- Global: +2.9% capacity, +1.9% scheduled services year-on-year;
Global seat capacity up 2.9% in Jan-2012: OAG
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CAPA global airline financial outlook
Operating margin to reach new high in 2016, but this may signal a subsequent downturn. CAPA’s global airline operating margin model indicates that the industry was more profitable in 2015 than it has been for almost five decades. Moreover, the model predicts that world airline operating margins will rise further above previous historic peak levels in 2016. These new levels of profitability are mainly thanks to the low oil price environment, coupled with strong demand growth in spite of global economic growth rates that are far from exceptional.
Much of the industry is also benefiting from a period of relative capacity discipline. New revenue sources may also be helping, although their role in airline profitability is still emerging.
The macroeconomic and geopolitical backdrops provide the main risks to this forecast. Beyond that, the biggest challenge for the industry will then be to try to sustain margin levels, rather than to allow a peak to be followed by a rapid downturn, as has always happened in the past. But downturns can play a positive role in industry development, possibly even stimulating consolidation.
CASK: Europe's Full Service Airlines have the world's highest costs, US airlines the lowest
In the Americas there is a narrower CASK gap between FSCs and LCCs than elsewhere. This has created an opening for the development of the region's ultra-LCCs, particularly in the US. Europe is, on average, home to the highest-cost FSCs in the world, in spite of some cost-efficient FSCs that are close to LCC territory. Europe also has some ultra-LCCs, with even lower unit costs than in the US. The Asia Pacific & Middle East region has perhaps the greatest diversity of CASK levels, reflecting its range of business models and its combination of developed and emerging markets.
For all airlines and all markets, CASK reduction - or, at least having the most efficient level of CASK for the chosen business model - is crucial. The long-term history of the global airline industry is one of falling unit revenue in real terms. The only way that the industry has ever made a positive margin has been through lowering its CASK. This remains vitally the case as economic conditions remain soft.
After profits, CASK has become a vital focus for airline managements over recent years. Segmentation of the world's airlines according to their unit cost – cost per available seat kilometre (CASK) – reveals much about their relative competitive positioning. It highlights the differences between airline business models, and also between the major regions.