CAPA State of the Industry | Dec 2025

Transcript

Jonathan Wober:Thank you, Marco. I was, I was interested that Stephen said that he felt like a fraud as a— or an imposter. It's nice to know that even the chief executive of large global companies have imposter syndrome. And in a sense, I kind of relate to that because I always describe myself as being an external observer of the aviation industry. I have never worked in the aviation industry. I have never worked in the aviation industry. worked in an airline, so I'm very much an outsider looking in, but I have been doing it for the best part of 3 decades, so I hope I'll be able to bring some very big-picture macro overview insights into the way I see the state of the industry currently. Now, those of you that have been to a number of CAPA events in the last few years will have seen me do this, and I usually call it 20 numbers in 20 minutes, but for absolutely no extra price, This time I'm going to give you 22 numbers in 20 minutes, so I've only got 19 minutes left now. You've got screens either side, so I'm going to stand in the middle so I don't block the view. Okay, so some of the topics I'm going to be touching on— 22 numbers in 20 minutes— are on the screen now, and what I'm going to try to do with all of this is just introduce some topics. We're going to get more detail in other panel sessions later on, If I touch on things which aren't in panel sessions, well, at least we've aired them. And I want you all to tell me as well when you see me in the breaks the numbers that I should have included and didn't include, okay? So this is not necessarily going to tell you everything there is to say. Let's get on with it. First number here, looking at traffic from IATA, most recent monthly traffic figures being for October this year, both passenger and cargo traffic, so RPKs and CTKs. Okay. We're up to 112% of the equivalent month of 2019. Still looking at the recovery from the pandemic. We've actually been above 100% on both passenger and cargo for the best part of 2 years. You could tell me, well, why are we looking at recovery from the pandemic? Well, because I think it's still important to gauge how far it's come. If you want to look at year-on-year growth, RPKs in the 10 months year to date, were up by 5.3%, and cargo ton kilometers were up by— what does it say there— 3.3%. So back to sort of fairly steady levels of growth year on year. Now moving on to capacity, and we can go much more recent because from OAG and CAPA numbers we've got this week's capacity in terms of seats around, around the globe. And again, looking at recovery from the equivalent week of 2019, The global average is up at 112.5%, so rounding that to 113%. And if we look at it region by region, Africa is up at 126%. You can see Latin America, Middle East, sort of mid to high 110-something percent. North America, 106. Asia— Europe, sorry, 105.6%. And Asia-Pacific down at the bottom at 102%. So still some regional variation. but all moving well ahead of, uh, of the 2019 levels. Uh, again, looking at recovery from the pandemic, but this time the number of jet aircraft in service globally, and this is straight from the CAPA fleet database. Um, the total is 110%. This was at the end of November compared with November 2019, 110%, and a total of more than 28,000 jet aircraft If we look at the different kinds of, um, of jets, narrowbodies are ahead at 117%, widebodies up there at 103%, but regional jets down at just 91%. So the recovery there has not been as strong. And then if I look at this same sort of question but a slightly different way around, this is the percentage of jets that are inactive, so parked or stored. as a percentage of the total, and this is how it's varied month by month since 2019. If you look back to 2019, there's a lot of lines here that— the sort of purple line is the total and the others are the different kinds of jets. So if you just look at the purple line, back in 2019 it was hovering around the 4% mark fairly steadily. Obviously it spiked significantly during the COVID pandemic and then fell very steadily and continuously until it started to hover around the 7% mark. It never got back down to 4%. Of course, there were all kinds of other issues that the industry was dealing with in terms of the supply chain and engine maintenance issues. There's aircraft that haven't been back in service. In September this year, it fell below 7% and is now down to 6%, so still above where it should be, you could say, but it is starting to come down again and hopefully will come down further. All right, again sticking with aircraft, this is the total number of deliveries by the 2 principal airframe manufacturers, Boeing and Airbus. So we have Airbus is the lighter blue and Boeing is the darker blue there. And if you look at the total expected deliveries for 2025 based on Airbus's own guidance, which has been 120 deliveries for the year. They've stuck with that guidance all year. It means quite a lot towards the end of the year, but let's stick with their number. Boeing hasn't been giving guidance on deliveries for quite a long time now, but analysts are projecting something in the region of 600. So add them up, about 1,420 for this year, but that level would be the level that was being delivered back in 2016. So we're talking about 9 years behind, if you like, in terms of deliveries. terms of the delivery totals. Deliveries were, were