Inside the Ethiopian Airlines Playbook

Hello and welcome to the airline Weekly Lawn.

Xiaomi O's Gordon Smith, and I'm joined as usual by co-host Jay Shabbat.

In part one, we're taking a closer look at Ethiopian airlines, and in part two,

we're setting the scene for Q4 learning season.

Hi Jay, how's it going?

All right Gordon, good to be back after a lengthy winter break.

It felt like a really long one.

I think just the way the days fell with Christmas and with New Year,

I think collectively we were out of office so to speak, even though we're all

remote for 9, 10, 11 days.

I kind of lost track, but it felt like a lifetime.

It was great in a way.

Obviously very sad not to get to speak to you.

Week in, week out, but we're back with Gusto in 2026.

I definitely missed your Gordon, and I missed the airline news for sure.

I'm guessing you also had a nice relaxing break with family friends all that,

and I did as well, but I certainly missed the airline drama and

getting to chat airlines with you, so good to be back.

Good to be back, and before we get into part one, I believe a happy birthday is an order,

not to me, but to Jay, and we won't disclose any ages, don't worry.

But we have verified that Jay entered service well after both American Airlines and Delta,

and you don't need to be an aviation historian to know that they're both celebrating

their centenary, so, and with far fewer mergers as well, I should add.

So Jay, happy birthday for the first of January, is that right?

First of January, yes, yes, and yeah, only one merger for me only than married ones,

but I'm not, yes, and I'm not quite a hundred years old, but probably getting closer to that

than zero, so.

Well, still, I think Cathay Pacific is the other big one celebrating an anniversary this year,

they're coming up for 80, so I can still comfortably say that you're, you're still younger than

Cathay. Jay, let's speak about another well-established carrier, not in Asia or the US, in Africa.

That's Ethiopian Airlines, because we are back to our usual cadence with the airline weekly issue,

if you're waiting for that. We were off during the holidays, but Monday 12th of January is the date

for your diary. It will be landing in your inboxes there for the airline weekly subscribers,

and this week's feature story as a micro spoiler is all about Ethiopian Airlines, Jay.

I had a quick scan of some of the notes that you've been putting together for the feature story.

It's a really, really interesting read, particularly, so at this pivotal time for the airline,

for those listeners who are maybe not quite so familiar with Ethiopian, give us a quick

scene setter of where we are, what they're up to, and why we thought this was such an interesting

story to focus on this week. It is a super interesting airline. I agree with you, Gordon.

Ethiopian, it's people from outside the industry are sometimes surprised that a country-like

Ethiopia, which has some of the lowest per capita incomes in the world, and it's not a very

wealthy economy by any means, but it does have one of the most successful airlines

internationally in the industry. And so periodically, over the years, some long time airline

weekly readers will have, remember, some profiles we've done of Ethiopian airlines,

thought it'd be a good time to revisit them because they are just about to begin construction

on a brand new airport. It's going to be really big. It's eventually, it's designed to

accommodate more than a hundred million passengers. So that's, you know, we're talking

Istanbul size, or just for context, Atlanta Airport, which is the busiest in the world today,

had about, I think, that 2024 figure was about 110 million passengers, give or take a few.

So it's going to be a very, very ambitious project. It's supposed to open at about 2030,

you know, these things have a tendency to be delayed, you know, giant projects, but 2030,

and it'll open in its first phase with about, with capacity for about 60 million, so still,

you know, very, very, very big airline. And Ethiopian, which has, you know, tremendous

record of both growth and profitability, they are, you know, they're getting ready. They've

got a lot of planes on order, and they are very ambitious as they have been for decades now.

So it's, you know, on paper, if you've never heard of Ethiopian airlines, you know, coming from

outside the industry, and, you know, why is this, is this a boondoggle, why are they building a,

you know, an airport for 100 million passengers, the, you know, their track record is pretty good.

