Airline Weekly Lounge

For a second straight year, Delta’s operating profit margin has fallen year-over-year in the first quarter. The reason for the decline, once again, is rising costs. The good news: Rising revenues—from nearly every corner of Delta’s network—propelled the airline to a solid 8% operating profit margin. One of the rising costs is, of course, fuel. Are fuel prices putting a damper on earnings overall? IAG seems interested in expanding its empire, having purchased a small stake in Norwegian and considering a full takeover. Lion Air, meanwhile, is purchasing planes… lots and lots of planes. In the U.S., Allegiant came under fire over safety concerns. Lastly, Frontier is adding 69 routes this month alone.

Numbers were put to the misery South African Airways has been experiencing when, last month, the airline finally reported earnings for its fiscal year ending in March 2017. Those numbers included a gut-wrenching negative 9% operating profit margin on the year. “Crisis” isn’t too strong of a word. What is SAA doing to turn things around? Elsewhere, it’s steady-as-she-goes for Cebu Pacific, which again is sitting among the world’s profit leaders. The Indian government has solicited bids for a 76% stake in Air India. Any taker would get the surprisingly-profitable Air India Express but would also have to assume a considerable amount of debt. Plus, the comeback continues at Kenya Airways. And lastly, will Berlin’s new airport ever open?

Air France/KLM and Lufthansa have a lot in common, including the fact that both distantly trail IAG (the parent company of British Airways, Aer Lingus, Iberia and Vueling) in terms of profitability among Europe’s Big Three airline groups. What does IAG have that the others don’t? Meanwhile, Virgin Atlantic turned in a profitless 2017 partly because of hurricanes. The fiesta has fizzled in Mexico right now as overcapacity, a weak peso and political concerns made it a miserable 2017 for the airlines there. Aeromexico can at least chase money overseas. Volaris has not been so fortunate. Hopefully, Volaris can make a comeback like Copa and Turkish Airlines. Both carriers have gone from tears to cheers in recent years.

Life is good in Australasia—especially if you’re Qantas or Air New Zealand. Both carriers are enjoying a bit of a golden age that stems from good management and some macro tailwinds. Meanwhile, Virgin Australia, seemingly unable to catch those tailwinds, drifted toward a disheartening 2% operating profit margin in 2017. Scandinavia’s SAS, meanwhile, had a negative margin that really wasn’t disheartening, because it was a small loss (-3%) and came during the airline’s always-difficult fourth quarter. Avianca managed to profit despite a painful pilot strike. And finally, Seth Kaplan caught up with Qatar Airways Vice President of the Americas Günter Saurwein to chat about the new airline's business-class product and much more.

Not only does Ryanair keep on rolling, it seems to be gaining speed. Its full-year 2017 operating profit margin will almost certainly be the world’s best after every airline has reported. Ryan-like Wizz Air is also among the world’s profit leaders despite paying a lot more for fuel than last year. Korean Air and Asiana saw their China problem solved in Q4, and both received a lift from cargo and won appreciation. Air Canada and WestJet are trying just about everything to compete against each other, and it’s working—for the moment. Spirit is delivering solid profits, although they aren’t Spirit-like. Meanwhile, fellow Scandinavian carriers Norwegian and Finnair likely have divergent views on 2017—one was glad to see it go, while the other likely wished it would never end.

With the bulk of U.S. airlines having now reported fourth quarter earnings, what has unfolded is largely a success story. 2017 wasn’t as good as 2015 or 2016, but it was generally good. Gone are the exhilarating margins of 25% and 27%. Instead we’re seeing healthy margins of 17% and 19%. Delta continues to set the pace for the Big Three. United continues to trail its peers, and that has led to some head-turning growth plans. American saw revenues surge in Dallas, Phoenix and its transatlantic market. Southwest overcame a fuel hedge reckoning to deliver strong results. Alaska appears to be coming down to Earth. JetBlue, which saw some of its Caribbean markets decimated by hurricanes, nonetheless, had a good quarter. Allegiant delivered disappointing results by its standards, but the airline still bested all U.S. carriers that have reported in Q4. And while it continues to enjoy sunny results, Hawaiian may be facing more competition in 2018.

Delta’s 2017 profits were down slightly from the glory days of 2015 and 2016. But make no mistake: This airline is performing very well. Consider that fuel prices increased 23% in the fourth quarter, and the airline was still slightly more profitable in the quarter year over year. The transatlantic market is performing well. The Asian market is performing well. The South American market is performing better. And that’s all before you get to Atlanta, which is one of the most valuable pieces on the worldwide airline chessboard. For a little more color on Delta’s positioning around the globe, this episode includes an interview with Steve Sear, Delta’s President of International and Executive Vice President of Global Sales. Click here to subscribe to podcast. –Jason Cottrell Subscribe to Podcast | Listen Whenever: iTunes | Stitcher

Just a few years ago, the often-troubled SAS was merely inches away from seeing its light burn out permanently. Since then the airline has rallied. This past October the airline completed its best fiscal year in two decades. Is the airline merely surfing the buoyant European economy? Or is it building long-term success? Finnair is also enjoying a brilliant year. Icelandair is coping with growing competition. And the Air Berlin parts sale is largely settled. In the U.S., Spirit announced that in 2019 it will again part ways with its CEO, which happened just a couple years ago. Frontier had a pretty solid 2017, but it didn’t launch an IPO. Lastly, Delta kicks off earnings season this week.

Jet Airways had a pretty mediocre third quarter. Still, there are plenty of signs of hope for the often troubled airline. In fact, Jet has posted 10 consecutive profitable quarters. India’s low-cost carrier IndiGo, meanwhile, is raking in double digit profit margins. And SpiceJet—an airline that fairly recently had buzzards circling above it—had its best third quarter ever. Both major airlines in South Korea have seen their profits tamped down by a diplomatic spat between their country and China. Fortunately both Asiana and Korean Air enjoyed robust growth in cargo revenue, which kept things from getting too ugly. Meanwhile, Kenya Airways is quietly regaining its footing. And lastly, we take a quick look ahead to 2018.

European low-cost carrier easyJet isn’t doing as well as competing LCCs Ryanair and Wizz Air. But make no mistake: easyJet is doing well. The airline’s 20% operating profit margin for the April-through-September period puts it among the most profitable carriers in the world at the moment. In the U.S., Delta and Alaska Airlines have been waging a battle for Seattle for years. And more recently, Delta and JetBlue are brawling in Boston. Is it possible all three airlines are making money at these highly contested airports? LATAM continues to rebound from the Brazilian recession. Avianca had a good summer despite labor strife and ending service to Venezuela. Finally, we close this episode looking at some growing and slowing airports.