1 00:00:08,039 --> 00:00:11,240 Hi there, and welcome to Flight Global Focus, a podcast from 2 00:00:11,240 --> 00:00:14,600 Flight Global offering insight and analysis into the world of 3 00:00:14,600 --> 00:00:17,480 aviation. My name is Alfred Chua, the Asia 4 00:00:17,480 --> 00:00:19,280 Airlines editor at Flight Global. 5 00:00:19,280 --> 00:00:22,360 And joining me this week is Flight Global's Head of 6 00:00:22,360 --> 00:00:24,280 Airlines, Louis Harper. Hi, Louis. 7 00:00:24,440 --> 00:00:31,640 Hi, Alfred, good to talk to you. This week, we're going to be 8 00:00:31,640 --> 00:00:35,120 discussing what lies ahead for the global airline industry in 9 00:00:35,120 --> 00:00:37,720 2026. Now last year, we saw the 10 00:00:37,720 --> 00:00:41,000 industry show a degree of resilience against the number of 11 00:00:41,000 --> 00:00:44,120 headwinds, helped along by lower fuel costs. 12 00:00:44,400 --> 00:00:48,600 And then IATA also forecast in December that 2026 will see the 13 00:00:48,600 --> 00:00:51,880 global industry achieve its highest ever profit. 14 00:00:52,480 --> 00:00:56,040 But the first couple of weeks this year have provided a stark 15 00:00:56,040 --> 00:00:58,880 reminder of some of the geopolitical challenges that 16 00:00:58,880 --> 00:01:01,240 could escalate across the coming 12 months. 17 00:01:01,600 --> 00:01:04,599 Now, Louis, it's been quite an eventful start to the year, 18 00:01:04,599 --> 00:01:06,520 hasn't it? It certainly has, yeah. 19 00:01:06,520 --> 00:01:09,720 We're at the midpoint of January and it already feels like we've 20 00:01:09,720 --> 00:01:12,680 had a few months worth of geopolitical developments in 21 00:01:12,680 --> 00:01:16,520 2026, that's for sure. We know the global airline 22 00:01:16,520 --> 00:01:19,440 industry is particularly vulnerable to outside factors, 23 00:01:19,760 --> 00:01:22,400 but also, you know, many stakeholders will say it's been 24 00:01:22,480 --> 00:01:25,520 adapting well to absorbing the impacts of geopolitical 25 00:01:25,520 --> 00:01:29,360 developments in in recent times That will clearly be tested 26 00:01:29,360 --> 00:01:32,240 again in 2026. I think that much is clear. 27 00:01:32,560 --> 00:01:35,640 So I'm speaking on the the 15th of January. 28 00:01:35,880 --> 00:01:39,000 And it is also the case that while geopolitical tensions have 29 00:01:39,000 --> 00:01:42,920 risen so notably in the Middle East, we've seen a lot going on 30 00:01:42,920 --> 00:01:47,280 in Iran between NATO allies in what could be a big change to 31 00:01:47,280 --> 00:01:51,080 the world order, and in Latin America with the US as actions 32 00:01:51,080 --> 00:01:53,840 in Venezuela. I'd say despite all that, the 33 00:01:53,840 --> 00:01:56,520 global economy is not in bad shape so far. 34 00:01:56,520 --> 00:01:59,680 So it is showing it's own resilience in the face of 35 00:01:59,760 --> 00:02:03,160 geopolitical uncertainties. And we know that airline growth 36 00:02:03,320 --> 00:02:07,120 tends to track GDP trends. We also know that low fuel costs 37 00:02:07,120 --> 00:02:11,039 are a game changer for airlines. And so far in 2026, despite 38 00:02:11,039 --> 00:02:14,400 geopolitical developments, oil prices are still trending 39 00:02:14,400 --> 00:02:18,760 favourably for airlines. I mean, that said, there is 40 00:02:18,760 --> 00:02:21,640 clearly a tipping point where geopolitical developments begin 41 00:02:21,640 --> 00:02:25,240 to have a significant economic impact and potentially a more 42 00:02:25,240 --> 00:02:29,160 direct impact on airlines in terms of airspace restrictions, 43 00:02:29,600 --> 00:02:32,920 more markets becoming out of bounds, demand impacts, that 44 00:02:32,920 --> 00:02:35,120 kind of thing. But for now, while it's 45 00:02:35,120 --> 00:02:38,000 obviously a case that the red lights are flashing for airlines 46 00:02:38,000 --> 00:02:41,200 when it comes to assessing whether outside risks awaited to 47 00:02:41,200 --> 00:02:44,200 the downside or upside, I think there is still room for some 48 00:02:44,200 --> 00:02:46,360 optimism about the 12 months ahead. 49 00:02:46,600 --> 00:02:50,280 And not least because as we've talked about 2025 providing more 50 00:02:50,280 --> 00:02:54,280 evidence that people are prioritising air travel over 51 00:02:54,280 --> 00:02:58,280 other expenditure and in terms of real life examples of that 52 00:02:58,280 --> 00:03:01,120 playing out, the first major airline to report it's fourth 53 00:03:01,120 --> 00:03:04,720 quarter earnings in January is as ever, Delta Airlines in the 54 00:03:04,720 --> 00:03:06,880 USA. And they were pretty upbeat 55 00:03:06,880 --> 00:03:10,400 about the outlook for this year. So it's forecasting 5 to 7% year 56 00:03:10,400 --> 00:03:13,160 on year revenue growth in the first quarter. 