The track record is outstanding, I would argue, Jay, especially given all the various constraints

that you've got in that part of the world, you know, open skies, etc. Not quite as big a deal

in Africa, despite a lot of movement, to try and get something towards that. We can discuss

all the sort of the vacuum left by failed African carriers, particularly sub-Saharan African

carriers in a moment. But let's just keep things top-line for the moment. The scale of Ethiopian

airlines is growth is striking you saying the future story, 43% bigger than 2019 in ASK terms.

That's based on a Syrian deodata fleets, well over 150 now. This seems like an airline that

should have a little bit more prestige, a little bit more sort of chatter and buzz around it.

Alla Turkish Airlines. This is a very, very fast-growing major international airline, but it's

just sort of, pardon the pun, flies under the radar a little bit compared to some of its,

maybe more Bolshee, bigger name, household name, competitors.

No, that's a great question. And I think part of the answer is that they are smaller. I mean,

Turkish Airlines and Emirates and some of these carriers are, you know, substantially bigger.

I don't recall off top of my head how many planes exactly Ethiopian has now, but it's

something like 150, does that sound about right? Yeah, 152, I think we said, but let's more in order.

And lots more in order, and a lot of them are wide bodies too, so we're talking about heavy metal here,

not just, you know, they do have some some regional jets as well, or regional turbo props as well,

but yeah, it's a substantial airline, but yes, they're not as big as, you know, the Turkish airlines

that were older than Emirates. And as you suggested, Turkish Emirates, Qatar Airways,

these are carriers that just spend enormously unmarketing and Ethiopian doesn't have that kind

of budget for marketing. So they do kind of fly under the radar. I think people who, you know,

are international, regular international flyers know who they are very well, and they do,

I'll go through, you know, some of their strengths in a moment, but they do have itineraries

and journeys that they, that they just do very well for, for travelers. So they, you know,

starting with the fact that, and I'll go through some of the strengths now, I guess, that

no better time than now. Addis Ababa, which is capital Ethiopian and their big hub,

that city just has very, very good geography. And it's almost, if you, it's not that far from Dubai,

I looked, it was about 2500 kilometers of roughly speaking from Dubai. So that is, you know,

it's not, not around the corner, but it's pretty close. Kind of when, if you draw,

sort of an imaginary circle that includes, you know, Istanbul on the edge and Dubai would be in

there and you could even catch like Mumbai over in India, Addis would be in that circle. So it's

kind of in that center of the world geography that works very well for so many connections from

here to there, from there to here. That is a big part of its success story. Now, there are other

cities in East Africa that have similar geography and just haven't quite been able to establish

the success of Ethiopian airlines. And there are a whole bunch of other reasons why Ethiopianers

stood out. One is that Ethiopia, people didn't realize this. In fact, I was talking to someone

in the airline industry today who didn't realize even this person didn't realize this when I

told them, but Ethiopia actually is a huge population. It's, I think, something like the 10th

biggest country in the world by population, similar in size to Mexico. Only within Africa,

only Nigeria has more people. So that is helpful. So yes, it is, you know, it's, it's not a wealthy

country by any means per capita income is very low, but it does have a lot of people. And so,

that is, is helpful. They also Ethiopia also partially because they have so many people.

They have a large diaspora. So a large Ethiopian community living overseas. And a good example of

that is in Washington, DC, which Ethiopian has flown for many years. They, big, big Ethiopia,

I used to live in Washington and I remember going to Ethiopia and restaurants all the time,

big community there, very, very visible. California has a big, big community, probably even

New York City. And then there's also a big community in the Middle East. So in the UAE,

in Saudi Arabia and Israel. So that's also contributes to the demand that Ethiopian is able to tap

into Canada, South Africa, a few other markets or a few other countries that have big Ethiopian

populations. And then probably more than anything else, Ethiopian just has an unbeatable access

to Africa. And a lot of places in Africa are just not very well served, or they're served by,

let's say, let's put it charitably, untrustworthy airlines. Airlines that don't have international,

internationally recognized reputations. And some of these, yeah, just some of these plays are very

hard to get to. And the example that I used in the article for that, I guess you'll be,

people will be listening to this on Thursday. And so the following Monday, the article will be

published in an airline weekly. An example that I used was, you know, think about a World Bank

employee that needs to go from Washington, that's where World Bank's headquarters, to Cameroon,

