Podcast: What’s In Store For Airlines In 2026?

ATW and CAPA – Centre for Aviation editors discuss the impact of the U.S. military action in Venezuela and other geopolitical occurrences on the operations and financials of the world’s airlines.

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Karen Walker: Hello everyone, and thank you for joining us for Window Seat, our Aviation Week air transport podcast. I'm ATW and Aviation Week Network air transport editor-in-chief Karen Walker, and I'm delighted to welcome you on board. Now, this week I am joined by my colleagues, Kurt Hofmann, who is the ATW European senior editor; Aaron Karp, Routes and ATW senior editor; and Lori Ranson, the CAPA senior analyst Americas. So, we really do have an expert set of editors and analysts here. And what we're going to talk about today is forecasts, key focus areas, and what to watch out for among the global airline industry in 2026. We have to really start our conversation with the most startling early news of the year, which of course is the US military operation in Venezuela and the capturing of that country's president and his wife. The FAA closed commercial airspace in the Caribbean area around Venezuela as that operation took place, leading to many flight cancellations and subsequent delays that have continued into this week.

Among the airports that seemed most affected was the Luis Muñoz Marín International Airport in San Juan, Puerto Rico, which is an important hub for the Caribbean. We already saw politics and tariffs affect travel patterns in this area in 2025. Essentially, that was drops in demand in the US-Latin America traffic. So I will be interested to hear my editors' thoughts on the longer-term disruptions, bookings, and confidence in travel to the Caribbean and Central America. Lori, would you like to kick off on that, please? What are your thoughts about the longer-term impact of the Venezuela issue?

Lori Ranson: So I think similar comments and actions that started about a year ago regarding immigration policy. The recent rhetoric about Colombia and Mexico, along with the still continuing immigration issues, could really put some pressure on demand, and particularly just as demand from Mexico to the US is starting to recover. And while I think that we can all agree that the probability of similar actions in Colombia and Mexico seems low, I think the instability and any show of force wouldn't bode well for outbound demand from the US. And overall, it just adds another layer in demand complexity that all airlines are going to have to deal with this year on top of the still ongoing immigration issues and trade policy that's very unpredictable. So, I think that airlines are just going to have to plan for this level of uncertainty for the foreseeable future because the comments and rhetoric from the presidential administration don't appear to be waning at this point, although it sort of switches from day to day.

And it seems like today the focus is on Greenland. But I think overall, it's just going to be something that airlines are going to have to deal with throughout this year in terms of uncertainty in Latin America and the Caribbean.

Karen Walker: Yeah. The keyword there I think is uncertainty, and that's a dangerous word in the airline industry. People want to be sure, particularly with this market, the Caribbean market. At the end of the day, that's mostly a tourism market. So, people have a choice. They can say, "You know what? I don't think this is the year we'll go there." My feeling is that at the very least, people will start to revert to some of what they did during the pandemic, which is not making decisions to purchase those types of trips until much nearer the time when they have a better idea of if it's okay to do that. But of course, that makes it even more unpredictable for airlines. Aaron, you are based here in Washington DC too. What are your thoughts on this?

Aaron Karp: I think it underlines how when airline executives look at the year ahead, how much difficulty they have predicting all the events that could happen that would affect them. And I don't think any executives in US airline C-suites, if you had said, "You're going to have to cancel flights to Puerto Rico because of a military action in the Caribbean," that's something that would've never come up. And we should note that this has been going on in terms of the ... There have been notices to airmen being put out by the FAA going back to September, really, about avoiding airspace around Venezuela, being careful with airspace around Venezuela. That has caused some European airlines to pull back on flights to the Caribbean, particularly to Venezuela. So, I think as Lori said, it's just a level of uncertainty and just shows as we look ahead to 2026, how events always happen around the world, geopolitical events that airlines can't predict yet that affect them.

Karen Walker: Absolutely. So, let's look further afield. Another major focus area in 2025 was India, where there is, of course, very strong growth in air travel and demand for air travel, but there's also significant challenges, not least with the infrastructure there. And of course, then we also had the Air India Boeing 787 crash, and that's still being investigated. And then there was the IndiGo airline operational meltdown later in the year that's caused a lot of controversy across not just India, but outside. Kurt, you interviewed Air India CEO Campbell Wilson in December when he was at the CAPA Leadership Summit in Portugal. Can you share some of his key thoughts about where Air India and the Indian air transport market are heading in 2026?