57 00:03:13,480 --> 00:03:17,040 It cites a more balanced supply demand environment in the US 58 00:03:17,040 --> 00:03:20,440 following last year's pretty significant capacity cuts in 59 00:03:20,440 --> 00:03:24,440 some cases, and it anticipates full year capacity growth of 60 00:03:24,440 --> 00:03:29,480 about 3% after a lacklustre year for growth in 2025. 61 00:03:30,160 --> 00:03:32,760 Of course, Delta possibly isn't the best bellwether for what's 62 00:03:32,760 --> 00:03:36,200 going on in the wider US sector, given the divergent in 63 00:03:36,200 --> 00:03:39,120 performances among the country's airlines in recent years. 64 00:03:39,320 --> 00:03:42,840 And elsewhere, we've also had Korean Air report its Q4 65 00:03:42,840 --> 00:03:47,680 earnings already in 2026 and its outlook for the year and 66 00:03:47,760 --> 00:03:50,280 slightly more downbeat. I think it cites a weak local 67 00:03:50,280 --> 00:03:54,000 currency, softening outbound demand, increased global 68 00:03:54,000 --> 00:03:58,800 volatility and slowing economic growth at a global level as well 69 00:03:59,080 --> 00:04:03,000 and saying it needs to be more agile in 2026 to to deal with 70 00:04:03,000 --> 00:04:06,120 those factors. So another sort of less positive 71 00:04:06,120 --> 00:04:08,040 side of the coin there. OK. 72 00:04:08,040 --> 00:04:10,400 And I think as we get through earnings season, I think we'll 73 00:04:10,400 --> 00:04:12,440 kind of see a bit more of this kind of commentary. 74 00:04:12,720 --> 00:04:15,800 We can kind of get a clearer picture of what airlines think 75 00:04:15,800 --> 00:04:19,800 2026 will shape up to be like On the topic of supply and demand 76 00:04:19,800 --> 00:04:23,040 balance, Airlines are still operating with the, you know, 77 00:04:23,040 --> 00:04:24,760 constrained capacity in many markets. 78 00:04:24,760 --> 00:04:26,800 Is that right, Lewis? Absolutely. 79 00:04:26,800 --> 00:04:28,480 So we're just talking about delta. 80 00:04:28,480 --> 00:04:31,760 The US short haul market is perhaps a bit of an outlier in 81 00:04:31,760 --> 00:04:35,480 terms of having experienced excess capacity in the post 82 00:04:35,480 --> 00:04:38,640 COVID period. At the IATA global media day in 83 00:04:38,640 --> 00:04:41,920 December, Director General Willie Walsh again said that the 84 00:04:41,960 --> 00:04:45,000 the member airline chief executives continue to be 85 00:04:45,040 --> 00:04:48,600 incredibly frustrated by the supply chain challenges that 86 00:04:48,600 --> 00:04:51,400 mean they are not getting new aircraft quickly enough and that 87 00:04:51,400 --> 00:04:54,080 it's tough to keep their current aircraft in the air. 88 00:04:54,560 --> 00:04:56,720 From everything I've heard, we're we're not going to see a 89 00:04:56,720 --> 00:04:59,320 material improvement in that situation this year. 90 00:04:59,720 --> 00:05:02,800 There might be pockets of better news, but I think a lesson from 91 00:05:02,800 --> 00:05:06,720 2025 was that for every step forward in the supply chain 92 00:05:06,720 --> 00:05:09,320 challenge, there tended to be a step back. 93 00:05:09,600 --> 00:05:11,800 For example, you know, there were airlines that were more 94 00:05:11,800 --> 00:05:15,640 optimistic about an improving situation with their groundings 95 00:05:15,640 --> 00:05:18,680 caused by engines inspections earlier in 2025. 96 00:05:19,080 --> 00:05:22,200 And some were often disappointed later in the year when things 97 00:05:22,200 --> 00:05:25,040 hadn't improved quite as much as they'd hoped. 98 00:05:25,480 --> 00:05:29,080 One positive thing to talk about I think is that Boeing's 99 00:05:29,080 --> 00:05:32,640 improvements are continuing. Lots of CE OS talked about a 100 00:05:32,640 --> 00:05:35,760 really noticeable turn around from the airframer in 2025. 101 00:05:35,760 --> 00:05:38,280 So that's a positive. But there's so much ground to 102 00:05:38,280 --> 00:05:41,880 make up there that this remains a years long challenge. 