Duala Cameroon, I just use that example. But Ethiopian is just can just perfectly placed to take,

probably not even the best example to use now. And in the article I explained, Cameroon was an

example I used because Ethiopian also has a hub in West Africa. So they actually used to get to a

place like Cameroon, which is over on the West African side. They use a hub in in Togo. So maybe

not the best example. But even if you want to go to South Africa from from the United States,

if you want to go to, you know, Malawi, Zambia, Zimbabwe, Addis works really, really well. And then

they'll have connections, you know, a lot of Europe to into Africa, into the Middle East,

China to Africa. That's been a growing market over the past couple of decades. So they can do a lot

of that through Addis. And, you know, I'll stop there. You can everybody can read more about

Ethiopian strengths in the upcoming feature. But, you know, you'll see they have a big cargo

business. They have all sorts of other auxiliary businesses. They have pretty big domestic market.

They get a lot of government support. Their cost base is pretty low. So you can go on and on.

And eventually, you know, you start thinking about all these advantages. And you start, okay,

now I can understand why they were only one of 20 airlines worldwide to earn more than a billion

dollars of operating profits in 2024. So they're in pretty elite company. Pretty elite company,

indeed, Jay, just want to tease out one of the countries you mentioned there. That was China.

It does feel like it's a bit of an underappreciated part of Ethiopians, broader story. How

critical is Beijing's African strategy more broadly to Ethiopians rise? And by that, I'm talking about

not just point-to-point connections from Ethiopian going into mainland China. But what China is doing,

its investments in and around Ethiopia and on the Ethiopian network that fuels traffic to these

destinations. Yeah, I do think that's important. You know, China just being such, you know,

the second largest economy in the world, investing so much in Africa, Ethiopia, you know, Addis and

Beijing in particular, I've had close diplomatic relations for many, many years, you know, going

back to the, you know, the Mao era, I think. I mean, historians can check me on that. But I know

that Ethiopia was flying to Beijing very, very early. And today, they fly to, I think it's Beijing,

Shanghai Guangzhou. There may be one other amissing, or yeah, Chengdu as well. So it's basically the

largest for, the four largest passenger markets in China. And then they have a whole bunch of cargo

markets as well. They'll do, you know, nonstop cargo flights to Urumqi and Western China and

Wuhan and a few other places, a few other like big production hubs. That doesn't even include

Hong Kong. So yeah, I think your premise is correct that China is a very important

market to Ethiopian. And I suspect that as they get more aircraft, you might see more Chinese

routes from Ethiopian. I don't know, you know, you have to imagine with Chinese economy slowing

a bit. Maybe the investment is slowing as well. And maybe that market is slowing as well. But

don't be surprised if, you know, Ethiopian adds a route to, you know, whatever, some Shenzhen or

something, some, you know, some other big city in China because it is, it is an important market.

For sure, only in China could you consider Shenzhen as being sort of a tertiary market. And

it's absolutely enormous by almost anyone else's standards, Jay. We've discussed the opportunities,

or at least touched on the opportunities, a much more detail in the airline, weekly optical,

as we said at the start of the show. Let's take a quick look at some of the challenges in

potential headwinds for Ethiopian. How much does the extended range narrow body flying

coming out of the Gulf change the competitive equation for Ethiopian? And by definition,

you could even extend that to to a symbol on elsewhere. The fact that we're getting these,

the max aircraft and the LRs from Airbus being able to put in some really meaty stage lengths

if the airline so chooses. Is there a risk that some of these new aircraft or newer aircraft,

I should say, are going to start to eat Ethiopians lunch?

Yeah, I think that is, that is a risk. What you're, what you're already seeing is some of these

Middle Eastern low cost carriers and aerobics comes to mind using some of the higher capable range,

range aircraft to narrow body aircraft to penetrate farther and deeper into sub-Saharan Africa.

And it's not just the narrow bodies. I mean, fly Dubai is an airline that quietly

has a pretty big Eastern African network already and they're going to be getting 787s.

