Change In System Unit Costs, Q3 2017 Versus Q3 2018

Airline Economic Analysis 2019



For the fourth straight year, labor represented the largest cost category for US airlines across all carrier groups. It accounted for 35.9 percent of Network carriers’ systemwide unit cost, 36.1 percent for Value carriers, and 22.2 percent for the ULCC group. Network carrier unit labor crept up 0.9 percent year-over-year, third quarter. During the same period, Value and ULCC unit labor cost increased 3.5 percent and 15.4 percent, respectively. Aircraft maintenance decreased 15 percent for Network carriers in the third quarter of 2018 compared to third quarter the year before. But Value carriers experienced an 8.6 percent increase in aircraft maintenance, while ULCCs remained flat. Although aircraft maintenance does affect quarterly profitability, it is difficult to analyze such short periods because heavy maintenance checks can cause swings in costs



The above analysis is an excerpt from the Airline Economic Analysis 2019.

The rising demand for air travel globally has been encouraging airlines to focus on the need for new capacity and the potential to expand revenue and market share — even if such moves mean sacrificing margins and reducing yield. This year’s Airline Economic Analysis reinforces our earlier findings that adding capacity at a pace faster than US economic growth has contributed to carriers’ eroding margins over the past several years and is likely to continue to do so until supply and demand is more aligned.

Based on current trends, the operating margin for US airlines is expected to narrow to between five and six percent in 2019 — a margin that is less than 40 percent of the industry’s peak of 15 percent in 2015. Ironically, this margin squeeze began during a period of falling oil and jet fuel prices: In January 2016, oil prices per barrel slid to around $35 from a high of more than $110 in 2014. Although prices quickly recovered to above $50, they have not returned to the $80-plus levels they had maintained between mid-2009 and October 2014. Still, the outlook is mixed, and the Energy Information Agency projects prices trending upward in the second half of the year. Jet fuel remains the industry’s second biggest operating expense.

About the Report

In its tenth year, the 62-page report covers a range of aviation industry-specific economic and performance data as well as global capacity growth by region. This year spikes out special analyses on the profitability of the Pacific region and a more indepth fuel price analysis. 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 and ultra low-cost models
  • The industry business cycle considering GDP, airline margins, and fuel prices
  • Operational resiliency and on-time performance statistics

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Airline Economic Analysis 2018
Airline Economic Analysis 2018
Airline Economic Analysis 2018