The Airline Weekly Earnings Scoreboard

Pushing Back: Inside the Issue

United and Alaska joined the earnings parade last week. More on that in a second. First, there’s growing chatter about a possible mega-merger in South America, pairing the Brazilian carriers Gol and Azul. Any such deal would by extension involve Avianca, which is merged with Gol under the Abra umbrella. Would regulators allow Brazil to be left with just two major airlines? Even three seems a bit scant. We’ll see soon enough if there’s in fact a deal to be done.

Returning to United and Alaska, both posted uninspiring headline figures for Q1. But beneath the surface were wellsprings of positive momentum. A lot of what has been strong remains strong, notably premium demand. And now, corporate demand has reentered the arena, giving things another boost. Even while battling cost inflation and Boeing pains, both airlines are expecting a lucrative summer peak.

Elsewhere in North America, Air Canada announced another big international expansion. Spirit tried to reassure investors about its liquidity following horrifically-bad first quarter losses (isn’t Q1 supposed to be Florida’s peak season?). JetBlue hired a longtime Frontier executive to oversee its network. Southwest unveiled a new marketing campaign that highlights its flexible policies. Aegean is stretching its wings with longer-range planes. Airports Council International published its latest airport rankings. Cirium has new data on which airlines are most punctual. And our very own Airline Weekly figures rank the world’s airlines by operating margin. Read on to see who’s number one!

Airline Weekly Lounge Podcast

Fresh out of United’s Q1 earnings call, Gordon Smith and Jay Shabat discuss the headline numbers and critical trends facing the U.S. carrier. Listen to the episode here, and find a full archive of the Lounge here.

Weekly Skies

An Official Q1 Net Loss. But Don’t Worry. United is Flying High.

• No, it didn’t outperform Delta (maybe one day). But United’s first quarter financial performance was nevertheless excellent, despite the red ink on its bottom line—its official Q1 net loss came to $124m. January-to-March is the weakest quarter of the year for most U.S. airlines, and especially so for United. Still, the Chicago-based carrier earned a positive 1% operating margin last quarter. Add back $200m—that’s an estimate of what the Max-9 grounding cost it—and United’s Q1 operating margin would have been positive 2.5% (Delta’s figure, remember, was 5.1%). Just like Delta, United’s Q1 figures were better y/y but worse versus Q1, 2019. 
• All U.S. airlines, alas, are regrettably operating in a higher-cost environment relative to pre-Covid times. It’s true for fuel costs. It’s true for non-fuel costs. United is also struggling to implement a business plan that’s heavily dependent on the introduction of new aircraft, many of which are subject to intolerable delivery delays. Last quarter’s Max 9 grounding aside, United is without the Max 10s it was counting on—the plane still hasn’t been FAA-certified. As a result of these aircraft delays, United finds itself overstaffed, with a workforce sized to manage capacity levels that are proving impossible to fly. This, to be sure, is taking a toll on United’s unit costs. 
• But wipe away the tears. Because on the demand side, the theme song might as well be that 1980s hit “Almost Paradise.” Pretty much all markets are thriving, with unit revenue gains especially impressive domestically and across the Atlantic. To nobody’s surprise (based on Delta’s earlier comments), demand for premium products—like business class seats—has never been hotter. And now, to add further momentum, corporate travel is finally hot again too, led by road warriors from the tech, industrial, and professional service sectors. 
• United has now reset its aircraft delivery schedules, adding more Airbus A321 Neos and building contingencies for further delays. 
• Always one to share his mind, CEO Scott Kirby expanded on his thesis of why low-cost carriers are underperforming so much in the post-pandemic world. He emphasized the significance of the industry’s elimination of change fees, which are enabling carriers like United and Delta to capture a larger-than-understood segment of small business travelers. Southwest, for example used to distinguish itself by its lack of change fees. In addition, Kirby said United’s Basic Economy fares are now a more potent weapon, with greater seat availability for price-sensitive fliers. Earlier, with so many regional jets, the airline simply didn’t have so many Basic Economy seats left to sell. Moving to large narrowbodies like Max 9s, Max 10s, and A321 Neos will address this over time (note: These are planes with extremely low unit costs, implying more wherewithal to offer deeply discounted fares and still make money). 
• United and Delta, Kirby suggested more generally, now have an impenetrable moat surrounding their businesses, underpinned by their globe-spanning networks, their massive loyalty programs, and their premium products and services. United does face some extra scrutiny from the FAA, hence the postponement of a planned investor day event. It does have exposure to Lufthansa’s recent labor unrest. It did say demand originating from Germany, a key European market, is weak. But these are mere molehills on a mountain of strong demand. 
• And one final note: Denver is now United’s busiest hub, based on seats scheduled this quarter (Cirium Diio). 