And I'm sure some of those are going to show up in Africa, you know, down maybe South Africa,

maybe West Africa. So that I believe is something that Ethiopian has to keep their eyes on.

Of course, the, you know, the bigger Gulf carriers, the Emirates, Qatar Airways, they are,

they have substantial African networks as well that compete with Addis Ababa, you know,

they use their hubs Dubai, Doha. But probably the most, you know, the carrier that presents the

most challenges to Ethiopia, Ethiopian is Turkish Airlines because they've just built such a huge,

probably the, you know, it's between, honestly, if you have to rank which airlines in the world,

have the best African networks, it's between Turkish and Ethiopian. And, you know, it depends on

what, you know, obviously Air France, some of the European carriers and the Gulf carriers,

as I mentioned, have good networks as well. But Turkish has really added a lot of those hard

to reach markets. Some even that Ethiopian doesn't serve, a few of them I can think of. So

that is probably their biggest, you know, competitor. But you are right that the longer these

narrow-body aircraft can reach, the, you know, the, the more that they can cover in Africa.

And let's wrap up Jay, at least part one, with a broader question. And that's, you know,

why has Ethiopian been the exception rather than the rule in Africa in terms of being a successful

airline on the continent, serving the continent from the continent. So much, we've discussed this

many, many times on the, on the podcast and then the airline weekly issue as well. So much of Africa's

capacity, even intra-African capacity is with airlines based outside the continent. Ethiopian

airlines is a very, very rare success story. I have maybe poop. Ooh, if I'm being generous,

Royal Emma Rock, Egypt, that's pretty much it. Can you airways? Can you airways maybe not doing

quite as much as they, as they should be despite the, the SCAR team membership and other bits and

pieces? Rwanda air, like a tire of ways. But these are all the ones you name are either much smaller

or they're, they're financially challenged or rely heavily on subsidies. It's, it's, it's,

either all, all of what I said or, or some of what I said, whereas Ethiopian very much is,

you know, a very viable economic entity on its own that's large, that's profitable,

that's growing. There's really no other African airline you can say that about.

Yeah, and I guess my straight answer to straight questions is why, you know, without getting

into extreme detail, do you think we're, we're going to see a series competitor to Ethiopian

Airlines the next decade. I mean, you mentioned Rwanda air there. There's been much talk about the

investment possible 49% investment with Qatar Airways. South African Airways, obviously, you know,

are the very, very tip of the continent, but still a huge amount of potential there. Is, is,

is there anyone that couldn't, can come in on the continent already, who could really sort of

rival Ethiopian scale? Well, the other, the one that everyone always has hopes for,

the dating back to when, you know, the Virgin group started Virgin Nigeria. Oh, Nigeria, yes.

Nigeria, you know, Nigeria is just, you know, exploding with, with aviation potential,

huge population, pretty big economy. The geography of Lagos is not quite, it's different than,

than, and out of something, you're not going to get that kind of, you know, Dubai like, or Istanbul,

like everywhere to everywhere type coverage. But if you're in a place like Lagos, you know,

imagine what you could do as far as being a gateway for the Americas into Africa. And that's

something that, you know, there, there've been many West African Airlines that have tried that.

Royal Air Marrake has tried that. They've even invested in airlines in, in Dakar, Senegal.

Dakar has tried to position itself like that. Royal Air Marrake, or sorry, I just mentioned

Royal Air Marrake, Air Arabia, Marrake. Their Moroccan venture has, at times,

tried to create a hub in Senegal. So, you know, Lagos would be perfect for that. But for

reasons that probably go beyond this podcast, you know, very difficult political environment,

you know, just very different, difficult aviation regulations.

You know, all sorts of reasons. Nigeria has never been able to develop a viable, you know,

or let's say a strong international airline. They keep trying. I mean, there's been projects

over the years. Many of them, I, you know, I could name a lot for my memory off top my head,

but they never worked. And if you ever, you know, read the story of Virgin Nigeria and you kind of

get an idea of why it's been a quite, quite a chore to try to develop an airline there. Oh, yeah.