103 00:05:42,920 --> 00:05:45,640 We also know that supply chain challenges are a double edged 104 00:05:45,640 --> 00:05:48,440 sword for airlines. In a previous podcast, I talked 105 00:05:48,440 --> 00:05:51,960 about how the passenger traffic achieved globally by airlines in 106 00:05:51,960 --> 00:05:55,960 2024 was about the same level that would have been achieved in 107 00:05:55,960 --> 00:06:00,320 2020 absent the global pandemic. And I think that quite starkly 108 00:06:00,320 --> 00:06:04,040 reflects the reality in the industry where according to 109 00:06:04,040 --> 00:06:07,760 IATA, it's about 5000 aircraft deliveries short of where it 110 00:06:07,760 --> 00:06:10,920 would have been without the supply chain challenges seen in 111 00:06:10,920 --> 00:06:14,040 recent years. And a consequence of that, that 112 00:06:14,040 --> 00:06:17,200 we've talked about before is that in many markets, capacity 113 00:06:17,200 --> 00:06:19,920 is tight and that's helping to support yields. 114 00:06:20,120 --> 00:06:23,360 So that's good for incumbent carriers and does help to shield 115 00:06:23,360 --> 00:06:26,080 the industry for some of the headwinds it has faced in the 116 00:06:26,120 --> 00:06:28,600 post COVID period. When we talk about that 117 00:06:28,600 --> 00:06:32,600 resilience, I think it needs to be framed, framed within that. 118 00:06:32,760 --> 00:06:36,680 And it's a real reason why load factors globally are are so high 119 00:06:36,680 --> 00:06:39,360 at the moment. But obviously on the other side 120 00:06:39,360 --> 00:06:42,200 of the equation, airlines are incurring costs by having to 121 00:06:42,200 --> 00:06:45,280 keep older aircraft for longer, and not least because they 122 00:06:45,360 --> 00:06:48,240 usually use more fuel. And because the supply chain 123 00:06:48,240 --> 00:06:50,800 challenges are creating uncertainty around planning, 124 00:06:50,920 --> 00:06:53,880 which means they're having to spend more on spare parts, spare 125 00:06:53,880 --> 00:06:57,240 engines and spare aircraft. And they're also tapping the wet 126 00:06:57,240 --> 00:06:59,880 lease market more often than they would like to. 127 00:07:00,320 --> 00:07:04,000 And that can be expensive. So supply chain challenges, 128 00:07:04,000 --> 00:07:05,200 definitely a headache for airlines. 129 00:07:05,200 --> 00:07:08,040 Don't expect to huge improvement this year. 130 00:07:08,360 --> 00:07:11,240 It does have some positive consequences at the same time. 131 00:07:11,240 --> 00:07:14,440 So I think it may be more of the same this year on that issue. 132 00:07:14,840 --> 00:07:16,640 Right. And you know, keeping older 133 00:07:16,640 --> 00:07:19,640 aircraft for longer, this kind of brings to mind as well the 134 00:07:19,640 --> 00:07:22,240 issue of sustainability. Now the older aircraft are 135 00:07:22,240 --> 00:07:24,840 making emissions targets harder to achieve. 136 00:07:25,240 --> 00:07:28,520 Talking about sustainability, do you think that we'll see kind of 137 00:07:28,520 --> 00:07:31,200 a breakthrough in terms of sustainability or you know, 138 00:07:31,200 --> 00:07:32,560 among the airline sector this year? 139 00:07:33,200 --> 00:07:35,480 I think it that seems unlikely at this point. 140 00:07:35,680 --> 00:07:38,800 We know the political backdrop to net zero has shifted in the 141 00:07:38,800 --> 00:07:42,000 past year or so with the rise of populist government. 142 00:07:42,000 --> 00:07:46,000 Some, you know, including in the USA, who are sometimes outright 143 00:07:46,000 --> 00:07:49,800 denying the the climate science. You know, some momentum for 144 00:07:49,800 --> 00:07:53,400 change in wider societies has been lost, undoubtedly. 145 00:07:53,600 --> 00:07:56,960 Now is that a kind of get out of gaol free card for the airline 146 00:07:56,960 --> 00:07:58,840 industry? I don't think so. 147 00:07:58,840 --> 00:08:01,800 And I, I don't think anyone, anyone sensible would would 148 00:08:01,880 --> 00:08:04,400 either, you know, any stakeholders who, who do 149 00:08:04,400 --> 00:08:07,480 understand the science will presumably want the industry to 150 00:08:07,480 --> 00:08:10,920 be on the right side of history. And we know the political wind 151 00:08:10,920 --> 00:08:13,120 can change quite quickly as well. 152 00:08:13,720 --> 00:08:17,280 So if we look at sustainable aviation fuel, which obviously 153 00:08:17,280 --> 00:08:20,960 remains the key driver towards net zero for the airline sector, 154 00:08:21,240 --> 00:08:25,280 progress continues to be slow. There's not yet any sign of the 155 00:08:25,280 --> 00:08:28,840 breakthrough towards the kind of exponential growth in production 156 00:08:29,200 --> 00:08:32,159 that some people predicted is likely to occur at some point. 