Kurt Hofmann: Yes, Karen. Let's have a quick look at India itself. The order book on new aircraft for the whole nation currently is around 3,000 aircraft, including also widebodies. So that means the traffic to and from India, the focus getting back more to the Indian carriers itself. So bringing back the air traffic to India and not giving everything to, let's say, to the Gulf carriers or Turkish Airlines or something else. Before, let's say during the privatization process of Air India, the nation itself had just 43 widebody aircraft. Now that changes dramatically. For Air India itself, the CEO told me 2026 will be a real change for the airline in terms of international services. That means the domestic fleet is refurbished. The intercontinental fleet [Boeing] 787s and 777s will be reconfigured with new cabins, so that should create much more comfort for Indian travelers. So, this is one of the main topics for the airline, beside of course, getting some new aircraft which are late, but we expect only around 21 aircraft this year.

However, there are challenges for India. As we know, the Pakistan airspace is closed. That means all flights to the US, for example, which is a very important market for India, one hour to three hours take longer flying time, which creates a huge impact on connectivity, profitability, load factors, and a lot of things like that. Besides that, Mumbai Airport was opened. The new one, Navi Mumbai Airport started Dec. 25. Also there, Air India started operations. And we also can talk about the Air India 171, which you questioned about, if you like.

Karen Walker: Yeah, you're right. That was a good summary of where things are going in India. I just think it will be very interesting to see how things play out this year with those big ambitions and aspirations, but will they actually get their act together? That's always been the case with the Indian airlines and the infrastructure system. And I assume we will get a more detailed investigation report on the 787 crash. I don't think that that's going to make a huge difference in terms of the overall Indian market, but it will be something that people will be watching for this year. Kurt, let's just get to a few overall numbers that are being forecast. You and I were both at the IATA Global Media Day at their Geneva headquarters in December. And I think a key part of this is their senior leadership gave some forecast numbers for 2026, but the key thing to remember here is that that was before the Venezuela situation.

So, I'm sort of interested to wonder whether some of these numbers might change as a result, but of course it's still only a forecast anyway. But what they were saying, the top line was that they expect to see a record average load factor across all airlines that will be around 84%. A lot of that is due to the continued shortage of new aircraft and engines. So, airlines were expecting to get a certain number of aircraft and then also they're packing more people into the aircraft that they do have. And the collective net profit for the industry as a whole will be $41 billion on revenues of just over $1 trillion. Sounds like big numbers, but again, it's the same old story when it comes to airlines and margins. This is a very expensive business to run, and so IATA thinks the margins will stay razor thin at around 3.9%.

That's about the same as 2025. Kurt, when you were, say you were in Geneva with me, what was your sense for optimism or otherwise among the IATA leadership team?

Kurt Hofmann: I'd like to start with the margin topic. I learned that I found quite interesting when we both have been in Geneva. The biggest margins, around 15% on average, will be generated in the Middle East. So, Emirates, Qatar Airways and these guys continue to be, looks like, the most profitable airlines in the future and to continue to be so. When we talk lower margins, that always comes to my mind here in Europe, where I live, some airlines have just 3.1% margin. It is very difficult for them to invest in new fleets. In terms of challenges, as you mentioned, I learned that there are around 4,000 aircraft currently grounded in terms of engines, supply chain and all the topics we know, from around 28,000 aircraft worldwide operating. So, the supply chain issue will remain a challenge. And as we spoke about Venezuela, of course, the geopolitical challenges as well, which we never know what happens on the next day.

I always think that airlines learned to handle those kinds of challenges and who is making the most money. I think that those also varies a lot from which region they are operating. I learned recently when I was visiting Iberia between Europe and Latin America, at the moment these routes are the cash cow, for example, to São Paulo, Buenos Aires. How much this will be affected by Venezuela or maybe surrounding countries—we have to wait and see. Europe is by far the weakest continent in returning back to more stabilized margins. So, for me, the outlook of feedback from Willie Walsh, the CEO of IATA, was always the margin topic, which will never go up the same procedure as every year it looks like.

Karen Walker: Absolutely. Yeah, that's right. And then keeping on that topic of margins, one of the things that I thought was interesting that came out—a change—is that IATA, again, was forecasting that airlines in Europe as a collective will make a net profit this year of around $14 billion, leading to a net margin of 4.9%. And if that happens, they would overtake North America for the first time in terms of profitability rankings. Again, IATA is forecasting North American airlines to post an $11.3 billion net profit and a 3.4% margin. That I thought was very interesting. Now, I will caveat that where IATA sees that Europe performance really coming from, what's driving that, is Türkiye. And as we know, Türkiye has become a very strong growing market, but even so, I just think that's interesting. So I'd like to go back to Aaron and Lori about the US situation in particular and the low-cost carriers and Spirit. I mean, Spirit—the Caribbean market is very important for them. We all know that their survivability is still in question, I think. What are your thoughts, Lori?

