Was 2018 a good year or a bad year? Speaking collectively, airlines can’t complain. As IATA pointed out last week, industry profits should hit about $32b this year, good for a 7% operating margin. This 7% comfortably exceeds the sector’s cost of capital. But IATA isn’t throwing any parties.
That might sound like a lot of money, but $32b will be down from $38b. And it’s the lowest figure since 2014. The industry’s operating margins will also have declined for the third straight year. The fact is, 2018 was filled with pressure, most importantly from fuel prices, and with no shortage of economic and geopolitical headwinds. There were, of course bright spots too, especially on the demand side. Here, in no particular order, are Airline Weekly’s 10 most noteworthy developments of 2017:
1. New aircraft technology forges ahead, but with production headaches: It wasn’t the first year for the latest generation of A320s and B737s. But in 2018, airline fleets began achieving a critical mass of NEOs, while rapidly incorporating MAXs. On the widebody side, Qatar Airways debuted the newest and largest version of the A350, the -1000, while Singapore Airlines introduced the newest and largest version of the B787, the -10. Back on the narrowbody side, it was a breakthrough year for the A220, previously called the CSeries, winning big orders from JetBlue and JetBlue’s founder David Neeleman for his new U.S. airline.
Brisk demand for MAXs and NEOs continued, although the widebody market stayed tepid, notwithstanding some activity from Turkish Airlines, American and a few others. Selling planes, how ever, wasn’t the big issue. More problematic was building the planes and delivering them on time, which Airbus in particular struggled to do. Engine manufacturers were partly to blame. Engine issues on some B787s already flying, moreover, caused disruptions. More tragically, following a fatal Lion Air crash, Boeing faced questions about whether it had done enough to inform airlines and pilots about the MAX’s updated stall avoidance system.
2. Cargo boomed despite threats to global trade: Just hearing the word “tariff” sends a shiver down the spines of airlines like Korean Air, China Airlines and Cathay Pacific, all heavily dependent on the cargo business. It’s a big business for others like Lufthansa, Air France/KLM and LATAM too. But the worst fears haven’t materialized. Instead …
To continue reading, become a Skift Airline Weekly subscriber today.