Apple of My Sky: West Coast Big Tech is Flying Again

• In some ways Alaska Airlines is like United. It carries a lot of business traffic. It offers premium-oriented products and services. In other ways, Alaska is more like an LCC. It only flies within North America. It doesn’t operate widebodies. So, is the Eskimo faring well like United? Or is he struggling like most LCCs? 
• The answer is clear: the Eskimo is doing great, underpinned by “robust close-in leisure demand” and—this is new—a “strong return” for west coast corporate business travel. Things are so good demand-wise that Alaska might just need to write its own song; Suggested title: “Heaven is a Place Called Seattle.” 
• Like United, Alaska did report a Q1 net loss, and even a Q1 operating loss. Operating margin was in fact negative 6%. But—there are a few big buts, actually—this includes a $162m negative impact from the Max 9 grounding in January. Boeing has since repaid that $162m in cash. Add that back to Q1 results, and Alaska’s operating margin ex items would have been positive 1%. 
• Remember, Q1 tends to be especially bad for Alaska. And keep in mind too that it’s paying a lot more for fuel than other airlines due to higher west coast refining margins—it paid $3.08 per gallon last quarter, compared to United’s $2.88 and Delta’s $2.76. 
• After a rough, lossmaking Q1 last year, Alaska rethought its network and redeployed capacity, resulting in better-than-expected unit revenue improvements. Also helpful last quarter was the absence of any major weather disruptions. 
• A few details on the long-elusive corporate recovery: Alaska said revenues from managed business bookings jumped 22% y/y, with about half the gain attributed to more volume and the other to higher yields. “Tech companies saw the biggest improvement with revenues up over 50% year-over-year and professional services revenue an impressive 20%.” February and March seemed to be the months when corporate business began taking off like a rocket. So much for any reluctance to fly on Boeing 737s. “Today, managed corporate revenue has fully recovered the 2019 levels, while tech [alone] is approximately 85% recovered.”
• Premium cabin demand was especially strong. The Alaska loyalty program “continues to post strong results.” Booking curves are normalizing. The spring break travel season looks highly encouraging. And looking beyond the spring, “the back half of the year looks to be shaping up well as industry capacity constraints remain in place, and competitive industry dynamics across our west coast markets stabilize.” JetBlue, for one, is cutting a lot of west coast capacity. 
• Alaska expressed enthusiasm for IATA’s NDC-style distribution, as well as other IATA initiatives expected to “massively increase our ability on the revenue side to distribute our various products and services.” 
• Anything else going on for Alaska? Well, there’s the tiny matter of Hawaiian Airlines. The planned takeover is on track, subject to government consent. Will the DOJ sue to stop the deal, as it sued (successfully) to stop the JetBlue–Spirit merger? Stay tuned. 

Bad Spirits

• Amid concerns about its financial health, Spirit provided investors with updated guidance. It now expects to end Q1 with about $1.2b in cash and other liquid assets. It expects to end the year with about $1.4b. The carrier continues to negotiate with Pratt & Whitney on compensation for grounded engines—in March they reached a deal whereby Spirit will receive monthly credits through the remainder of 2024, which will save the airline between $150m and $200m in cash. “Spirit intends to discuss appropriate arrangements with Pratt & Whitney in due course for any Spirit aircraft that remain unavailable for operational service after December 31, 2024.” 
• Nothing much has changed about the airline’s earlier assessment of its first quarter performance. It was, to be kind, downright dismal, with operating margin something like negative 14% to 15%. And don’t forget: Q1 is peak season for Florida! Margins were a bit depressed by the accounting treatment of its Pratt credits, some of the gains from which were moved out of Q1. But at best—even without that adjustment—management said operating margin would have been negative 11%. 
• On a positive note, better than expected operational performance helped with labor and other costs. Network changes, furthermore, are resulting in somewhat lower airport costs. 
• Will Spirit have to file for bankruptcy, as some on Wall Street anticipate? (Ted Christie called those comments a “misguided narrative” during a call with analysts in February.) A lot will depend on whether its network adjustments lead to more profitable flying, and whether fuel prices remain at reasonable levels. Note that Spirit recently pushed back aircraft deliveries to help cut near-term capital costs. But that means even fewer of the new planes it so desperately needs to grow. By not growing, holding down unit costs is an uphill battle. And it also means Spirit doesn’t need as much staff, leading to resentment among of unions. In the meantime, it just opened a new headquarters building near Fort Lauderdale (that’s not free). If only that judge let it marry JetBlue.  