Lori Ranson: Yeah, I agree. Spirit survivability is a big question mark heading into 2026. I think there are some meetings happening this week regarding what their strategic plan could be, or there's talk about a potential merger with Frontier. Frontier's performance isn't that great either. And so I think Spirit's a big question mark. And you're right, they do have a big presence in the Caribbean. And just given their situation, it's probably a little bit harder for Spirit to recover from some of these geopolitical shocks, especially a very quick decision to close Caribbean airspace. Just on a larger scale in the US, and I think what's driving this outperformance in Europe compared to North America, if you just think about it, and the commentary that we hear is that Delta and United are essentially responsible for 90%, I believe, of airline profitability in the US. So you have two airlines that are driving profitability, and the other ones are either struggling or catching up.

So, I think in 2026—what needs to happen to change that, or is it just going to be more of the same?

Karen Walker: Yes. I think this is what we may see in 2026 is that gap between the US airlines that are doing well, which is the big three, and the smaller carriers, the midsize and smaller carriers, particularly the low-cost carriers, having more of a struggle. So there'll be a widening gap between those, and that will be interesting. What do you think, Aaron?

Aaron Karp: Well, one thing we should note, I was down at the Takeoff North America conference a couple months ago and I spoke with John Heimlich, who's the Airlines for America chief economist, and he said there's been a persistent main cabin weakness in the US market. So premium is doing okay, pretty well. There's been a return in corporate travel, but the airlines are having real trouble selling the main cabin tickets at good fares. And I think that's a problem that you can do as much with premium as you can, but ultimately you have to fill those seats in the main cabin. And what's happening is that people who buy the main cabin tickets are the most hit by inflation, which remains persistent. And he pointed out they're less likely to have the inflation offset by good stock market performance with stock market portfolios. So, I think there's a problem that the US carriers have with the main cabin and that doesn't seem to be going away.

Karen Walker: Right. Yeah, absolutely. Just touched a little earlier on about the industry supplier side of the house, and that is also factored into some of these forecasts, the load factors certainly, because airlines are still not going to get all the aircraft they'd originally thought they would have. And in some cases, they get them, but then they've got maintenance issues and the aircraft are grounded. I'll go back to you, Aaron. Do you see it being a better year for Boeing in particular this year? I mean, there were several good signs coming out from them towards the end of last year. What do you think?

Aaron Karp: Perhaps moderately better. One thing I was struck at looking through the IATA forecast is there really were some staggering numbers. There's a shortfall of 5,000 aircraft that should have been delivered. The delivery backlog is 17,000 aircraft, which is equivalent to 60% of the global fleet, and that's double from 2007. And airlines are just having a lot of trouble because not enough planes are being delivered, not enough planes are being delivered on time. In terms of fuel efficiency, over the last several years, fuel efficiency improved about 2% a year, that flatlined last year. The fleet was no more efficient in 2025 than 2024. So, I think Boeing has made some progress, but they've had so many problems that that progress probably will be incremental. And if you just look at the numbers, there's such a backlog, such a shortage of shortfall of deliveries and airlines are having to operate older aircraft than they'd like to. That means they're less fuel efficient. That means maintenance costs are higher. I don't see that problem solving not only this year, but for the next several years.

Karen Walker: We've got two big airshows this year. The Singapore Air Show in February is just around the corner, and then the Farnborough Airshow will be in the summer. What are your thoughts on new aircraft orders this year? Do we anticipate still seeing some big orders as we actually did in 2025? What do you think, Aaron?

Aaron Karp: I think airlines want to order aircraft. It's just a matter of how many years they have to wait for them. So often you're ordering an aircraft and you're waiting five, six years for it to be delivered. And so that is the issue that a lot of airlines are dealing with is that you order an aircraft and you have to look so far out into the future as to when you're going to need it and when it's going to be delivered. And so I think airlines do want to order aircraft. They do want to make their fleets more efficient. It's just that as we were just talking about, the production problems are such an issue. Like we said, the backlog is 17,000 aircraft. So production slots are an issue. Engines—more and more aircraft are being built by Boeing and Airbus and just being sitting there waiting for engines.

And so I think we could see some orders and airlines want to make orders, but there's just so much uncertainty about the production process that I think that that's the thing that holds them back.

