The Airline Weekly Halftime Show: A region-by-region look at developments that shaped the first six months of 2017

With the global economy perking up and oil prices falling again, airlines in most parts of the world are looking forward to the second half of 2017. In the first half, some new and advancing developments challenged the status quo, including the rise of longhaul LCCs and Chinese carriers on intercontinental routes. Low commodity prices continued to weigh on airlines in commodity-heavy economies like South America, the Middle East and Russia. And while the U.S. dollar slipped in value against most currencies during the half, its relative strength remained a headache for many non-U.S. airlines. Nevertheless, in the first quarter of the year (carriers haven’t started their Q2 reporting yet), the world’s airlines collectively earned an operating margin of roughly 5%, not bad for what’s an off-peak period in most geographies. At the same time, traffic growth and tourism is extremely strong, aircraft prices are softening, cargo markets are reviving and productivity is growing with heavy IT investments. Security concerns haven’t disappeared, as recent attacks in the U.K. make clear. But the disruptions to airlines were less in this year’s first half than a year earlier, highlighted by the rebound in Asian tourism to Europe. Here’s a closer look at first half trends for each of the world’s 10 global regions:

North America
U.S. carriers weren’t entirely immune from pressure. Certain international markets like London and China faced overcapacity concerns. United’s Dr. Dao fiasco and IT snafus at other airlines gave the industry a public relations black eye. And labor costs rose sharply in Q1, as did fuel costs prior to easing in Q2. In the end, Q1 revenues rose just 2% y/y compared to an 11% spike in operating costs. So operating margins fell sure enough, for each and every U.S. airline except Hawaiian. But they fell from extremely high levels in early 2016, when fuel prices were at extreme lows. Most carriers are now confident of once again being able to expand their margins, especially with fuel prices now in retreat. Carriers are also keeping costs in check through their fleet strategies, through productivity enhancements built into new labor agreements, through ongoing seat densification, through the deferral of widebody aircraft deliveries, through their unprecedented negotiating clout with suppliers and through their investments in technology. Even more im…

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