157 00:08:32,440 --> 00:08:35,559 Putting some numbers on it, at it's annual media day in 158 00:08:35,559 --> 00:08:39,960 December, IRTA said that SAF output would reach 1.9 million 159 00:08:39,960 --> 00:08:44,560 tonnes in 2025, almost double the 1,000,000 tonnes produced in 160 00:08:44,800 --> 00:08:48,520 2024. However, this year the rate of 161 00:08:48,520 --> 00:08:51,280 growth is projected to slow, which is obviously not a good 162 00:08:51,280 --> 00:08:54,160 sign when we we look towards that kind of exponential growth. 163 00:08:54,440 --> 00:08:58,960 So output this year, IRTA is forecasting would be around 164 00:08:58,960 --> 00:09:03,240 500,000 tonnes, up year on year at 2.4 million tonnes. 165 00:09:03,800 --> 00:09:08,160 IRTA also points out that SAF production in 2025 represented 166 00:09:08,160 --> 00:09:12,160 only nought .6% of total fuel consumption of airlines. 167 00:09:12,720 --> 00:09:16,400 In 26, the figure is expected to reach nought .8%. 168 00:09:16,920 --> 00:09:21,280 And it it cites as ever the slow take up being a a consequence of 169 00:09:21,280 --> 00:09:25,040 the high price of SAF and the lack of policy support for its 170 00:09:25,040 --> 00:09:27,280 production. For example, his figures show 171 00:09:27,280 --> 00:09:30,960 that, you know, SAF prices exceed fossil based fuel by a 172 00:09:30,960 --> 00:09:35,240 factor of 2 and up to five in the markets where it's mandated. 173 00:09:35,240 --> 00:09:38,880 So you can really see that the cost difference there and we, we 174 00:09:38,880 --> 00:09:42,280 know fuel is a huge cost for airlines at the best of times. 175 00:09:43,000 --> 00:09:45,920 IASA continues to lament the European Union's approach of 176 00:09:45,920 --> 00:09:49,920 mandating SAF usage, saying that that just forces prices up and 177 00:09:49,920 --> 00:09:53,320 it prefers a carrot rather than a stick approach as you would 178 00:09:53,320 --> 00:09:55,520 expect an airline association to. 179 00:09:55,520 --> 00:09:59,320 I guess I think in that regard is is interesting and worth 180 00:09:59,320 --> 00:10:03,400 keeping an eye on China in 2026. Regarding SAF, I do feel like 181 00:10:03,400 --> 00:10:06,280 the tables have turned a bit and it feels like we might see more 182 00:10:06,280 --> 00:10:08,280 momentum on South from that country. 183 00:10:08,680 --> 00:10:12,080 The USA was in the spotlight under the Biden administration, 184 00:10:12,080 --> 00:10:16,480 in particular the IRA programme and the incentives that created 185 00:10:16,480 --> 00:10:18,760 for producers. But it feels like today there 186 00:10:18,760 --> 00:10:22,400 are more positive noises coming from China on the issue, and 187 00:10:22,400 --> 00:10:24,880 that obviously matters greatly because of the size of its 188 00:10:24,880 --> 00:10:28,000 market and the power it has on the world stage. 189 00:10:28,560 --> 00:10:31,880 Yes, and amid these uncertainties, can airlines 190 00:10:31,880 --> 00:10:34,480 still bank on passenger demand holding up well this year? 191 00:10:34,800 --> 00:10:37,240 Yes. So 2025 felt like the year of 192 00:10:37,240 --> 00:10:39,200 the premium cabin in some respects. 193 00:10:39,200 --> 00:10:43,000 We know that in many cases network carriers have managed to 194 00:10:43,000 --> 00:10:45,400 offset softness in the main cabin sort of on the 195 00:10:45,400 --> 00:10:49,200 transatlantic for example, with buoyant sales in the premium 196 00:10:49,200 --> 00:10:51,120 cabins. Not in every case, but in, you 197 00:10:51,120 --> 00:10:53,960 know, with a lot of the big players that that has been the 198 00:10:53,960 --> 00:10:56,640 trend. Will that continue in 2026? 199 00:10:56,640 --> 00:10:59,200 Quite possibly. There are certainly a lot of 200 00:10:59,200 --> 00:11:02,000 airlines banking on that, not least because they're investing 201 00:11:02,000 --> 00:11:04,960 in expanding and improving their products. 202 00:11:05,280 --> 00:11:08,120 The premium leisure market in particular has become really 203 00:11:08,120 --> 00:11:10,440 important. And ultimately, again, 204 00:11:10,440 --> 00:11:13,640 referencing that lack of capacity is likely to mean that 205 00:11:13,640 --> 00:11:17,440 airlines can still extract a lot of value from that sector in 206 00:11:17,440 --> 00:11:20,760 2026. I would say there are likely 207 00:11:20,760 --> 00:11:23,720 plenty of people who travel in economy who will be hoping for 208 00:11:23,720 --> 00:11:26,280 the year of the economy cabin at some point. 