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Air Europa: it started competition in Spain, but now pays the price, despite unit cost efficiency

Analysis

In this second part of our report on Air Europa, we analyse the airline's revenue development and estimate its unit costs. In recent years, it has achieved revenue growth in spite of falling passenger numbers. However, it has recorded losses for at least the past two financial years, blaming "competition from low-cost airlines" and pilot strike action.

Established as a charter carrier in 1986 and operating domestic scheduled flights since 1993 and international scheduled flights since 1995, Air Europa has been part of the Globalia tourism group since 1991. The first privately owned airline to operate domestic scheduled flights in Spain in competition with Iberia's then monopoly position, it is somewhat ironic that it is now suffering from increased competition.

Air Europa's unit costs look to be very efficient compared with other European FSCs, but the impact on unit revenues of LCC competition has weighed on its profitability. So, why is it growing its short-haul operations once more in 2013?

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