So, yeah, Ethiopian has really been able to, and it's, you know, some of those, they've been

able to do it where others haven't because of some of those reasons I mentioned. I mean,

the large population, the diaspora, the, you know, the good government policies, the geography of

Atis and, you know, I mentioned all those things. They've also been able to, I mentioned they have

a Lomae hub, Lomae Togo over in West Africa. So that incidentally, I talked about the potential

of West Africa as a gateway into all of sub-Saharan Africa. Lomae, the Ethiopian, it's pretty small,

but Ethiopian has done a pretty good job of making Lomae that hub that I'm describing that,

that, you know, ideal gateway hub. They've been able to do it somewhat, and they've been able to

do it by investing in the local airline, basically doing a joint venture. And they have a couple

of other joint ventures too. They want a Malawi, they want a Zambia, they want a Democratic

Republican Congo, but they're, you know, those are, they're generally small. But yeah, I mean,

just, for example, they, they'll do non-stops to Washington from, from Lomae, not just Atis.

And one of the problems, and I should, I should mention this too, this is kind of an interesting,

this is actually very important for the, the airport project that we started conversing about.

So one thing about the new airport, it's actually going to be at a significantly lower

altitude as the, than the existing airport. And that, that is important because the existing

airport is a very high airport. I think it's even quite a bit higher than Denver. And that limits

the range of even some of these airplanes, like the, you know, 835, 900s and 1000s and the,

the dreamliners and, and they can't even do Atis Ababa non-stop to Washington. They actually,

they're three, eight through 51,000s, make a stop in Rome. So you can see that's, that's a big

challenge for them. You, you asked me about challenges before that's, that's the current airport

as that challenge. They're the range of their aircraft that are compromised. So they have to do,

so one, you know, one route they did for a while was Los Angeles because there's, you know,

I think there's a sizeable Ethiopian diaspora population in LA. And I think there were a lot of,

you know, LA's just a big city. There's a lot of LA demand into, you know, places like the Middle

East and they can service that very conveniently over Atis made, made sense, but they couldn't reach

it from Atis, even with the super long range aircraft. So they had to go through Dublin. And at

that point, you know, if you're in Los Angeles, you'll just say, I might as well just connect through

Dubai or I might as well connect through Istanbul. So we're even on some itineraries. I might as,

might as well connect through Europe. So it's just very competitive. The new airport will give them

more flexibility in what they could do to the US. So they'll, you'll listen to their executives.

They talk about, yeah, we want to, you know, we want to serve Seattle, we want to serve Denver.

They actually already do our Atlanta, which actually shocks me. I can't imagine how that makes

money because they're not in Skyteam. So they don't partner with Delta. So I don't, I don't know

how they do that. But we'll leave that as a big question mark. But they do, yeah, they do. I think

they do Toronto as well in Canada. So they have, you know, they have a big list of many more

roots in the Americas that they want to do. Even even in South America, I wouldn't be surprised,

you know, if they eventually do Rio, I think they do South Harlem, Buenos Aires right now.

So yeah, more to come. And they've got the aircraft in order to do it, including, by the way,

the, uh, the new triple seven nine's, which, uh, you know, we talked about before, delayed by

a couple of years, but, but Ethiopian will eventually get those as well. Yeah. And, and, you know,

when I started to ramble on here, Gordon, but, uh, when I think about all the new, you know,

latest and greatest airplanes, like, you know, the eight through 51,000, the triple seven nine's,

and all the seven eight seven's, you can see why Boeing and Airbus value Ethiopian a lot

as a customer, which, you know, probably grants them to, grants them privilege pricing.

You know, you can't imagine there as prize the customer is, you know, an Emirates or a Delta,

you know, one of these giant, giant global airlines. But still, I think that's an advantage for them.

And they get, you know, Ethiopian being a developing country. They get a lot of support

from export import organizations in both the United States and in Europe. These are just companies

that basically guarantee loans, you know, if you, um, we want developing countries like Ethiopia

and buy American products. So if you, uh, so, you know, buy some Boeing planes. If you can't pay

them, don't worry, well, we'll, we'll guarantee the loans, allow you to get the loans at lower

industry. So they have, um, Ethiopian airlines has a lot of backing from, you know, the US

XM bank, for example. So yeah, they're just, just, just another reason why this is a big success story.