209 00:11:26,280 --> 00:11:30,080 I I think it's fair to say it's sometimes a neglected part of 210 00:11:30,080 --> 00:11:32,800 the product offering. In many cases it doesn't look 211 00:11:32,800 --> 00:11:35,320 drastically different from the offering 20 years ago. 212 00:11:35,640 --> 00:11:38,200 In fact, you could argue the changes have made since then 213 00:11:38,200 --> 00:11:41,600 have made the experience worse, including cramming more seats 214 00:11:41,600 --> 00:11:43,440 in. But maybe that's a discussion 215 00:11:43,440 --> 00:11:47,400 for another another podcast. I mean, broadly, I would go back 216 00:11:47,400 --> 00:11:49,880 to my comments regarding geopolitics and the economic 217 00:11:49,880 --> 00:11:52,080 outlook. We definitely live in a riskier 218 00:11:52,080 --> 00:11:55,320 world today, yeah, where it would not take much for consumer 219 00:11:55,320 --> 00:11:59,000 sentiment to dip enough for airlines to notice a significant 220 00:11:59,000 --> 00:12:01,680 softening in demand. But let's hope that's not the 221 00:12:01,680 --> 00:12:04,040 case in the coming 12 months. Yeah. 222 00:12:04,040 --> 00:12:08,480 And you know if if that doesn't come to pass, IATA reckons 2026 223 00:12:08,480 --> 00:12:11,440 will see the airline industry achieve a record profit, right? 224 00:12:11,640 --> 00:12:14,440 Yeah, In December, IATA's message on the airline 225 00:12:14,440 --> 00:12:19,240 industry's health going into 2026 was a relatively +1. 226 00:12:19,840 --> 00:12:22,640 It expects the industry to achieve its highest ever profits 227 00:12:22,640 --> 00:12:25,200 this year. As you say, European carriers 228 00:12:25,240 --> 00:12:28,400 have overtaken North American operators as the biggest 229 00:12:28,400 --> 00:12:32,760 contributors to that total is forecasting a an industry net 230 00:12:32,760 --> 00:12:39,480 profit of $41 billion in 2026, up from a forecast of 39.5 231 00:12:39,480 --> 00:12:44,200 billion in 2025. And and that forecast for 2025 232 00:12:44,560 --> 00:12:46,840 that it made in December, obviously we're still waiting on 233 00:12:46,840 --> 00:12:48,880 Q4 results. That's why it's still forecast 234 00:12:48,880 --> 00:12:51,760 in 2025. That was actually an upgrade on 235 00:12:51,840 --> 00:12:57,840 on the the forecast it made in June by $3.5 billion for 2025. 236 00:12:58,080 --> 00:13:01,560 It's seen a surprise strong performance from air cargo and a 237 00:13:01,560 --> 00:13:05,000 weaker U.S. dollar, which lowers costs for many airlines, 238 00:13:05,000 --> 00:13:08,200 obviously helping on the on the bottom lines there. 239 00:13:08,440 --> 00:13:12,320 So a kind of a a positive story there on the the cold hard 240 00:13:12,320 --> 00:13:14,080 figures. Obviously that within that 241 00:13:14,080 --> 00:13:16,360 there's lots of different experiences for airlines, but 242 00:13:16,600 --> 00:13:18,640 but a positive trend nevertheless. 243 00:13:19,400 --> 00:13:21,880 I think an interesting piece of context is you can you can look 244 00:13:21,880 --> 00:13:25,280 at a single big energy producer who might have been making 245 00:13:25,280 --> 00:13:29,280 profits sort of in the 30 billion, 40 billion zone on 246 00:13:29,280 --> 00:13:32,880 their own in 2024. So yeah, when airlines say that 247 00:13:33,040 --> 00:13:36,240 it's unfair to burden them with the costs of the SAF transition, 248 00:13:36,800 --> 00:13:39,440 I think there's a reasonable point they can make around, 249 00:13:39,760 --> 00:13:43,360 yeah, the entire industry only achieving a profit around the 250 00:13:43,360 --> 00:13:46,040 level that one energy producer might expect. 251 00:13:46,760 --> 00:13:49,000 Back to the the airlines themselves, as mentioned 252 00:13:49,000 --> 00:13:52,120 European carriers will contribute 14 billion of of 253 00:13:52,120 --> 00:13:56,640 global airline net profit in 26 IRTA is forecasting and that's 254 00:13:56,640 --> 00:14:00,400 versus 11.3 billion from North American carriers. 255 00:14:00,840 --> 00:14:03,520 European carriers were also ahead in IATA's forecast for 256 00:14:03,520 --> 00:14:08,600 2025 at 13.2 billion versus 10.8 respectively. 257 00:14:08,880 --> 00:14:13,040 That represents a shift from trends pre 2025 when North 258 00:14:13,040 --> 00:14:17,560 American carriers tended to be the profit leaders, a topic we 259 00:14:17,560 --> 00:14:20,360 talked about before. Walsh and IATA really keen to 260 00:14:20,880 --> 00:14:24,360 highlight the tight margins that airlines experience. 261 00:14:24,360 --> 00:14:26,920 And I go back to the point I made about energy producers. 262 00:14:27,320 --> 00:14:31,480 Yeah, with the forecast 2026 global net profit equating to a 263 00:14:31,480 --> 00:14:36,120 Net margin of 3.9%, which would be below the pre COVID high of 264 00:14:36,120 --> 00:14:38,800 5%. And there's a big dichotomy of 265 00:14:38,800 --> 00:14:42,080 performance by region as well when you get into the margins. 