Reflecting on the first six months of 2018, two words quickly come to mind: “strong,” which describes the revenue environment, and “rising,” which describes the cost trajectory. Airlines around the world—and their suppliers too—spoke glowingly of strong traffic growth, strong premium demand, strong tourism, strong cargo trends and so on. Less happily, oil, labor, aircraft and U.S. dollar markets were likewise strong, offsetting—and in some cases completely neutralizing—the revenue momentum. In general, though, the global airline business is producing healthy profits, with the global economy still growing nicely and energy prices yet to reach levels of true distress. But concerns increased as the half progressed: How much more might oil prices rise? How much damage might stem from rising interest rates? Is the U.S. overstimulating its economy with boomtime federal tax cuts and spending hikes? Are falling Chinese stock prices and currency values a sign of trouble? Might a trade war dismantle the international economy?
The first half did not bring answers on key Brexit questions, i.e., will U.K. airlines still retain their E.U. and U.S. flight rights? But nor did it bring many security shocks—there were no major terror attacks (knock on wood) in any major airline markets. There were, however, disruptions in the aircraft market, including lengthy delivery delays and engine flaws affecting some Dreamliners. An engine malfunction, meanwhile, caused a passenger fatality on a Southwest flight.
Aircraft-related developments weren’t all negative for airlines. On the contrary, the half saw new models debut, such as the B737-MAX 9 (with Lion Air), the B787-10 (Singapore Airlines), the A350-1000 (Qatar Airways) and the secondgeneration E190 (Widerøe). Airbus, meanwhile, prepared to take control of the CSeries program, while Boeing prepared a parallel takeover of Embraer’s commercial jets. In non-aircraft technology developments, airlines stepped up their digital strategies, seeking revenue growth and cost savings alike by exploiting their rich pools of commercial and operational data. Here’s a closer look at first half trends for each of the world’s 10 global regions: North America The U.S. market wasn’t immune from revenue pressures during the first half. A California…
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