DOT Pledges State Partnerships

• The U.S. Department of Transportation has announced it will partner with 18 state attorney generals to investigate airline consumer violations. The program, called the ‘Airline Passenger Protection Partnership,’ would expand the DOT’s oversight, creating a new system that fast-tracks airline misconduct cases. Transportation Secretary Pete Buttigieg said currently only the federal government could handle passenger complaints and enforce passenger protections. 
• Buttigieg said attorney generals will play a more direct role in resolving passenger issues. When an office receives a complaint, it will investigate. And if the attorney general determines that an airline is not cooperating with a state investigation or that it violated the law, the complaint will then be referred to the DOT. The Transportation Secretary said the program would allow the department to resolve passenger issues more quickly, since the state offices would have done “much of the legwork.” “Whenever something does go wrong, there has to be accountability,” Buttigieg said. “And we know that with that accountability comes better practices on the part of airlines that have the right incentive to do the right thing and prevent these problems from happening in the first place.”

Update on China

• China’s major airline groups reported their first quarter traffic and capacity figures (RPKs and ASKs). Travel is up sharply versus last year, when the country was just starting to unfreeze its strict travel restrictions, even domestically. For the Big Three—Air China, China Eastern, and China Southern—Q1 domestic load factors were in the low 80% range. International load factors were in the high 70% range. Hainan Airlines, however, filled just 64% of its international seats. Spring Airlines, a low-cost carrier, saw overall load factors exceed 90%.
• Generally speaking, China’s economy has struggled to regain pre-pandemic rates of expansion, with the critical real estate sector no longer a growth engine. Domestic consumer spending has also been weak but not—critically for airlines–in the area of domestic travel. Domestic tourism is one area of the economy that’s currently faring well. China, to be sure, is also producing world-class companies, from TikTok to the electric vehicle maker BYD (and NFL fans, remember those Super Bowl ads for Temu?). But growing resistance from foreign governments threatens the country’s vital export sector. Even airlines like Air China have found it difficult to access certain markets, notably the U.S., where the Big Three are only permitted a fraction of the flying rights they held pre-Covid.  

— Jay Shabat and Gordon Smith
Additional reporting by Meghna Maharishi

Fleet

E2 Scoots to Singapore

• Scoot, the low-cost subsidiary of Singapore Airlines, has accepted its first Embraer E2 jet. The arrival, provided through lessor Azorra marks the first of nine new E190-E2s to the budget carrier. Scoot will soon become the first major operator of the new-generation Embraer aircraft in Southeast Asia.
• To celebrate the milestone, Scoot named the aircraft ‘Explorer 3.0’, in recognition of the third fleet addition to the carrier (it already operates Boeing 787 Dreamliners and Airbus A320 Family jets). Leslie Thng, Scoot CEO described the E2 as “crucial to our overall network growth strategy.” Scoot E2 services are set to begin next month with Explorer 3.0’s inaugural flight to Krabi, Thailand.
• Scoot joins KLM cityhopper, Porter Airlines, Royal Jordanian, Wideroe, and Binter among global E2 customers. However, one blindspot for Embraer’s flagship passenger jet is the United States. The peculiarities of U.S. pilot contracts are largely to blame. Contracts at Alaska Airlines, American Airlines, Delta Air Lines, and United Airlines bar them from contracting regional partners to fly any plane with more than 76 seats — and even the number of those is capped — or with a maximum takeoff weight, or MTOW, greater than 86,000lbs. Embraer’s smallest E2, the E175-E2 (which has yet to enter production) can be configured with just 76 seats but it weighs in with a MTOW of nearly 99,000lbs, making it a non-starter in the United States.
• That’s not to say Embraer aircraft aren’t flying in the U.S. – au contraire. The previous generation E175-E1 is so popular that American recently ordered more for its Envoy subsidiary. “We believe the E1 still has an important market, especially in the U.S.,” Embraer CEO Francisco Gomes Neto said last year. “We will have more and more opportunities for E1s in the next 10 years at least.”

Aegean Eyes LRs Amid Premium Push

• Greece’s largest airline is creating a “special purpose sub-fleet” of A321neos. Aegean confirmed on April 17 that it is acquiring an initial four planes to “best serve non-EU markets, mostly to the south and southeast of Greece” of between four and 7.5 hours flight time from its Athens hub. Deliveries are due in 2026 and 2027. 
• The carrier confirmed that the cabin configuration of the LR aircraft will be “entirely different” from its standard fleet. A higher level of comfort for both economy and business class passengers is promised. This pivot to a more premium product with lie-flat seats will see the passenger capacity reduced from 220 on its standard A321neos to less than 180. Other onboard perks will include satellite connectivity and in-flight entertainment screens at every seat. 
• The Greek carrier highlighted both new and existing destinations as those likely to be served by the new jets. Within the Gulf region it named Riyadh, Jeddah and Dubai (all of which it already operates to), alongside Bahrain, Qatar and Oman – the latter three being new to the airline. Perhaps most interestingly, Aegean also referenced cities in Central Africa and Asia as being on its radar. Lagos, Addis Ababa, Nairobi, Delhi, Mumbai and Almaty were all mentioned as LR candidate destinations.
• Aegean CEO Dimitris Gerogiannis said: “We believe in the great opportunity for Aegean and for our country that lies in developing markets beyond the EU, either in the Gulf area, Africa or in regions of Asia which could be served with a special, extended range, version of the A321neo given our location in the southeast edge of Europe.”
• The development comes after Aegean exercised three additional A321neo options with Airbus late last year. The airline also converted five firm orders from A320neo to A321neo. The total number of Neo aircraft already received or on-order has now reached 50, of which 29 are now A321neo. As for deliveries, 28 Neos have been handed over to the carrier, with the remaining 22 due before the end of 2028.

