Growth Expectations of Low Cost Carriers
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Low-cost carriers: growth expectations
After a decade of rapid development, low-cost carriers in mature markets are now having to expand their horizons, both demographically and by geography, to keep their foot on the accelerator
Financial results for low-cost carriers over the past 12 months show the sector underlining its continued profitability credentials. After coming out of the 2009 meltdown relatively unscathed compared with their battered network rivals, nearly all airlines improved their financial position as demand rose.
Revenues across 36 carriers in this year's Airline Business low-cost carriers survey jumped 19% to $58.7 billion in 2010, while operating profits across nearly 30 of these airlines more than doubled to 4.2 billion last year.
While a similar pick-up in fortunes has been seen among their network rivals, most of which enjoyed the unexpectedly quick return in premium traffic last year, a look at recent profitability levels of both types of carrier highlights the robustness of low-cost operators.
Data from four years of the Airline Business low-cost carrier and world airline ranking surveys shows that while the 10 largest network carriers were highly profitable in 2006 and 2007, seven lost money in 2008 and eight were in the red in 2009 at an operating level.
Contrast this with the top 10 low-cost carriers - only two lost money in 2009, three in 2008 and one apiece in 2007 and 2006. The graph opposite shows the top 10 low-cost carriers have remained consistently profitable, albeit it at lower levels than their 10 biggest network counterparts - which have thrived in the good times and haemorrhaged in the bad.
"The [low-cost] business model has performed well through the recession, and that makes sense because business and leisure traveller are seeking value [during periods of recession]," says London-based RBS Aviation analyst Andrew Lobbenberg. While the sector has had
Top of Form
Low-cost carriers: growth expectations
After a decade of rapid development, low-cost carriers in mature markets are now having to expand their horizons, both demographically and by geography, to keep their foot on the accelerator
Financial results for low-cost carriers over the past 12 months show the sector underlining its continued profitability credentials. After coming out of the 2009 meltdown relatively unscathed compared with their battered network rivals, nearly all airlines improved their financial position as demand rose.
Revenues across 36 carriers in this year's Airline Business low-cost carriers survey jumped 19% to $58.7 billion in 2010, while operating profits across nearly 30 of these airlines more than doubled to 4.2 billion last year.
While a similar pick-up in fortunes has been seen among their network rivals, most of which enjoyed the unexpectedly quick return in premium traffic last year, a look at recent profitability levels of both types of carrier highlights the robustness of low-cost operators.
Data from four years of the Airline Business low-cost carrier and world airline ranking surveys shows that while the 10 largest network carriers were highly profitable in 2006 and 2007, seven lost money in 2008 and eight were in the red in 2009 at an operating level.
Contrast this with the top 10 low-cost carriers - only two lost money in 2009, three in 2008 and one apiece in 2007 and 2006. The graph opposite shows the top 10 low-cost carriers have remained consistently profitable, albeit it at lower levels than their 10 biggest network counterparts - which have thrived in the good times and haemorrhaged in the bad.
"The [low-cost] business model has performed well through the recession, and that makes sense because business and leisure traveller are seeking value [during periods of recession]," says London-based RBS Aviation analyst Andrew Lobbenberg. While the sector has had