Karen Walker: Kurt, what are your thoughts on aircraft orders this year?

Kurt Hofmann: Well, as Aaron mentioned, the waiting time for new aircraft is a big challenge because when you are a CEO of an airline and you're looking ahead and the demand and the changes of the markets are also dominant. So, do I need the aircraft in five, six years, or do I need something else? So, I think also the leasing companies will have their fair share in the future in the aircraft market because it gives some airlines more flexibility. And also it's not only the engines which are missing; many aircraft are sitting on the ground with no seats or waiting for seat certification like Lufthansa with the challenge with the Boeing 787 fleet. Last year, remember there were around 15, 16 aircraft ready for delivery, but the seats were not certified by the FAA. So many challenges ahead. Yes, I agree there will be more aircraft ordered next year because airlines like to be more efficient in the future, but airlines need also the money to invest in future aircraft.

Karen Walker: Yep, that's right. That's always the conundrum. I have one last question for all of you, if I may. I'm wondering as we go into this year, will the public surge in air travel demand that we saw and have continued to see since the pandemic, given everything that's going on, the geopolitical and economic concerns, do you think that that surge for air travel will continue or will it dampen early on in this year?

Lori Ranson: It's a little tough to predict just given everything that's happened and the way the year has started off, but I think fundamentally the appetite for air travel demand remains strong. And what airlines have learned over the last few years is that they have to be very nimble and be able to shift their assets around as demand patterns change, and those demand patterns can change very quickly. So, I do think air travel demand will remain stable and fairly robust, but I think airlines have to be prepared, as I said, just to be nimble. And I think that's one of the big lessons that they've learned over the last few years is you have to be able to react quickly. And in some ways, you can see that with the restrictions that were imposed over the weekend, maybe with the exception of a couple carriers, some of the larger carriers were able to put seats in the market and add flights once the restrictions were lifted. So, airlines to their credit have learned to react more quickly to some of these geopolitical shifts.

Karen Walker: Yeah, that is true. I think if there's a silver lining out of the pandemic, it's some of the lessons learned by some of the airlines. I would put out Singapore Airlines as a real good example of not the only one, but if you look at them, they've got no ... All their market is international. They lost everything overnight in terms of traffic, air traffic, and they were just incredible about how they adapted. And that ability to adapt, as you say, is very important these days. Kurt, what are your thoughts? Do you think people will still want to fly this year?

Kurt Hofmann: Yes, I think so. And it probably will vary from region to region, but just as we talk about India, the demand for air travel is huge. There are middle classes growing, especially in Africa or Latin America. People like to travel. Tourism is a big thing. We see much, much more traffic, for example, from Asia into Europe with all the Chinese guests and South Korean people traveling much more. So, there's a huge demand for air travel as people have generated more income, as I mentioned in Africa or Latin America. And of course, there are always these geopolitical impacts which can happen—recession [and] if people have money to travel or not. But overall, I would say yes, people like to travel. There's still a big demand, but it can vary from region to region. Maybe some places like Europe could be weaker, some other areas [will be] better. You mentioned Türkiye before. Türkiye is a huge market, a young population. They like to travel. It's a good place to do a holiday there because it's fair price, value for money. So, there will be many, many markets which will be well operated with airlines and will have good passenger numbers on the opposite.

Karen Walker: So you raise an interesting point there is that what we've seen is that things happen, but it doesn't stop people traveling. It may change where they travel to, but they still want to fly and they find new destinations. Aaron, final word for you. Are you confident people still want to fly this year?

Aaron Karp: I think there could be real regional variations. The last two years, there was an overcapacity problem in the US domestic market in the first half of both years, and the airlines had to do a big growth drawback, capacity growth drawback in the second half of the year in order to get yields up. And so, I think it's worth looking at the US market, Europe, intra-Europe travel. But like Kurt said, I think in the developing markets, India, Brazil, there's a growing appetite for air travel and more people able to afford air travel. So, I think you could see the developing markets really, really driving a lot of that growth.

Karen Walker: Absolutely. Let's be optimistic, hey? Especially this early in the year. We've got everything ahead of us. So thank you so much, Kurt, Aaron, and Lori. To our audience for more of our 2026 industry forecast, be sure to check out the January issue of ATW magazine where we'll have the full report there. Thank you also to our producer, Cory Hitt, and of course, a huge thank you to our listeners. Make sure you don't miss us each week by subscribing to Window Seat on Apple Podcasts or wherever you like to listen. This is Karen Walker disembarking from Window Seat.