— Gordon Smith

Routes and Networks

Middle East; High Tension

• After Iran’s drone and missile attack on Israel on April 13, airlines are considering what, if any, changes need to be made to networks and routes. At the peak of the crisis, airspace above Israel, Lebanon, Jordan, Iraq, and Iran was closed or heavily restricted. By April 14, the situation had stabilized, and temporary airspace bans were lifted. The European Union Aviation Safety Agency (EASA) said it is “closely monitoring the situation in the Middle East.” However, it emphasized that “there was no overflight risk for civil aviation at any time.” 
• Despite airspace reopening, many international airlines are taking a cautious approach. Virgin Atlantic confirmed to Airline Weekly that it has made changes to Indian routes. An additional 30-minute flight time is expected for services to Mumbai and Bengaluru. “We have been closely following events in the Middle East and have made the decision to temporarily avoid the airspace of Iraq, Iran, and Israel, meaning some Virgin Atlantic passenger services between the UK and India will be adjusted,” said a company statement.
• British Airways would not discuss operational matters, citing safety and security reasons. However, analysis of flight platforms tracking at the time of writing suggests that many of its aircraft are flying a northern route over Azerbaijan. Others are taking a more southern path than normal, particularly over Saudi Arabia, to avoid geopolitically sensitive regions. Qantas, KLM, and Singapore Airlines are among the other major airlines that are currently avoiding Iranian airspace. 
• However, many Middle Eastern carriers were quick to resume flying over Iraq and Iran and some, such as flydubai and Qatar Airways, also restarted flights to Iranian cities such as Mashhad. For its part, EASA recommends “exercising caution” when flying in Iran, noting that “there continues to be an increased potential for miscalculation and/or misidentification at present” over the country.

Tokyo Rejoins Top 10

• As 8.5 billion passengers returned to the skies last year, Tokyo Haneda retook its rightful place on the list of busiest airports. Airports Council International (ACI) ranked the hubs by total passengers, international passengers, and cargo. ACI reported a 93.8% recovery in total passengers compared to 2019. Out of all the airports in the global top 10, Haneda had the greatest percentage increase in total passengers from 2022, at 55.1%. The Japanese hub leaped from 16th place to 5th in just a year. 
• Elsewhere, U.S. airports — including Denver, Los Angeles, and Chicago O’Hare — made up half of the top 10. Other than Haneda, every location in the top 10 also made the cut in 2022. Hartsfield-Jackson Atlanta International remained the busiest hub overall, but there was a shake-up for silver. Dubai International trailed the Georgia gateway, overtaking Dallas Fort Worth with its nearly 87 million passengers in 2023.
• Dubai didn’t just dominate with total passengers. It ranked first (again) for international travelers, followed by London Heathrow. The British airport reported its busiest-ever December last year, even surpassing its pre-pandemic highs. Other notable entries include Seoul Incheon which jumped from 32nd in 2022 to 7th on the list for international passengers. The South Korean hub enjoyed a spectacular 213% rise in international traffic year-on-year.

Once Upon a Time

• New data from Cirium has revealed which major airlines were the most punctual last month. The figures show a company’s on-time performance across its entire network for March 2024. This is defined as an aircraft arriving at the gate within 15 minutes of its scheduled arrival time.
• In tenth place is Turkish Airlines. The Istanbul-based firm has grown rapidly in recent years to serve 120 countries – more than any other airline. Despite its global reach, in March 84.03% of tracked flights arrived on time. In ninth place is Saudia, followed by SAS in eighth position. Spain’s Iberia squeezes in at seven, narrowly beating its Scandinavian rival. The first and only mention in the top 10 for a U.S. carrier comes next. Delta Air Lines is in sixth place, with 85.54% of tracked flights on time. As the table below illustrates, Delta operated more flights during March than the top five airlines combined, proving that scale and timekeeping can be achieved. 
• The next three spots are all Latin American companies. In fifth place is Latam Airlines. As well as its international network, it also operates in five domestic markets: Brazil, Chile, Colombia, Ecuador, and Peru. In fourth position is Aeromexico, falling from February’s top spot. The Mexican carrier is followed in third place by Colombian national airline Avianca. In second is Turkish low-cost carrier Pegasus. The company has six airport bases throughout Türkiye and is the only budget airline in the global top 10.
• Leading the global list for March is Qatar Airways – it achieved an 87.36% on-time ranking. Notably, the Doha-based carrier didn’t feature at all in February’s top five – marking a strong rise up the table. Given that the company flies to more than 170 destinations worldwide – including many of the world’s most congested airports – taking pole position is quite a feat.