So much more we could discuss Jay, as we said, more detail in the airline weekly article,

feature story, uh, in the next issue, dropping on January the 12th. And a notable mention as well

back to our early discussion on Nigeria Airpiece is the, uh, the current major Nigerian

bro to try to make a, an international name for itself. I saw it. I think there's a least

triple seven at London Gowick, uh, just a couple of weeks ago. So they are spreading their wings.

Part two, I know we're going to be discussing US airlines in particular as we get into quarterly

earnings season. But before that, a quick reminder to send any questions or comments that you

might have for us to podcast at skifters.com. That's podcast with an S at the end. And please

don't forget to follow or subscribe to the podcast where if you're listening or watching.

And if you are enjoying the show, please rate us five stars or leave us a positive review so

you can continue to spread the word about the airline weekly lounge. Don't go anywhere. We'll be right

back. Hello and welcome back to the airline weekly lounge. I'm Gordon Smith joined as usual by

cohost Jay Shabbat. Part one, we were discussing all things Ethiopian airlines and African aviation

in general. Uh, but now we are going to pivot to US airlines in particular. But I'm sure some other

themes will come into the next year, Jay, because we are on the eve of earnings season once again,

dates for your diary, delta airlines kicking things off on Tuesday, January 13th. The next big one

is United Airlines on January 20th and then the cadences as per normal. I think we've got Southwest

on January 29th, Rhiner, 26th. And then some of the European majors they're coming in in February

and early March, Jay. But we thought we've just run out some key questions that are in our minds as

we enter the latest quarterly earnings season, Jay. And let's kick us off. Where do you want to begin?

This is our true holiday season, right? When people say happy holidays. Oh, not yet. Not yet. It's

still to come. Coming. Yeah. Next week. The food's not as good, but still plenty of twists and

turns in a bit of drama, I dare say. Yeah. Key questions for US airlines as we enter 2026. What do

you want to begin? Sure. How about we? I have a list of questions. I know we were sharing our list

this morning. You have some as well. So yeah, just a list of some questions that we're asking ourselves

as Q4 earnings season for US airlines gets underway next week. And so we'll leave delta side.

Obviously, they'll be they'll be going first. We're going to learn a ton more from them. But I think

one giant question for 2026 is will spirit survive? Will spirit survive? Yeah, it doesn't get

doesn't get more monumental than that. It's not a case of is the airline going to be doing XYZ,

pivot strategy to ABC survival J. Yeah, survival. And so they, you know, they enter the new year.

I don't want to I don't want to be unfair to them and say hanging by a thread. They may take

objections to maybe maybe that's a little bit too severe of the characterization. But obviously,

you know, they are bankrupt. They had to sounds like they had to cajol and beg for some more

some more cash from their creditors because they weren't meeting their financial objectives.

And they apparently are, you know, last we heard, they're still trying to see if they can work out

a merger with frontier. But, you know, no, no guarantee that they'll be able to hold out. They are

a lot, lot smaller than they used to be. They've just been shedding a lot of roots and assets.

And they, you'd have to imagine that the next couple of weeks, you know, let's say we're

here early January, but certainly February and March. That's, you know, super peak season for

Florida, which is the bigger market. So I could be maker break for our friends at spirit. And we

certainly wish them and their employees well. Yeah, absolutely. It's very easy when we're talking

about big airlines and corporations in general to forget the human factors. So, you know,

keeping everyone who's involved in the spirit machine in our thoughts at this difficult time.

And they're not here to defend themselves, but the market filing on December 15th insisted that

flights ticket sales and operations continue as usual. And if you're looking for the latest

updates, the company maintains a dedicated website about its restructuring process. That's

at spiritrestructuring.com. What is a question that's on your mind regarding the U.S. airline

industry? Well, interestingly mentioned Florida there, Jay. How is Florida faring up to snugs? We

spoke many, many times in the post pandemic period about the strength of Florida and then the

relative over capacity in Florida, sort of paired rightly or wrongly with Las Vegas in terms of

over saturation of domestic leisure markets. And then capacity got pulled out and you obviously got

sort of micro factors with jet blue and spirits and others. I want to know if someone could tell me

Jay's famous crystal bowl, you know, how is the Florida market right now?