266 00:14:42,080 --> 00:14:45,600 So they use a per passenger figure and there's some really 267 00:14:45,600 --> 00:14:47,240 stark differences. So you look at the Middle 268 00:14:47,240 --> 00:14:50,920 Eastern carriers in the forecast, their profit per 269 00:14:50,920 --> 00:14:54,480 passenger in 26 is forecast at 28.6 dollars. 270 00:14:54,960 --> 00:14:59,320 That's versus 10.9 dollars in Europe and 9.8 in North America. 271 00:14:59,840 --> 00:15:02,200 And at the other end of the range, African carriers are 272 00:15:02,200 --> 00:15:06,080 expected to achieve a profit per passenger of just one point $3. 273 00:15:06,480 --> 00:15:10,680 And it creates a global average of 7.9 dollars, which would be 274 00:15:10,680 --> 00:15:13,960 roughly flat year on year. And to give it a bit more 275 00:15:13,960 --> 00:15:18,200 context, IATA likes to point out that that kind of seven point $9 276 00:15:18,200 --> 00:15:21,240 figure isn't much more than you you would pay for a cup of 277 00:15:21,240 --> 00:15:24,240 coffee I think in plenty of places in the world today. 278 00:15:24,240 --> 00:15:26,880 So a good sort of headline figure in terms of 279 00:15:26,880 --> 00:15:28,960 profitability. But when you look under the 280 00:15:28,960 --> 00:15:31,960 bonnet as it were, there's plenty of tight margins and 281 00:15:32,080 --> 00:15:36,040 challenges potentially when we talk about how geopolitics might 282 00:15:36,040 --> 00:15:38,880 affect demand etcetera. And that's when those those 283 00:15:38,880 --> 00:15:42,920 tight margins might get exposed. And you know, sort of just 284 00:15:42,920 --> 00:15:46,520 staying within the topic of of the different regions in the 285 00:15:46,520 --> 00:15:49,720 world, you know, what are some of the talking points in some of 286 00:15:49,720 --> 00:15:51,400 these big airline regions that you're? 287 00:15:51,400 --> 00:15:54,480 Looking at, yeah, I think in in North America eyes will be on 288 00:15:54,480 --> 00:15:58,640 the the low cost sector in the the USI think we know Spirit 289 00:15:58,640 --> 00:16:04,000 Airlines going through it's 2nd Chapter 11 proceedings and the 290 00:16:04,080 --> 00:16:06,960 fortunes of other operators in, in that, that that area of the 291 00:16:06,960 --> 00:16:10,080 market will be really keenly watched as well as they all 292 00:16:10,240 --> 00:16:13,800 continue to adjust to that tough operating backdrop. 293 00:16:14,160 --> 00:16:16,920 Obviously already 2026 has given us a really interesting 294 00:16:16,920 --> 00:16:20,680 development in that sector with Allegiant moving to buy some 295 00:16:20,720 --> 00:16:24,040 country and that's a piece of news I'm sure will cover in more 296 00:16:24,040 --> 00:16:28,040 depth on another podcast. As mentioned earlier, I think 297 00:16:28,040 --> 00:16:31,800 network giants Delta and United have a noted kind of financial 298 00:16:31,800 --> 00:16:35,440 divergent in their performance versus that of other carriers in 299 00:16:35,440 --> 00:16:37,520 the USA. And it will be really 300 00:16:37,520 --> 00:16:39,880 interesting to see if that continues this year. 301 00:16:39,880 --> 00:16:43,400 And I think at the moment bets would be that it most likely 302 00:16:43,400 --> 00:16:47,160 will even if there is some improvements from from some of 303 00:16:47,160 --> 00:16:49,400 their peers. I think there will also be 304 00:16:49,400 --> 00:16:54,040 scrutiny of US tourism data amid some signs of weakening demand 305 00:16:54,040 --> 00:16:57,280 for travel to the country, not least since the administration 306 00:16:57,280 --> 00:17:01,680 of President Donald Trump began to issue travel bans talked 307 00:17:01,680 --> 00:17:05,280 about scrutiny of social media postings for visitors. 308 00:17:05,760 --> 00:17:08,560 And I think in the last 24 hours or so, there was also block on 309 00:17:08,560 --> 00:17:11,880 on working visas from dozens of countries as well. 310 00:17:11,880 --> 00:17:15,319 So I think the the US government's ramping up a 311 00:17:15,319 --> 00:17:18,839 rhetoric against it's nearest neighbours, Canada and Mexico is 312 00:17:18,839 --> 00:17:22,680 also not obviously creating the best environment for encouraging 313 00:17:22,680 --> 00:17:26,000 travel and trade between them. And I think, yeah, broadly, we 314 00:17:26,000 --> 00:17:28,760 all know that anything that makes travel more difficult or 315 00:17:28,760 --> 00:17:32,120 gives people pause for thought before travelling is, is bad 316 00:17:32,120 --> 00:17:35,200 news for airlines. So, so that's a trend to keep a 317 00:17:35,200 --> 00:17:37,360 close eye on. Obviously as I talked about 318 00:17:37,360 --> 00:17:41,160 earlier, it didn't seem to be overly concerning Delta and its 319 00:17:41,160 --> 00:17:44,280 outlook for the year, but certainly it can't be ignored as 320 00:17:44,280 --> 00:17:48,440 a potential headwind in Europe and as I said, which is forecast 321 00:17:48,440 --> 00:17:52,600 to be the leading global profit generator in 25 and 26. 