— Gordon Smith

Additional reporting by Elizabeth Casolo

State of the Unions

Giant Pay Rise at Allegiant

• Flight attendants at Allegiant Airlines have agreed to a “game-changer” new labor deal. The breakthrough will see 1,700 crew members receive immediate wage increases. The average pay rise is 25%, however the exact amount varies. While the minimum is 20%, Allegiant staff with the longest tenure and who have reached the top pay rate under the current contract will get up to 41.2%. The new agreement is the result of intensive negotiations that started more than 18 months ago. It represents the Transport Workers Union of America (TWU) Local 577’s second deal with the Las Vegas-based low-cost airline.
• Alex Garcia, TWU International Executive Vice President described the new contract as “a game-changer.” He also suggested it could have an impact across the wider sector, arguing that it “sets a new standard for flight attendants at other low-cost carriers like Spirit and Frontier.” The agreement covers five years and makes Allegiant crews some of the best paid among U.S. ultra low-cost airlines. In addition to the headline pay rises, the deal also includes what the TWU describes as “wage enhancements.” For example, there will be greater ‘duty rig,’ which increases the amount of time flight attendants are paid for being on duty.
• Allegiant President Gregory C. Anderson said he was “pleased” that the proposals had been ratified. “This contract is structured to meaningfully improve [flight attendants’] experience and better recognize their vital role as part of Team Allegiant,” he added. Along with the average 25% wage increase upon ratification, other changes are also in the pipeline. All flight attendants will get an hourly pay rise of 3% each year for a combined 41% average increase over the life of the contract. The company has credited its “strong positive working relationship” with the TWU for helping reach a deal, which was ratified through a conclusive vote. The TWU reported that 90% of votes were in favor with 97% of eligible voters having their say. It represented the second phase of the current round of negotiations. An earlier tentative agreement reached in June 2023 was voted down.
• Allegiant management has not been alone in navigating intensive labor talks. Flight attendants at American Airlines and Alaska Airlines are among those currently negotiating new deals. Strike action at Alaska is a possibility if progress is not made in the dispute. Earlier this month flight attendants at United Airlines picketed the carrier’s major hubs and bases in the U.S. and U.K. In other developments, flight attendants at low-cost airline Breeze filed the paperwork to unionize with the AFA in January. Elsewhere, Southwest flight attendants recently reached a tentative agreement with the company, but the union needs to ratify the new contract before it can go into effect.

AA Pilots Raise Safety Concerns

• American Airlines’ pilot union has reported a “significant spike” in safety and maintenance-related incidents. “While United Airlines is currently under public and government scrutiny, it could just as easily be American Airlines,” the Allied Pilots Association wrote in a memo to its members last week. The memo went on to list a series of safety incidents, which included tools left in wheel wells and the removal of overnight maintenance checks unless the aircraft is due for scheduled maintenance. The memo also alleged that, amid a shortage of planes, there has been pressure to return aircraft to service to maintain on-time performance.
• Captain Dennis Tajer, an American pilot who is also a spokesperson for the APA, said the union had talked with management about its concerns. The union wants earlier involvement in the safety risk assessment process, and management’s response has been “encouraging,” Tajer said. “There are changes being made to safety processes that are legal but just because it’s legal does not mean it’s safe or smart,” Tajer said in a statement. The union also said it noticed greater intervals between routine aircraft inspections, and that American conducts abbreviated flight check tests when a plane returns to service after heavy maintenance or long-term storage. 
• “Safety at any airline is a shared mission and it’s especially true at American. Our robust safety program is guided by our industry-leading safety management system,” American said in a statement. “It includes a multitude of collaborative programs — and regular touchpoints — with the FAA and all our unions, including APA, to further bolster our strong safety record and enhance our ever-evolving safety culture.”

Vistara CEO Addresses Staff Concerns

• Vistara CEO Vinod Kannan has outlined a roadmap for the airline’s impending merger with Air India, following staff concerns and recent operational disruption. In his latest communication to employees, Kannan said the company will share details of their roles in the combined entity through May and June, subject to final approvals. The merger awaits clearance from the National Company Law Tribunal (NCLT). However, Kannan expressed confidence in receiving this imminently. “We have received all relevant competition approvals from various jurisdictions,” he stated, signaling the merger’s advanced stages.
• Acknowledging staff anxieties about the process, Kannan said: “The leadership teams and relevant cross functional teams have now started meeting more frequently to ensure that the relevant decisions for the merger are made in time and then executed seamlessly once we have the relevant approvals.” 
• Addressing specific concerns, Kannan announced that townhall sessions would explain the process. He added that detailed updates on each staff member’s assigned role in the combined organization would follow through May and June. The airline had over 150 cancellations and 200 delays exceeding two hours between March 31 and April 4. This coincided with pilots, discontent over a stretched roster and a new pay structure ahead of the merger, allegedly taking mass leave.

