CAPA State of the Industry | September 2026

Transcript

Lori Ranson:Thank you, Claudia, and thanks everyone for being here this morning. This is probably the most practical way to think about the state of the industry right now. At the start of the year, no one was betting on a prolonged war in the Middle East and fuel prices doubling. Here in the Americas, though, both North America and Latin operators Our optimistic demand is holding steady, but financial results for airlines remain mixed. I know this is a bit of a dense slide, but it's from our CAPA Airline Leader Briefing, and I think the study's findings really underpin a general agreement among airlines that uncertainty is the new norm, and both consumers and airlines accept that reality. While booking windows are shortening and travel patterns are shifting, People are still traveling and for now willing to pay higher fares. Demand is pretty solid here in Latin America. This is the IATA data for July showing traffic for Latin America and the Caribbean grew 6.1% year over year, fueled by a 7% jump in international traffic. LATAM's management recently described demand as strong and stable, with premium revenue continuing to grow. And it's worth noting Latin America has one of the highest growth rates of premium seats and travelers worldwide. North America does remain the largest travel market from the region, but next-generation aircraft are opening up new markets, including some interesting long-haul intercontinental routes. This is tracked ASK growth from CAPA for Latin America. Not a dramatic rise as the year comes to a close, and airlines continue to stress they'll make adjustments if demand patterns change. For the current quarter, IATA is forecasting growth in the top 10 markets. Panama growing at 11.4% and Argentina plotting 10% growth. Colombia and Peru are both growing 4.8%, and Brazil's growth is 4.7%. This is a slide that should please some of you in the audience. Carriers are really using their assets efficiently, with the highest increase of any region for aircraft utilization in Q2 being Latin America. And we all know that's pretty valuable in helping to manage cost in an expensive fuel environment. Next slide, please. This is a breakout of orders by manufacturer for Latin America. Obviously, Airbus remains the market leader, but after big wins with LATAM and ABRA, Embraer has gained share. According to our CAPA fleet database, there are about 746 aircraft on order here in the region. Here are some delivery projections for Latin America, a steady stream over the next few years with a peak in 2027. No one really expects significant deferrals, just given how tight delivery slots are, and demand does remain steady for now. I could put some forward-looking data for other regions up on the screen, but just given what's happened during the last few weeks, and honestly during the last couple days, that could change as I exit the stage. So maybe it's a bit more beneficial to hear from some industry leaders. European airlines have a bit more exposure to the Middle East, and generally the region's larger carriers are warning the second half of the year is going to be tough to navigate. Here's a quick snapshot of what Air France-KLM is seeing in August and September. Overall for Europe, essentially the era of pursuing growth for its own sake is giving way to a sharper focus on sustainable margins, This is the AAPA Director General's take, and I think it's the right question to ask. Are there going to be cracks in demand? And it's obviously a question no one is able to answer with any real certainty at this point. It varies by region, passenger segment, and how airlines manage supply from now until the end of the year. Thank you, Lori. In the US, United's CEO doesn't believe all the gains in fares will erode and sees an opportunity to have enough pricing traction to sustain and maintain profitability. But still, right now, it's just a game of managing fuel price volatility and high crack spreads. Just to reinforce where we are, even with solid demand and fare increases holding steady, some of the larger US airlines lost money in the first half of the year. It just shows fuel remains a major headwind, and some airlines are better positioned than others. Earlier this year, Kirby predicted that 4 of the 8 publicly traded US commercial airlines are probably going to lose money this year, and That's probably a safe bet that prediction's going to become a reality. This is IATA's financial forecast from June for Latin America. While some things may move around, if you look at net profit margins, they'll fall from last year, but we all know that's going to be true for all regions. I think what's interesting is the forecast here of 2.1% for 2026. That's a lot. Isn't far below North America's net margin of 2.5%. Of course, everyone wants to see higher margins, and these margins aren't wonderful, but to remain in positive territory this year could be considered a win. While everyone's trying to manage the current geopolitical fallout, AI continues its march across all industries. And one of the fastest-growing areas for AI in the travel ecosystem is travel planning. And honestly, it's not clear stakeholders are ready to make adjustments for this new reality. A recent study by MindTrip, Sojourn, and Sabre shows 40% of respondents saying AI introduced them to a new destination they wouldn't have found on their own, and 29% changed their destination because of an AI recommendation. Those numbers are only going to grow, and adapting to that new reality is going to be really important going forward. So again, this is just a snapshot at where we see things at this moment in time. There's a lot of volatility, as we all know. Stay tuned to see what happens for the rest of the year and into 2027. But first, have some great discussions at the conference. And now I'd like to welcome Michael Bell to the stage. Thank you, Lori.

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