322 00:17:52,760 --> 00:17:55,680 I think consolidation is a key theme as we move through the 323 00:17:56,000 --> 00:17:58,840 shrinking number of mid sized national airlines who aren't yet 324 00:17:58,840 --> 00:18:01,800 part of one of the big three airline groups. 325 00:18:02,040 --> 00:18:06,040 TAP Air Portugal will be among the focus carriers in in that 326 00:18:06,040 --> 00:18:09,440 regard and who knows we might even see some movement in the 327 00:18:09,440 --> 00:18:11,880 low cost sphere. I think that'll be interesting 328 00:18:11,880 --> 00:18:16,200 to watch as there are a few sort of medium big size players there 329 00:18:16,200 --> 00:18:19,880 and stakeholders do see that as carrying potential for 330 00:18:20,240 --> 00:18:23,360 consolidation. I think towards the end of last 331 00:18:23,360 --> 00:18:26,560 year, Turkish carriers, so Turkish Airlines and Pegasus 332 00:18:26,560 --> 00:18:30,200 were significant movers in European consolidation with our 333 00:18:30,200 --> 00:18:32,360 Europa and Smart Wings respectively. 334 00:18:32,560 --> 00:18:35,200 So that that's the theme to watch in 2026, what they're 335 00:18:35,200 --> 00:18:37,680 going to do with those beyond consolidation. 336 00:18:37,680 --> 00:18:41,360 I think the performance of the key transatlantic market will be 337 00:18:41,360 --> 00:18:44,640 closely watch by year. It's big airline groups amid the 338 00:18:44,680 --> 00:18:46,680 geopolitical turmoil we've been seeing. 339 00:18:47,040 --> 00:18:48,960 And I'm looking forward to hearing from, you know, 340 00:18:48,960 --> 00:18:53,000 Lufthansa, Air France, KLM and IAG on on how that's going when 341 00:18:53,000 --> 00:18:55,680 they report their earnings in the coming weeks. 342 00:18:56,360 --> 00:18:59,240 In Asia Pacific, India's biggest carriers will be aiming for 343 00:18:59,240 --> 00:19:03,040 better headlines. I think in in 20262025 saw 344 00:19:03,200 --> 00:19:06,760 various challenges at, you know, the biggest carrier Indigo, 345 00:19:07,240 --> 00:19:09,840 including an operational meltdown towards the end of the 346 00:19:09,840 --> 00:19:12,000 year. Obviously there was the crash of 347 00:19:12,000 --> 00:19:15,920 the Air India Boeing 787, which happened not long after Delhi 348 00:19:15,920 --> 00:19:18,200 had hosted the IR to AGM in June. 349 00:19:18,440 --> 00:19:21,160 And I think that that that crash was clearly one of the darkest 350 00:19:21,160 --> 00:19:24,400 moments of 2025 for the global industry. 351 00:19:24,720 --> 00:19:28,240 Reports in early 2026 suggests that Air India might be looking 352 00:19:28,240 --> 00:19:31,840 for a new chief executive as it seeks a a kind of leadership 353 00:19:31,840 --> 00:19:34,480 reset. So I think it's fair to say 354 00:19:34,480 --> 00:19:37,680 there's some stories to play out there before before India is 355 00:19:37,920 --> 00:19:40,720 back on track. China's big carriers as well 356 00:19:40,720 --> 00:19:42,720 will be hoping for a better year financially. 357 00:19:42,720 --> 00:19:45,800 I think there were some signs things were improving in that 358 00:19:45,800 --> 00:19:50,280 regard towards the end of 2025. They've kind of been outliers 359 00:19:50,280 --> 00:19:53,160 from, from when you look at the biggest airline groups globally, 360 00:19:53,440 --> 00:19:56,760 how they've been performing financially, the the Air China, 361 00:19:56,760 --> 00:19:59,920 China East and China Southern to various degrees kind of stand 362 00:19:59,920 --> 00:20:02,840 out in, in terms of the, the weakness of the profits. 363 00:20:02,840 --> 00:20:05,960 They've been reporting, you know, amid A tricky emergence 364 00:20:05,960 --> 00:20:09,960 from the, the COVID-19 crisis in financial terms. 