I think it's a very important question. And I'm not sure that Delta, I mean, Florida is a big

market for Delta, but because they're so global, I'm not sure they'll specifically talk about Florida.

Maybe one of the analysts will ask about it or maybe one of us will ask as well.

But the Florida market is extremely important to a lot of these low-cost carriers that struggled in

2023, 2024, 2025. And it's an economy with a lot of the Florida economy. I don't think it's

quite as robust as it was, let's say two or three years ago. There's questions about some of these

affordability questions, if you think about the housing market there, a lot of insurance costs

and condo costs have gone up a lot. And so that's just a local economy and the traffic that's

generated out of there. But then as far as inbound Florida tourism, obviously, I have the international

stuff, which doesn't affect the U.S. airlines that much. I mean, Canada, that's certainly down to

Florida, Canada demand. And the U.S. airlines carry some of that through their hubs. But more

importantly, I think if you look at the Jeppelese with the world and South-West, and even some

of the smaller one-spirits, frontiers, breeze, a lot of there, a legion, one thing that they will

encounter this quarter. And I looked in Serium Dio just earlier to check, Florida capacity is

going to be sea capacity is going to be up about three or four percent this quarter year over

year, which is, you know, it doesn't sound like a lot, but overall domestic capacity, the entire

United States industry wide is only up like one percent. And the economy is maybe growing

two or three. I mean, we had some higher GDP growth readings of late, but probably two or three

is a fair statement. So, you know, Florida growing ahead of GDP, I don't know that that sounds a

little bit too bullish. And you do kind of see it if you just do a sampling, you know, you look at

fairs and they look pretty low. If you look at, you know, North big markets like Northeast to

Florida, the fairs are pretty, pretty low. So that could be, you know, that's not, that wouldn't

be good news. They could also be, you know, weighing on the Florida tourism market as well, it could

just be general, you know, economic consumer, household spending malaise. There's not really any

hard evidence of that, but we know that, you know, the last couple months of 2024, US job markets

started showing signs of weakening, et cetera, et cetera. So, you know, maybe some pressure on

that market, which would not be good for these LCCs that are trying to recover not to, you know,

beat a dead horse, but I did notice, for example, the Fort Lauderdale market, you would think that

that maybe would be down in capacity because of all the capacity, you know, all the flights that

spirit has pulled, but no, it's not like Fort Lauderdale is now one of the fastest growing markets

in the United States year of year, which, you know, surprise, surprise. And a big reason to that

is that, you know, JetBlue, for example, has just, you know, all out of salt on trying to

knock spirit, you know, give spirit out of knock out below there. And it's capacity, just this first

quarter, up 27% from Fort Lauderdale. You know, Americans is up 13%, allegiance up 32%,

frontiers is more than double 117%. I can go on a below up 35%. So, yeah, you can see that Florida

may not be a happy story. And it is like, you know, I hate, again, I repeat myself. Probably people

are getting tired of me repeating myself, but a Florida is a very, very important market with,

you know, big, significant percentage of some of these carriers total capacity.

Huge year for a lot of US carriers, but in particular Alaska, because they've got a huge

intercontinental push that started with Alaska metal now going across to Tokyo and so,

obviously Hawaiian now part of the Alaska group. And they were already flying to parts of East Asia,

but Alaska now doing that in a more meaningful way. But the real attention this year is on Europe,

going to Rome, Reykjavik and London. Will Alaska's intercontinental push succeed?

Is that a question for me? I count me as a skeptic, Gordon. I know Alaska probably get mad at me,

but I wonder if flights like that, I mean, they're going to be, they're going to be up against

the Delta joint ventures, both to Asia and Europe. And those are pretty powerful.

Those are also particularly European routes. Even the Asian ones, very seasonal.

