CAPA State of the Industry | September 2025

Transcript

Lori Ranson:Good morning, everyone. Thank you for joining us. It's great to be here in Lima. I think we can all agree this year has been a bit of a whirlwind for the industry, but it seems like Latin America sits in a better position versus other regions in uncertain geopolitical and economic times. Here's traffic growth by region for the 2nd quarter, and you can see Latin America was one of the stronger performers with a jump of 5%. IATA stats compiled for July show Latin and Caribbean airlines posted the highest traffic growth at 7.2% year over year, and that was the 2nd consecutive month where the region was the fastest growing. International traffic for the region jumped 9.3% in July. Most of the airlines here are posting impressive financial results. LATAM Airlines Group is forecasting an operating margin of 14 to 15% this year, and Copa's forecast is 21 to 23%, much higher than airlines elsewhere. Overall demand seems to be holding up, with a bit of softness from Central America to North America and from South America to Mexico. Mexico, and Mexican carriers are navigating some tricky geopolitical issues. Just a snapshot of Latin capacity growth over the last few years. Overall capacity deployment seems pretty rational, and IATA stats show load factors for the region were essentially flat for July and the first 7 months of 2025. Just another solid performance in arguably unpredictable years so far. You can see aircraft utilization is another metric where Latin America has solidly performed, up 24% compared with 2019. And that performance is all the more impressive given some operators are continuing to deal with aircraft groundings from engine issues. One of the more interesting developments in airline reactions to rapid changes in U.S. trade policy and other geopolitical risks is a major pivot from Canadian carriers into Latin America. A snapshot for capacity deployment for the week of December 28th shows 2-way seats from Canada to Latin America are up 13% year over year. Porter is marking a milestone with its first flights to the region in the 4th quarter with its E2s, which are interesting markets for that aircraft. Air Canada is growing its capacity by 16% year over year to Latin America and the Caribbean during its winter season. And while Air Canada and WestJet are growing in established markets, they're also operating to some up-and-coming smaller markets, including Puerto Escondido and Tepic. U.S. carriers are also expanding into those markets. United launched flights to Puerto Escondido earlier this year, and American is planning to make its debut at the airport in December United also is starting service to Tepic later this year. Canadian carriers are also making a push into the Caribbean with 12% seat growth for that same time period in December. Here are some stats from the CAPA Fleet Database showing aircraft status by region. Latin America has roughly 710 aircraft on order. And narrowbodies account for 80% of that total. There are a couple interesting tidbits from the latest forecast from Airbus and Boeing, with Airbus projecting Brazil's trips per capita going from 0.5 in 2024 to 1.1 in 2044. Boeing expects international arrivals in Latin America growing 40% over the next decade. With business travel arrivals jumping 55%. This is an interesting data point from Boeing's forecast showing strong growth in intra-Latin traffic as connectivity continues to grow across the region. You'll see orders here from May to July. It's a pretty decent inflow for the manufacturers. The higher tally of widebodies is driven in part by operators opting to replace aircraft that they retired during the pandemic. And in this region, Latin carriers have about 23 widebodies on order. LATAM with 15 787-9s, Azul is at 7 A330-900s, and a single order from Aeromexico for a 787-9. Deliveries for May through July were up 9% year over year, but down 6% compared with 2023. I know it's a bit relative, but manufacturers do seem to be in a better position than a year ago. Boeing is producing 38 MAX aircraft a month and has plans to gradually boost output once it gets the all clear from the FAA to grow beyond current levels. The company has said after it reaches a rate of 42 per month, increases should come in increments of 5 no sooner than every 6 months. The current monthly build rate for the 787 is 7 aircraft and should go to 10 next year. Airbus is planning around 820 deliveries this year, more than the 766 it delivered last year, but below 2019 deliveries of 863. It's targeting a ramp of A220 rates to 14 a month by 2026, 75 A320neo jet families by 2027, and A350 rates should grow to 12 by 2028. Airbus saw the number of missing parts from the supply chain fall about 40% by the start of this year, but engine and cabin parts still remain a challenge. Embraer's forecast for commercial deliveries this year is 77 to 85 aircraft compared with 73 last year. There's been some gradual improvement with the geared turbofan. Pratt Whitney is seeing slightly fewer removals for engines powering the NEOs, 220s, and E2s. It anticipates daily AOGs will fall in the 300, 350+ range by year-end, And while that still might seem high, let's remember that peak groundings were around 650. Here's the current industry forecast: about $36 billion in profits this year and a 3.7% profit margin. IATA's forecast for Latin America is $1.1 billion in profits, a drop from last year driven in part by weak local currencies. There's been some recent relief in currency pressure, but fluctuations still remain a challenge. And of course, taxation continues to be a headwind for carriers in Latin America and the Caribbean. But overall, I think Latin operators are showing a certain level of resiliency in these unpredictable times. Enjoy the conference.

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