365 00:20:10,000 --> 00:20:12,760 But you know some better signs there, and we'll be keeping a 366 00:20:12,760 --> 00:20:16,000 close eye on that this year. In Latin America, we'll 367 00:20:16,040 --> 00:20:19,040 obviously we'll be looking closely at Brazil's market, not 368 00:20:19,040 --> 00:20:22,520 least because the IR to AGM is due to be held in in Rio in 369 00:20:22,520 --> 00:20:24,760 June. We've got Azul's emergence from 370 00:20:24,760 --> 00:20:29,040 Chapter 11 to come. Any consolidation moves that 371 00:20:29,040 --> 00:20:32,000 might develop as a result of that or or elsewhere in the 372 00:20:32,000 --> 00:20:34,360 region. Obviously Abra Group growing and 373 00:20:34,360 --> 00:20:38,560 in Sky Airline last year. So lots of interesting stuff 374 00:20:38,560 --> 00:20:41,800 going on in that region. When we broaden out to look at 375 00:20:41,880 --> 00:20:44,560 the Caribbean as well. I think our eyes will be on the 376 00:20:44,560 --> 00:20:47,520 airspace and demand implications if if there's any further 377 00:20:47,520 --> 00:20:51,280 military activity from the USA after it's moves in Venezuela 378 00:20:51,280 --> 00:20:53,480 earlier this year. In the Middle East, there's 379 00:20:53,480 --> 00:20:57,120 obviously so much going on. We reported from the the Dubai 380 00:20:57,120 --> 00:21:00,880 Air show, busiest show I've ever seen in terms of just people on 381 00:21:00,880 --> 00:21:05,320 the ground, but also you know lots of big orders focused on on 382 00:21:05,320 --> 00:21:08,720 the region's airlines there. We know that Saudi Arabia is 383 00:21:08,720 --> 00:21:13,040 kind of probably one of the the biggest focuses for for airline 384 00:21:13,040 --> 00:21:15,960 growth in terms of, you know, existing carriers adding 385 00:21:16,400 --> 00:21:20,680 aircraft and you know, start up carriers really trying to drive 386 00:21:20,680 --> 00:21:24,760 tourism into that market and potentially creating a more hub 387 00:21:24,760 --> 00:21:28,760 activity in competition to the the the big hub players in that 388 00:21:28,760 --> 00:21:31,280 region. We know Emirates continues to be 389 00:21:31,280 --> 00:21:33,640 pretty formidable. It's the the biggest profit 390 00:21:33,640 --> 00:21:35,560 generator I think of any airline globally. 391 00:21:35,920 --> 00:21:39,320 Well, it was in 2024 anywhere and I'm sure it looked to be on 392 00:21:39,320 --> 00:21:43,760 tracking 25 as well. So, yeah, the Middle East is a 393 00:21:43,760 --> 00:21:46,680 big engine of growth. But obviously, as we've touched 394 00:21:46,680 --> 00:21:50,040 on a bit in this episode, the geopolitical challenges in the 395 00:21:50,040 --> 00:21:53,680 region always kind of of hangover that when the airline's 396 00:21:53,680 --> 00:21:56,720 looking at at risks and bit of an inauspicious start in that 397 00:21:56,720 --> 00:22:00,400 regard to 2026. So we'll be keeping a close eye 398 00:22:00,400 --> 00:22:03,480 on things there. Finally, in Africa, we've got 399 00:22:03,480 --> 00:22:05,800 familiar challenges at the biggest operators. 400 00:22:06,120 --> 00:22:09,040 It's not a market for the faint hearteds and that continues to 401 00:22:09,040 --> 00:22:11,520 be the case. In terms of specific stories 402 00:22:11,520 --> 00:22:13,560 we'll be keeping an eye on, we've seen a recent leadership 403 00:22:13,560 --> 00:22:16,920 transition at Kenya Airways and that'll be an interesting one to 404 00:22:16,920 --> 00:22:19,520 watch with what happens at that carrier in particular. 405 00:22:19,760 --> 00:22:22,880 I clearly can't cover everything that's that's going on, but I 406 00:22:22,880 --> 00:22:25,480 think those are some of the highlights and it's fair to say 407 00:22:25,480 --> 00:22:28,720 there's plenty for us to follow over the coming 12 months. 408 00:22:29,040 --> 00:22:31,880 Yep, that's plenty of things to look out for in the coming 12 409 00:22:31,880 --> 00:22:33,280 months. Thank you so much for your 410 00:22:33,280 --> 00:22:35,280 insights, Lewis. No problem, Alfred. 411 00:22:37,200 --> 00:22:40,400 Flight Global Focus is your essential podcast for trusted 412 00:22:40,400 --> 00:22:43,640 aviation insight. Join us for new episodes every 413 00:22:43,640 --> 00:22:46,440 week covering airlines, defence and aerospace. 414 00:22:46,760 --> 00:22:49,760 Flight Global Focus is a production of Flight Global with 415 00:22:49,760 --> 00:22:53,200 audio editing by Lucy Johnson. If you have any questions, 416 00:22:53,200 --> 00:23:00,120 comments, suggestions, or for commercialopportunitiespleaseemailpodcast@flightglobal.com 417 00:23:00,520 --> 00:23:03,160 and more information can be found in the show notes. 418 00:23:03,560 --> 00:23:06,440 Listen, rate, review, and subscribe wherever you get your 419 00:23:06,440 --> 00:23:07,120 podcasts.