peaked actually in 2018 because, um, you know, it wasn't COVID. They started to fall in 2019 because of course Boeing had those problems with the MAX, and then it plummeted during COVID and the recovery has been inconsistent. So still some way to go before it picks up to where it should be, if you like. Um, and then a final slide on the aircraft, and this is the global backlog. So we have about 17,300 aircraft, commercial— this is commercial passenger aircraft, so not just jets, but all commercial passenger aircraft, about 17,300 in the global backlog, which is of course a record. And you can say rightly that this is a, this is a vote of confidence in the future of the industry, the fact that this many aircraft have been ordered and are waiting to be delivered. But it's going to take some time to get them delivered because production levels are lower than they arguably should be. So just dividing that backlog by the number of aircraft expected to be produced this current year, you get about 12 years' worth of production in the backlog, which has come down. Uh, previous year, end of 2024, it was about 14 years, but it's still at historically very high levels. If you look back to the period before the pandemic, there's a number of years where it was around the 9 years, that light blue line, 9 years in the production backlog, fairly steady. Um, it started to go up in 2019 when there was the Boeing problems, obviously spiked during COVID You could sort of almost ignore the spike during COVID but the trend is still up, um, compared to history. Starting to come down, hopefully continues to come down, and, and airlines will be able to get their aircraft a bit quicker than they're currently having to wait. Um, I guess you could call this a supply chain issue as well. This is the number of people that both Boeing and Airbus are forecasting will be needed to be recruited as new aviation personnel over the next 20 years. They both have a very similar forecast, so averaging them together, you get about 2.4 million new aviation personnel need to be recruited by 2044, round about 1 million of them, um, Our cabin crew, about— what is the number now? It's about 700,000, a bit over 700,000 technicians and around 650,000 pilots. Significant recruitment issues for the industry over the next 20 years. Narrowing down to a specific area of the labor force in aviation, number of women on the IATA board It's currently 3, and I hope we've got 2 of them either in the room or attending the event over the next day or 2. Now, that's not a very big number, but it goes— it's 3 times what it was 5 years ago, and it's an infinite improvement on 10 years ago. So it's moving in the right direction. And if I show you that as a percentage of the total IATA board membership, it's actually around 10%, which isn't a big number, but it's a sort of— it's a double-digit number, so it's becoming noticeable. Yes. However, and sorry, not however, and it's an improvement on the percentage of women pilots in the industry, which is, estimates vary, but somewhere between 4% and 6%, so I'm calling it 5%. So there's a very long way to go in terms of bringing more women to the front of the aircraft. Changing topics now, low-cost carriers have a seat share for the current year according to data from CAPA and OAG of 33%. 34% globally. Um, and you can see the, uh, the international is the darker line and the domestic is the lighter line, and the 2 are converging. Whereas if we went back to before the pandemic, the, uh, the domestic line, they had a higher share. But if I just look at the global total, which is the little triangles in the middle there, 34% currently. Immediately before the pandemic, it was 30%. So there's been a 4 percentage point improvement since pre-pandemic, whereas the 5 years prior to that, there was only a 2 percentage point improvement in low-cost carrier share. So the, the, the, the low-cost carriers have undoubtedly come out of the pandemic very well in terms of market share, or seat share at least. Um, now moving to, uh, economic growth, uh, global GDP growth, and I'm using numbers here from the IMF, the International Monetary Fund. Earlier in the year, the beginning of the year, they were forecasting that global GDP growth would pick up a tiny bit from 2024 when it was 3.2% to 3.3% this year and stay at 3.3% next year. That's the box top left. Then in April, when just after the US tariff policy was announced, they revised everything downwards and cut this year from 3.3% to 2.8%. which is a big cut, and they cut next year from 3.3 to 3. But since then, they've had another think, and they've said, actually, it's not quite as bad as we thought in terms of GDP impact of the US tariff policy this year. So it's now 3.2 for this year and 3.1 for next year. But nevertheless, there has been a cut over the course of the year in GDP growth forecasts, primarily as a result of the US tariff policy. Not as bad as they originally thought because the US tariff policy was, you know, modified. Right. Let's put it that way, but it's still quite a bit of uncertainty about that. It's also worth pointing out that these rates are declining each year, so we're on a kind of slowing—I mean, slightly—but a slowing trajectory according to these forecasts. And moreover, these are below historical average rates. So I've put there in that box the average from 1980 to 2019—I'm going pre-COVID—was 3.4%. And the