— Gordon Smith

Additional reporting by Meghna Maharishi and Peden Doma Bhutia

Loyalty News

BA Takes a Pounding

• British Airways is shaking up its loyalty redemptions by making every flight available to buy from just £1 ($1.25), plus Avios. Until now, the lowest available ‘cash plus Avios’ price was dependent on multiple factors, meaning overall fare combinations varied considerably. Operated by IAG Loyalty, Avios is the reward currency used by British Airways and other major airlines including Iberia, Qatar Airways, and Finnair. It also has partnerships with brands including American Express, Avis Budget Group, and Marriott.
• Members of the Executive Club now have the option to discount any British Airways flight to as little as £1, with the difference being paid in Avios. The incentive applies to seats throughout the aircraft from economy right up to first class. In line with many of its competitors, such as Virgin Atlantic’s Flying Club, British Airways has long offered a part payment service. This allows frequent fliers or other high spenders to lower the cash price of their booking by using more points. In addition to journeys operated by BA, it can also be used on American Airlines flights between the U.K. and the United States, as well as some codeshare services. 
• Colm Lacy, British Airways’ Chief Commercial Officer, said the decision was made after listening to feedback from Executive Club members. “We know that most of our customers choose the lowest cash amount when it comes to making Reward Flight bookings, so we anticipate this to be a popular option for those using Avios part payment too. Ultimately, our goal is to keep adding more choice and flexibility for members.” The change does not impact BA’s popular ‘Reward Flight’ scheme. These will continue to be priced at a fixed rate, with a limited number available for each service.

— Gordon Smith

C-Suite Insights

Airline Weekly speaks with Geir Karlsen, CEO of Norwegian Air Shuttle

In the modern airline business, companies are usually divided by their ‘low-cost’ or ‘legacy’ models. The upstarts versus the old guard. But is there room for a little Scandinavian pragmatism in the mix? Norwegian Air Shuttle seems to think so. “We’ve never tried to be a superior airline for the few, or a cheap airline for the many,” touts its marketing materials.

Whatever Norwegian is doing seems to be working. The airline has emerged from the near extinction with a stripped-back route network and restructured finances. Long gone are its long-haul flights, which once stretched as far afield as Argentina and Brazil. These days it’s more about Copenhagen than Copacabana. 

Even in its slimmed-down form, Norwegian has bounced back to become Scandinavia’s second-largest airline (behind only SAS) and the dominant player in its native Norway. It boasts a robust network criss-crossing the Nordics, complemented by links to major business capitals and leisure-oriented routes to southern Europe.

Illustrating the scale of Norwegian’s gravity-defying turnaround, last year it snapped up Widerøe – the country’s largest regional carrier – as part of a $105 million deal.

Norwegian CEO Geir Karlsen has led the Oslo-based carrier since June 2021 and previously held the role of CFO at the airline. Speaking to Airline Weekly, he shares his predictions for the all-important summer season and explains how Norwegian is differentiating itself from big-name rivals.

Airline Weekly: Summer is traditionally Norwegian’s most important season. How is it shaping up this year?

Geir Karlsen: This summer is looking good. We’re selling tickets now for a 10-15% higher yield than we were at the same time last year and load factors are also on par. It seems like the booking curve has normalized a little. People are booking a bit earlier so we’re getting greater visibility. 

How concerned are you about the current demand levels softening? 

It’s a good question, but a difficult one. As of today, we don’t see a softening based on the visibility that we have. For us, the focus is executing our plan. We are more concerned about the potential for delays in the delivery of the Boeing 737s. We had delays last year, we have them this year and we will have delays next year as well. Other than that, the market is pretty hot. 

Do you have the ability to hold onto your older Boeing planes for longer to mitigate any delivery delays?

Yes, we do. That’s what we did last year and we’ll extend a few more this year as well.  

How do you differentiate Norwegian from direct and indirect competitors? 

Our main competitor by far is SAS [Scandinavian Airlines]. They have their product and we have ours, which is somewhere between the low-cost and legacy model. We have gathered the experience to learn that the markets we are flying in are willing to pay a little bit more for what we believe is a better product. 

Does this hybrid approach win you more business travelers?

We are taking market share on the corporate side. We’ve been doing this for quite a while but we’re now spending more time on the segment. One of the main reasons is that these business passengers are traveling all 12 months of the year, which helps to ease out some of the seasonal fluctuations. 

Extreme seasonality has been a huge issue for airlines in the region. What are you doing to help counter this?

