Issue No. 721

A Bad Quarter for European Airlines

This year’s first quarter was one all European airlines—no exceptions—would rather forget.

From January through March, there wasn’t a single publicly traded U.S. airline that lost money. In stark contrast, every European airline except IAG (among the vast majority that have reported so far) suffered Q1 losses. And even within IAG, only British Airways avoided red ink—Iberia, Vueling, and Aer Lingus all lost money. Elsewhere across Europe, the only other airline subsidiary earning a Q1 profit was Lufthansa’s Swiss unit.

Europe, of course, has a more seasonal airline industry, with comparatively worse winters and better summers. The Easter shift probably impacted Europe’s carriers more as well. In fact, aggregating the full-year 2018 financial results of the 12 major European airlines that publicly disclose figures, what emerges is a healthy-looking 8% operating margin on $142b in revenues. That’s only a bit worse than the 10% operating margin registered by America’s eleven largest non-regional airlines (on $178b in revenues).

Europe’s figures, however, belie great variance by airline, from success stories like Ryanair and IAG, with 12-month margins of 16% and 13%, respectively, to money losers like Norwegian, Icelandair, and Virgin Atlantic. In the middle, meanwhile, are carriers like Lufthansa and Air France/KLM, hurt for sure by their own shortcomings and complexities, but also consumed with frustration about developments beyond their control: Overcapacity, market fragmentation, labor strife, economic stagnation, onerous taxation, operational bottlenecks, and subsidies to zombie airlines.

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