The 10 most profitable airlines of the globe

23 June 2017 Consultancy.uk

American Airlines have become the world’s most profitable airline according to new figures between 2012 and 2016. Delta Airline, remain the most steadily profitable airline meanwhile, as the top earner between the longer period of 2007 and 2016. Scandal-hit United Airlines maintained third place in both time-frames, while British and Irish carriers also continued to fly high.

The global airline industry has long been criticized for its inability to earn sufficient returns. But in 2016, for the second consecutive year, the industry generated approximately $17 billion in economic profit (EP), down from the 2015 record of roughly $25 billion. American and Delta were meanwhile found to be the world’s most profitable airlines, according to an analysis from L.E.K. Consulting.

The professional services firm defined economic profit (EP) as the surplus after-tax operating income that companies generate, after charging for the capital they employ. Analysing figures from some 106 reporting airlines, L.E.K found that approximately over half were EP-positive in 2016, with 54 meeting the criteria to record profit in these terms.

Part of this profitability stems from the fact commercial airlines have added significantly to their seat-count per aeroplane in recent years, with an almost 50% increase in +100 seat flights between 2005 and 2015.

Researchers however also cited low oil prices as a significant contributor to growth in EP in 2016, though in the future oil prices are forecast to climb in 2017, suggesting that future profitability in the industry may well fall, especially as global aviation firms plan to add over 10000 planes to their collective fleets by 2027, which will inevitable drive up demand, and prices, for fuel further.

U.S. carriers continue to be the most lucrative airlines in the world, with all major U.S. carriers generating significant positive EP in 2016 and over the past five years. The four largest U.S. airlines retained their distinction not only as the top EP earners for the past five years, but also as the four largest market-cap airlines in the world, demonstrating that the financial markets are recognizing the value these airlines are creating.

Top 10 economic profit generators, by absolute dollars (2012-2016)

Market Turbulence

American Airlines remain the world’s largest carrier, with a fleet sized at 1,556 aircraft in 2016 ultimately providing the company with a platform for more rapid profitability between 2012 and 2016. The company registered an EP of $14,108 million in that time, compared to nearest competitor Delta, who brought home $12,107 million in the same period. However, with the world’s second largest fleet of 1,330 planes, Delta  were measured as the most profitable airline over a longer period, sustaining its number 1 ranking between 2007 and 2016, in spite of an economic crisis occurring during that period.

In the meantime, researchers found that United Airlines maintained a steady third place in both time frames, with their 1,229 aircraft bringing in an economic profit of $10,700 million from 2012-16. The US company saw stock value plummet 1.1% in early 2017 however, wiping out $255 million of the airline's market value, following police being filmed dragging a passenger from an overbooked flight. United will undoubtedly be keen to put the episode behind them in order to maintain their consistent profitability. Completing a completely American top four, both in terms of fleet-size and profitability, Southwest Airlines’ 720 planes meanwhile recorded EP of $5,407 million.

Anglo-Spanish outfit International Airlines Group, which according to the most recent figures the group had 464 aircraft with 150 aircraft on order, ranked fifth in profitability, raking in $4,408 million between 2012-16. The London-headquartered group joined in the top ten by Europe’s largest low cost carrier Ryanair, which boasts 349 aircraft. Placing sixth, with a 2012-16 EP of $3,429 million, Ryanair operated on a similar model to that of Southwest Airlines, the Irish airline only operating Boeing 737 aircraft. EasyJet, which operates out of London-Luton airport, meanwhile rounds off the top ten, posting an EP of $2,100 million over that same period.

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