We’ve made good agreements with all the unions – and there are quite a few of them in Norway. This has made it possible for the company to take out capacity in the low season. We have part of the crew that is only flying in the summer – these are more like six-month, seasonal contracts. I like to think of it as a menu where you can decide if you have an 80% position or a 70% position and so on. Using this system we have managed to get through the seasons – it is working for us. 

Are you seeing fewer tourists visiting from Asia due to the closure of Russian airspace?

Maybe to some extent, but we are also seeing more Europeans traveling up to the north. This is especially the case in winter to see the Northern Lights and other attractions. We have been slightly surprised – in a positive way – by how popular this segment has been. 

You took over regional airline Widerøe in January. What happens now? 

We are going to keep Widerøe as a separate airline with a separate management team, but we are going to take up the synergies between the two companies. The biggest one is obviously on the network side where we are going to align the two networks in a better way. That will take a little bit of time. For example, we both have the summer [2024] season on sale, so this will be a 2025 effect.

Does it worry you that there’s no obvious replacement for Widerøe’s turboprop fleet?

Yes and no. We know that there is no alternative today to fly this network. We have spent many hours in the hangar to get comfortable with the life extension programs that the aircraft are currently in the middle of. We believe that we can fly them for at least 7-10 more years. Then we will see what happens and what alternatives are coming.

— Gordon Smith

Feature Story

Thai on Top: Airline Weekly’s Earnings Scoreboard for 2023

Before the pandemic, Thai Airways was an airline drowning in a sea of problems, some external and some of its own making—a barrage of new low-cost and Gulf carrier competition, a deteriorating service reputation, a grossly complex fleet, etc. Already a decade ago, the company was admitting to “low staff morale,” a “slow decision-making process,” “high costs,” and even “lower productivity.” Things would only get worse as the 2010s unfolded. In 2018 and 2019, Thai suffered a combined net loss (ex special items) of nearly $700m. Yikes.

But what a difference a bankruptcy makes. When Covid struck in 2020, Thai—with financial help from its government—began a reorganization process that freed the airline from past obligations. It dramatically slashed costs, shed jobs, cut routes, and downsized and simplified its fleet. When demand reawakened, the once-sclerotic airline suddenly found itself earning industry-leading profits, positioning it to exit bankruptcy later this year. In 2023, Thai’s operating margin ranked first in the world among all airlines tracked by Airline Weekly.

As our rankings show, most of the world’s airlines made money in 2023, a year in which fuel prices dropped and demand strengthened. There were exceptions, of course. At the bottom of the list was Norse Atlantic. While Norse does have serious challenges ahead, its losses aren’t atypical of an airline just getting started—it happens to have opened its equity to the public earlier than most startups and therefore must reveal its early losses. The story is different for Hawaiian Airlines, a company that was near the top of this list during the latter half of the 2010s. Problems ranging from a weak Japanese yen to grounded A321s have made for difficult times—so difficult in fact, that Hawaiian’s share price slumped to levels that made it a tempting takeover target for Alaska Airlines.

It wasn’t the only U.S. carrier to lose money in 2023. Several LCCs joined Hawaiian, namely JetBlue, Spirit, and Frontier. All encountered overcapacity in Florida. All—according to United’s Scott Kirby, anyway—lost their competitive advantage as supply-side constraints made rapid growth impossible, and as rivals like United scrapped change fees and expanded their Basic Economy offering. Several Chinese carriers remained unprofitable last year, with international markets from China still depressed. Russia’s Aeroflot adapted to international sanctions better than most expected but still ended 2023 with an operating loss. SAS, like Thai Airways, was busy in bankruptcy last year. But unlike Thai Airways, its efforts weren’t enough to restore profitability. They were enough, incidentally, to attract an investment from Air France/KLM.  

Back at the top end of the rankings, Panama’s Copa unsurprisingly sat just behind Thai Airways. Copa was a profit superstar before the pandemic. And it’s a profit superstar again. Despite a big jump in low-cost capacity throughout the Middle East, Air Arabia had a great year. Note, however, that it does get an undisclosed portion of its profits from non-airline business activity, including hotels, tour packaging, IT services, etc. While Turkish Airlines had a great year, its low-cost rival Pegasus earned even higher margins, thanks to a boom in inbound tourism to destinations like Istanbul and Antalya.  

Thai wasn’t the only bankrupt airline to rank high on this list. Note the presence of Gol, which finds itself in the odd situation of earning strong profits but unable to pay past debts. Azul, which narrowly managed to restructure its debts and obligations without having to file for bankruptcy, likewise enjoyed highly favorable supply and demand conditions in Brazil last year. You’ll hardly be surprised that perennial profit champ Ryanair is high on this list. Far more surprising is the high position of Philippine Airlines, a long-troubled carrier that’s following a very Thai-like trajectory, benefiting from bankruptcy, cost cutting, and a sudden surge in longhaul premium demand.  

