Insights

Airline Economic Analysis 2017-2018

After 17 straight profitable quarters, the US aviation industry is on a winning streak. Even as the industry’s two largest operating costs – fuel and labor – edge up, a combination of persistent demand for air travel that’s outpacing the overall economic growth and newfound discipline on adding capacity is keeping network and value carriers in the black.

A return to growth in passenger yield is an example of the industry’s enduring strength.  In fact, in 2017 yield became the second biggest contributor, after new capacity, to revenue gains for US airlines – particularly for the network carriers’ domestic operations.

For those players, the key to staying profitable has been resisting competitive pressures to add excess capacity. While many value airlines still make their money and gain market share by adding routes and expanding available seat miles (ASM), their network rivals have learned that following them down that path leads to lower unit revenue.

 

Meanwhile, in the report period, the biggest contributor to new revenue was added capacity, the name of the game for most US value carriers.  As a result, a cultural gap has developed between network airlines and some of the more aggressive value players, based on the strikingly different ways the two operate and yet remain profitable in the face of rising operating costs. Meanwhile other value carriers are straddling the gap by judiciously adding capacity while keeping an eagle eye on yield.

Both value and network carriers remained profitable in 2017, with value airlines achieving operating margins that exceeded 20 percent in the second quarter. But there’s no doubt that rising costs from higher fuel prices and new labor contracts are slowing the momentum. Reversing a multiyear trend of decline, unit costs rose.

Even so, the recent resilience of US airlines is an impressive reversal of fortune after their cumulative performance from 2000 through 2014, when they lost $29 billion. While profits declined somewhat in 2016 and 2017, it was only in comparison with 2015, the most profitable year in the industry’s history.

Read the full report to learn more about the economic performance of the US airline industry across:

  • Revenue drivers of capacity, passenger yield, load factor, ancillary and other revenues, and cargo

  • Cost drivers of labor and fuel

  • Profitability and margins

Other special sections include:

  • Worldwide capacity trends in Asia/Oceana, North America, Europe, Africa/Middle East, and Latin America for the global airline industry

  • Hot topics of Brexit, breaking the business cycle, and the low-cost, long-haul business model

Airline Economic Analysis 2017-2018


Annual analysis of airline sector economics, trends, and performance.

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About the Report

In its ninth year, the 76-page report covers a range of aviation industry-specific economic and performance data as well as global capacity growth by region. The report also includes discrete analyses on:

  • Revenue per available seat mile (RASM)

  • Load factors

  • Passenger yield

  • Ancillary revenue

  • Stage-length adjusted revenue per available seat

  • Cost per available seat mile (CASM)

  • Labor cost

  • Jet fuel costs and labor costs

  • Profit margin data

  • US carrier capacity analysis

  • Global industry capacity trends for major world regions

  • The evolution of the low-cost long-haul model

     

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