And you know, the nice thing is they can move the aircraft around from Seattle to Hawaii, but

you know, how many, how many months of the year can you make money going from Seattle to,

what was it you said, Rome? Rome, Reykjavik and London, Heathrow.

Rome, yeah, Reykjavik. London's a little bit different because it's a business market,

you know, a little less seasonal. But yeah, it could be tough. It could be tough. Delta will be

a much more formidable competitor on intercontinental and that long haul stuff than they will be,

than they are domestically. So yeah, all good luck to them, but it's going to be a challenge.

Asia is one of those markets from the West Coast where the Asian carriers actually are pretty strong,

too. There's a lot of non-stop, you know, the, you mentioned, obviously Korean Delta have their

joint venture. But if you think about, you know, Tokyo, all in the pond and Japan airlines are both

very strong to the West Coast. And then, you know, you start thinking about other airlines. I mean,

look at Seattle to Taipei, which Alaska is not in that yet, I don't believe, right? But I think

there aren't there four airlines flying that. It's like Delta, EVA, Starbucks, and China

airlines are all flying that way. There's no way that that market can support four wide-body carriers.

So, you know, on the last, because not in that too, but just to give an idea that, you know,

Asia West Coast can be, it's not for, you know, it's no laughing matter.

No, no, no, no. And I was just going to say, you know, this story is not going to be

opening closed in 2026. It's going to take some months, multiple quarters, before we have a

fuller picture of, of how Alaska's intercontinental experiments plays out. Jay, any other

key questions for U.S. Islands in 2026, briefly before we wrap up?

Well, I think a big one I'll give one more is, you know, Will Southwest turn itself around.

Will this be the year after a couple of struggling years that they finally get back to Southwest

levels of profitability? What do you think, Gordon? Are you an optimist? Are you, or, you know,

conversely, are you still concerned about them? I'm still concerned about them. Something had to

change. I think what I've seen so far is broadly positive, but I think there'll be a few more

bumps in the road. But, you know, if we're sitting here at five years time, we haven't been

replaced by AI yet, Jay. I think the aviation historians will probably look fondly upon the

changes that take place or are taking place at Southwest, but it's just a question of the

execution, in my view. I saw Southwest stock price in December, I think it was, was up a lot.

It was one of the 10 stocks in, like, was it the S&P or whatever, whatever index they were,

it was one of the 10 U.S. stocks, basically, that had the highest increase, you know,

that it was in the top 10. So there seems to be some more bullishness there. And some of that

could be related to the fact that overall domestic capacity, as I mentioned, is only up 1%

year-to-year in the quarter. And then some of it could be just more optimism about some of the

many changes that they've made. And by the way, more changes to come likely, I mean, they're still

talking about doing lounges and maybe overseas swites and maybe a big question mark. I don't

want to sound too speculative, but I wouldn't totally rule out a jet blue takeover or something.

As grandiose as that, you know, this is still maybe

less probable than probable, but the logic is there. We will end it there, Jay, with that

beautiful. My going too far off, too far off the, I don't know, in there.

I'm quite happy to end on a spicy, provocative note.

Send us your thoughts, everybody. Send us emails. This should Southwest by JetBlue.

Yeah, podcasts at skip.com or contact Jay on LinkedIn. You're a bit of a celebrity over there on

LinkedIn, Jay. I was looking at your profile earlier today. And it was, the engagement is

second to none. You are LinkedIn guru. Anyway, if you join the podcast, I'll be signing autographs

at the next Skifty then. Yes. If you are enjoying the podcast, then why not consider a subscription

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airline reports and awesome, amazing research reports in the hopper for 2026. Take it from me.

And a quick thank you as well to Jay for the first episode of the year. I thought we were going

to be a little bit rusty because it's been like three weeks since we recorded something, but we

got through that. Well, we'll add the listener to you. That's very true. I don't want to be

marking my own homework, but we got through it, pushing 40 minutes as well. So a bit of a

bumper episode to treat you all back into the new year. Thanks to Jay for joining me and thanks

always to our producers Monica and Will and wherever you are in the world. Thanks for listening and

we'll catch you next time. Bye for now.

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