AirAsia X was another ASEAN-based carrier—along with Thai and Philippine Airlines—that dramatically reversed its fortunes with the help of bankruptcy. Also in the ASEAN region, Singapore Airlines earned the best profit margin of any large global airline. There was no bankruptcy involved, just a surge of pent-up premium longhaul demand. EVA Air of Taiwan and Hong Kong’s Cathay Pacific had strong comeback years as well, aided by a supply and demand imbalance into and out of mainland China. Aegean deserves mention for riding Greece’s inbound tourism boom. In the giant U.S. market, tiny Sun Country won the prize for best operating margin. But not far behind it was the global heavyweight, Delta. Among Europe’s Big Three, IAG was once again top dog. Two major disappointments in the U.S. and Europe, however, were Southwest and Wizz Air, respectively; both are normally much higher-margin carriers.

At this point, you might be wondering: Where is Emirates on this list? And Qatar Airways and Etihad and Saudia and Flydubai and Oman Air… As it happens, most of the Gulf region’s major airlines either don’t publicly disclose their financial statements or do so at intervals that don’t correspond with the calendar year. That’s the case for Emirates, which most recently said it earned a 16% operating margin for the 12 months that ended in September. It will next report its results for the six months that include the final quarter of 2023. If you’d like to include its lagged results through September on our Scoreboard, Emirates would rank an impressive number eight behind Ryanair. For Qatar Airways, its most recent income statement covers the period only through March 2023, though it did say in a November press release that it earned a healthy net profit in the April-to-September period last calendar year. Flydubai, in February, issued a press release with some headline financial figures for 2023—but no audited financial statements and no mention of operating results. Etihad said it earned a 7.1% operating margin in 2023 but didn’t make its income statement available; just a press release.

One of the largest non-Gulf carriers not on this list is China’s Hainan Airlines. Why not? As of Friday (April 19th), it hadn’t yet reported its Q4 results. Also absent from the Scoreboard: Major airlines controlled exclusively by their governments, or by private investors, i.e. Lion Air, Air India, Virgin Australia, WestJet, Ethiopian, Virgin Atlantic, ITA, Malaysia Airlines, Aerolineas Argentinas, Air Europa, Aeromexico, etc. Jet2, a British LCC, is like Emirates: It last reported for the 12 months through September (its operating margin was 7.8%). Of course, some government-controlled airlines without any publicly-traded shares do provide full financial disclosure, like TAP Air Portugal. Same for some private-held airlines like VivaAerobus. Also notably absent from the Scoreboard is TUI, a large European tourism group that doesn’t provide enough detail for just its large airline operation.

There are many more smaller airlines that don’t publicly disclose their finances—too many, some would argue, for the global airline industry to earn healthy investment returns. Also not on this list, by the way, are cargo-only carriers, or carriers offering mostly charter services.

How are these figures calculated? Airline Weekly simply divides a carrier’s operating profits by its operating revenues. We’ll remove anything that’s clearly a “special item,” for example a one-off accounting charge that doesn’t reflect the company’s operating performance. But we’re conservative in what we exclude. We don’t for example try to exclude sale-leaseback gains, a somewhat controversial practice whereby airlines with favorable pricing from Boeing or Airbus immediately sell planes to leasing companies upon receiving them, collecting a nice gain given the current strength of the aircraft market. IndiGo, Frontier, Wizz Air, and Gol are a few examples of airlines whose position on the Scoreboard would be at least a few notches lower were it not for hefty sale-leaseback gains. But don’t put too much emphasis on this—carriers like IndiGo and Gol legitimately had strong results last year. Separately, keep in mind that different regions of the world use different accounting conventions (GAAP in the U.S. for example, and IFRS in many other countries). 

A final note about our Scoreboard: We convert all figures to U.S. dollars using the average exchange rate for the year.

So, there you have it: A year in which the industry fared well, relatively speaking, after three years of severe illness from Covid-19. Collectively, for all the airlines shown above, revenues amounted to roughly $630b. And on that they earned about a 4.5% operating margin. That’s about three points worse than what the industry earned in 2019, when fuel prices were significantly lower. For context, the Brent price of oil averaged $82 last year but $64 in 2019. Though some carriers like Thai Airways managed to reduce their non-fuel cost base significantly in the past five years, with help from bankruptcy, most saw non-fuel costs inflate—think labor, airport fees, aircraft maintenance, etc. Recall finally that in 2019, the industry also experienced aircraft shortages with B737-Maxs grounded for most of the year. Shortages however are worse today, which in one sense is a blessing for airlines—it’s contributing to a capacity shortfall (in a bullish demand environment) that’s driving up ticket yields.

Will Thai Airways take the profit prize again in 2024? What other airlines will reach leading positions on the Scoreboard? The race is on.  

— Jay Shabat