average from 2000 to 2019 was 3.7%. So below-average rates of global GDP growth forecast and a slightly declining trend at the moment. And then the IMF also highlighted that what they thought were risks to the downside, and they highlighted, you know, considerable uncertainty, risks of protectionism from tariffs, labor supply shocks, They talked about fiscal vulnerabilities. A lot of governments around the world in debt have high spending needs, and how are they going to fund all that? And financial market corrections, which I suppose is a reference to the high valuation of artificial intelligence companies and whether we're going to see a downward revision in some of those valuations, I think is what they're getting at there. But considerable uncertainty, certainly. So then, Moving to the relationship between economic growth and traffic growth in the aviation industry. So this is a very strong and well-known relationship between RPK growth, revenue passenger kilometers, and global GDP growth. And for the roughly 50 years from early 1970s, the average RPK growth was 6.2% and the average global GDP growth was 3.5%. 3.1%, so it was a 2x multiple. It wasn't absolutely precise mapping, but as you can see from the chart where the blue line is RPK growth and the black line is GDP growth, they do move up and down quite, quite closely together. Of course, COVID came along, everything literally went off the charts, so we can almost not ignore but just sort of disregard that period in terms of the relationship. And now things are sort of settling into what you might call normal levels of growth in terms of GDP and RPK. or at least within the bounds of normality, but settling into probably a slower growth of RPKs. IATA's most recent forecast, after a 10.4% increase in 2024 in revenue passenger kilometers, is expecting 5.2% for the current year and slowing to 4.9% in next year, in 2026. Of course, this is a fundamental relationship, GDP and aviation traffic. It's a 2-way causality, I would suggest. You know, aviation stimulates economic growth, and economic growth stimulates demand for air travel. When I last gave one of these presentations in May, I said this about the relatively recently announced US tariff hike, that aircraft production costs would, would go up, Boeing would probably be worse affected than Airbus, and the airlines would see lower demand as a result of slower economic growth. And, you know, you can argue the detail of it. I think broadly I stand by that. The timing of things hasn't fully panned out yet. We've still got a lot of uncertainty, but we can see some evidence of lower air traffic demand. When I show you this slide, this is the number of visitors by air to the United States annually over the past— how far have I gone back to— past 20 years. So the boxes are the numbers and the line is the year-on-year growth. And year to date for the 10 months to October, the number of visitors by air to the US was down by 1.7%. And when you look at the boxes in 2024, the last full year, it still wasn't back above pre-pandemic levels. So we haven't got a full recovery in the number of visitors by air to the US according to US data, and it's starting to fall. In fact, there's been, um, there's been a significant number of months where if you look at the monthly numbers where year on year declines have taken place after what had been a very long period of growth post-COVID. Moving on to another topic, fuel cost in 2026 is forecast by IATA according to its latest numbers that came out a couple of days ago to be 24% of revenue next year, which is coming down. It's been falling over the past 3 or 4 years. Coming down towards the lower end of the range it's been in the last 20 years, not the bottom of it. And of course, this is a reflection primarily of the fall in the oil price. So on the one hand, lower fuel cost is good news for airlines, of course. On the other hand, lower Brent, lower crude oil prices is often a sign of slowing economic growth, which isn't necessarily such a good thing for airlines. And the other thing is that the, the fuel cost that we're talking about now is just primary primarily the cost of jet fuel, but it doesn't factor in transition costs. And last year IATA put out an estimate which, if you sort of worked out what it means in terms of total costs all in of all the fuel-related costs of the transition, of which SAF is obviously the biggest part, and there's also things like carbon offset emissions trading, etc., and you do that as a percentage of 2050 revenues, assuming that the revenue relationship grows in proportion to traffic growth over that period, it would come out at 61%. That number is probably slightly variable, but the point is it's considerably higher when you factor in all those fuel transition costs. And as— and if revenues don't grow substantially to accommodate that cost, you end up with a huge loss. Most recent data from Europe, at least, on airfare inflation, which go to October this year. From the EU, airfare inflation in October year on year was 1.7%, and in the UK it was 0.9%. We had this period during and immediately after COVID where there was a huge increase in fares as there was this relief travel where people were getting on a plane they hadn't been able to for a few years, and they were prepared to pay a lot more. That inflation level is still very volatile, but it's settled into much lower territory. But