hear the same
from Azul in Brazil. So, more so than aircraft
delivery delays, engine durability and reliability have
(44:33):
been greater issues for airlinesin the Americas in 2025.
Alfred, looking ahead to 2026, what should we keep an eye out
for in Asia Pacific? In 2026, I think one of the one
of the continuing trends that we'll see is that travel demand
is going to continue. It's going to continue to be
strong. However, and I think IATA
(44:54):
alludes to this in it's latest outlook, there's going to be a
lot more growth in terms of in interregion but rather intra
region travel. So that's travels within the
Asia Pacific region. And I think that's sort of a
byproduct of #1 growing economicuncertainty.
Therefore people are working shorter grips and the intra
(45:15):
region there's still sort of medical travel demand to go
around with India and China bothleading growth.
So I think travel demand is going to be strong, but it's
going to be LED mainly by intra region, not so much by your
inter regions meaning to like Asia, Europe or Asia, North
America. Another thing I'm looking out
for in the New year is how the Indian market is bearing now.
(45:36):
The Indian market has been seen at least in the past one or two
years as kind of this huge growth engine.
And I think there's a lot of talk about it growing even
faster than perhaps even Chineseairline sector.
I mean, of course, the Indian carriers have massive aircraft
order boats. Now that sort of bullish
sentiment has sort of been heemed down a bit in 2025, you
(45:56):
know, with the very high profilecrash of the air I787, and then
more recently, I think the operational meltdown of Indigo,
which is the first India's largest carrier.
And so these incidents, these two incidents in 2025 sort of
put a dampener in terms of the Indian airline sectors growth
ambitions. And in 2026, I think I'll be
very curious to see, you know, whether or not the bullish
(46:18):
sentiment that we started 335 foot was to carry on or is there
going to be a bit more of a normalisation, Is there going to
be a bit more recalibration in terms of growth sentiment?
And Howard, same for the Americas.
What should we expect in 2026 from that market?
Well, I would say in North America in particular, we'll
probably see a continuation of what we've seen for years from
(46:41):
Delta and United, which has beenwhere they kind of steamroll
everyone else. I've started thinking of this as
kind of a microcosm of the US economy where the biggest
companies are running away with the profits in the market share
while everyone else falls behind.
American and Southwest had another disappointing year this
year just looking at their financial numbers and Delta and
(47:04):
United vacuumed at most of the profits again and I expect that
to continue in 2026 as their advantages seem really deeply
entrenched at this point. I'll also be looking for
acquisitions in the new year. I think the whole US airline
industry is curious what happenswith Spirit.
There are have been some pretty strong indications that they're
(47:26):
exploring an acquisition by another carrier.
Some likely targets include Frontier Airlines, which has
made several attempts to acquireSpirit in the past, maybe even
American Airlines as well, even though they're one of the
biggest US carriers and previousUS administrations might have
looked unfavourably at one of the biggest carriers getting
(47:48):
even bigger, there is some sensethat maybe the Trump
administration would look upon such a deal more favourably.
They also operate a lot of A320 family aircraft.
So there is a bit of a fit thereelsewhere in the Americas.
I'm curious to see whether Abergroup, which I mentioned
before, they they're the parent company of Avianca and Goal and
(48:10):
they are looking to acquire Sky Airline, which is based in Chile
and they also have a, an operation in Peru.
Abra is making an attempt to acquire that airline and kind of
grow their presence in other places in South America.
So I think those two things between a possible Spirit
acquisition and a possible acquisition of Sky Airline are,
(48:33):
are the two biggest things that I'll be watching in early 2026.
And Louis, you've spoken about how the Middle Eastern carriers
are well insulated against some of the geopolitical events in
the world and other economic headwinds that other carriers in
Europe are facing. But it's not perfect for the
Middle Eastern carriers. And what challenges are they
(48:54):
facing going into 2026? Well, I think, yeah, you touched
something there. The geopolitical thing is Middle
East obviously is notorious for tensions between certain
countries and no one would be counting their chickens on that.
You know, it may be a relativelybetter position than we have
been in recent months in the Middle East at the moment in
(49:16):
terms of tensions. But but yeah, it it it certainly
carries the potential for for something else to to happen
there. So, and you know, that said, the
Middle Eastern carriers are wellversed in this and the big
network operators that that willgenerate a lot of the profit in
that region are fully aware of that and are clearly won't be
planning, planning their networks, etcetera, too much
(49:39):
around regions and and airspace where that may come up again.
But it but it certainly is a risk and one that you know, has
gone up and down across 2025. So yeah, no one is going to be
making assumptions about where that's heading.
And I think I did touch on this a bit earlier, but with the the
Saudi carriers growing at a pace, we need to watch out for
(50:02):
the capacity impact there. It's also worth noting that a
lot of so Middle East and the, the big network carriers,
obviously India's a big market for them even though they are
somewhat restricted in how much capacity they can fly into that
market. But with the growth of India's
carriers, for example, that is amarket where you know with
(50:22):
Indigo adding wide body aircraftat the same time as Air India
growing quite aggressively, obviously a narrow bodies, a lot
of narrow bodies coming online at Cassarera as well.
There's quite a lot of local activity in India that could
mean that the local population is more drawn towards using
those carriers, perhaps with more point to point flying
rather than having to fly through the Middle East to get
(50:43):
somewhere. So that's a trend to watch.
That's a potential risk and thatwill ramp up in 2026.
I would just add the caveat thatthe IRTA AGM when, when I was in
Delhi in, in June, it was looking really positive for
India's carriers. I think they'd had a great
period leading up to that. It was all all about growth.
But you know very quickly with the AIR I787 crash not long
(51:07):
after that event and then in more recent weeks we've seen
Indigo having some huge operational challenges around
some of the new regulations around crew rest time, etcetera.
And suddenly I think a lot of the gloss has gone off there.
So again, that that's actually apotential positive for those
Middle Eastern carriers that rely on on that market for quite
(51:27):
a lot of their connections. So, yeah, that there are other
risks obviously for the Middle Eastern carriers, whether that
comes from the local carriers who are able to connect people
direct. But equally, I would say that,
yeah, there was a, a narrative during COVID that that no one
would want to fly through hubs anymore because because it's,
you know, you're doing essentially 2 flights to get
(51:48):
somewhere and just increases thechance of you being exposed to
something. And everyone will want to do
direct point to point flying. But that clearly is not the
case. You know, the big connectors are
doing pretty well generating profits.
As I said, there'll be the envy of so many other carriers.
And that whole narrative I thinkhas has not come to pass.
And I think that the hubs are performing pretty well and
(52:09):
they're still driving a lot of the the global airline industry.
So there's a lot of positive trends there, but there are
risks and ones we'll be keeping a close eye on next year.
Thank you so much for joining me, Howard, Alfred and Lewis on
this episode of Flight Global Focus.
It was a pleasure to chat about the 2025 and airlines.
Thanks so much, Amber. I appreciate it.
(52:30):
Thanks, Amber. Amber.
Flight Global Focus is your essential podcast for trusted
aviation insight. We publish new episodes twice
weekly. Join us on Friday for a concise
news briefing and on Monday for in depth analysis covering
airlines, defence and aerospace.Flight Global Focus is a
production of Flight Global withaudio editing by Lucy Johnson.
(52:53):
If you have any questions, comments, suggestions, or for
commercialopportunitiespleaseemailpodcast@flightglobal.comand more information can be
found in the show notes. Listeners can get a discount to
a new subscription to Fly Globalwith the code FG.
Podcast terms and conditions apply.
If you listen on Spotify, leave us a comment and let us know
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(53:15):
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