if you look at the October numbers and you sort of calculate it as a percentage, or as a percentage increase versus October 2019 pre-COVID, then you can see that EU prices are 44% higher than they were and UK prices are 68% higher than they were. So people have got used to paying considerably higher fares than they were before the COVID pandemic, even if now year-on-year inflation is, is settling to lower levels. Moving on to a kind of really big— this is in some ways, for me as a financial guy, this is in some ways the most important thing, the most important slide. So there's only been 4 years, only 4 years this century where the return on invested capital in the airline industry has met the cost of capital. And if you went back to the previous century, you'd find probably, you know, like 1 year in the whole of that century when the return equaled the cost of capital. Cost of capital, of course, is important. That's the minimum return demanded by investors, in theory, and we, we don't get there. And in fact, I'm being a bit generous because that period where it equaled the cost of capital, actually, if you look at the numbers, they're all very slightly below the cost of capital. Now, IATA is forecasting that the return on invested capital in '25 will be 6.8%, a slight increase from last year, is 6.4%, and it will remain at 6.8% into 2026. Those, those are, you know, reasonably high numbers for the aviation industry, but unfortunately below the cost of capital, which is actually increasing due to higher costs of debt. A slide that digs into CAPA's database again. It feels like headlines have been talking quite a bit about airlines that have disappeared from the scene in recent months. So I thought I'd look at the numbers, and as of this week, there are 694 airlines in the CAPA database, and the same week last year, there were 712. So there has been a net reduction of 18 over the past 12 months, but if you look at that on a historic basis, that's not that significant. You know, look, there is a cycle of these things. There was a— A drop between 2017, 2018, and 2019. And of course then COVID, a much bigger drop, but it then recovered. So I'm not going to get too gloomy about the number of airlines that are disappearing currently. I wanted to say something about artificial intelligence. We've got a panel discussion on that. I'm not really going to get into the detail of artificial intelligence and the impact on aviation, but a kind of macro number here. According to the IMF, artificial intelligence could raise average GDP growth by 0.5 percentage points per annum. And of course, the benefit comes from productivity improvements in the world economy. But there is a cost of higher carbon emissions, because if you look at AI and the associated data storage and data processing plants, which of course you can't do AI without that, According to Columbia Climate School, that could account for between 2.5% and 3.7% of greenhouse gas emissions, which puts it right up there and slightly above aviation if you take the higher end of that range. And so this leads me into a comment on sustainability and SAF. So SAF is, of course, very, very important to get from here to net zero and new technology taking over in the future. According to IATA, SAF will be 0.6%, 0.6% of jet fuel use in the current year. Now, that will have doubled from 0.3% in, in 2024, but it's actually a slight downward revision from their forecast for most of this year when they said it would be 0.7%. So small numbers, but you don't want to see the use of SAF going down. You want to see it exceeding expectations. Of course, there are huge challenges. with getting SAF production on stream. And if you look at the slide that IATA has put out in the past with work they did with Worley Consulting, that's the, you know, the ramp-up of SAF to 2050 from different kinds of feedstocks. Availability of feedstocks should be good, but there's likely to be a gap to the required 500 megatons in 2050 because of the rollout of the technology will be a bit slower than expected. expected according to what they're saying. So that brings me then to my final 2 numbers, which is— you've seen this many times before, I change the number every year— there are 24 years to get to net zero, and that is an imperative. It's not, it's not an option, it's an imperative. So a recap on the 22 numbers. I'm not going to read them all out again. Feel free to take photographs of it. But I just conclude, and I'm slightly over time, apologies, Marco. No worries. By my feeling at the moment is the industry has a lot of challenges and a lot more uncertainty than at most of the time that I've been following the industry. Obviously, geopolitical uncertainty is always there, but it feels like there are more sources of geopolitical uncertainty than in the past. On top of that, we've got the green transition, and on top of that, we've got this whole new world of artificial intelligence and what that's going to do. That being said, of course, the industry has demonstrated very clearly its relevance to to the global economy, to bringing people together, to the business world and its resilience and its recovery from the COVID pandemic. I'm going to stop talking now. Please tell me the numbers I should have put up there, and I'll see you all during the breaks. Thank you very much. Thank you, Richard.

Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.