A decade of change for the global airline industry: A new and altered reality in the rankings
A decade is a respectable amount of time in our era when not only change but also the pace of change appears ever faster. Constant improvements in technology have made cutting-edge devices of 2000 seem to be quaint relics ten years later. However, there are also other factors, such as macroeconomic forces, at work that can bring enormous change as well. While not unanticipated, China has surpassed many other nations and soon is expected to be the world's dominant economy. There have also been demographic shifts, political change and the emergence of new business models.
Aviation on the cutting edge
Aviation is a technology heavy sector. Reservations computers introduced in the 1960s were actually the first big step towards the e-commerce society that we live in today. New airplanes about to enter service promise lower costs and improved operating economics using new materials and techniques.
But it is also a relatively conservative industry, with many of its legacy players slow to change either their mindset or their practices. Southwest Airlines has since spawned LCC clones and variations that now thrive in every geography. And not only China, but also other nations in Asia and South America have emerged as rich sources of customers that are taking to the air in ever-increasing numbers.
Shuffled lists of world leading airlines
All of this means that the top industry players are in flux, with old names dropping away as new ones emerge and rapidly move up the ranking scales. We will look at two measures of "big" and try to analyze what has happened and what is likely to occur in the near future.
First, there is no definitive measure of "biggest". The airline with the biggest fleet may not carry the most passengers nor does it follow that it will produce the most Available Seat Kilometres (ASKs).
Levels of profitability, perhaps the most important component for sustainability, often do not correlate with passenger numbers or network size. For the purpose of this examination, we will look at RPKs. While ASKs say something about size, it is ultimately the number of paying passengers that will affect the bottom line.
And, of course, passenger totals are always interesting, though, as has been repeatedly shown, full aircraft and lots of customers often still results in red ink.
First, Revenue Passenger Kilometres
The RPK comparison is a quick lesson in industry change. Eight-one third-of the 2000 chart residents have been replaced in 2010, six by merger, bankruptcy (or both) and two that have just seen their fortunes change.
The sole 2000 representative of a new business model, Southwest, is, in 2010, one of 3 such airlines. The other new players all are from either China or the Gulf, plus Turkish. The speed with which these newcomers have moved into the top group is, in some cases, rather breathtaking.
RPKs: A decade of Change
|
2000 |
2010 |
||
|---|---|---|---|
|
Rank |
RPKs (mil) |
Rank |
RPKs (mil) |
|
204,235 |
310,956 |
||
|
187,600 |
United (with CO) |
297,129 |
|
|
173,486 |
204,737 |
||
|
Northwest# |
127,317 |
201,944 |
|
|
118,890 |
146,134 |
||
|
103,235 |
129,668 |
||
|
91,801 |
125,778 |
||
|
88,999 |
China Southern |
111,327 |
|
|
88,606 |
107,723 |
||
|
75,728 |
96,588 |
||
|
70,795 |
94,938 |
||
|
67,924 |
China Eastern |
93,054 |
|
|
67,486 |
86,212 |
||
|
62,592 |
84,801 |
||
|
KLM# |
60,327 |
77,458 |
|
|
57,374 |
74,071 |
||
|
47,153 |
72,147 |
||
|
TWA# |
43,791 |
60,528 |
|
|
Thai |
42,395 |
59,740 |
|
|
41,433 |
ANA |
58,414 |
|
|
50,532 |
56,128 |
||
|
40,049 |
Thai |
55,676 |
|
|
37,939 |
52,738 |
||
|
Swissair# |
34,246 |
51,446 |
|
|
America West# |
30,753 |
51,242 |
|
Fast starts
Some were not even around until mid-century and some of the others have moved from obscurity to being omnipresent at airports across the world.
The emerging world order is clearly demonstrated when the carriers that made the list are compared by region. As we know, Asia Pacific will soon be the dominant aviation region and the Chinese carriers are amongst the fastest rising stars.
Top RPK carriers by region
|
2000 |
2010 |
|
|---|---|---|
|
10 |
6 |
|
|
7 |
6 |
|
|
Asia/Pacific |
8 |
10 |
|
Gulf |
0 |
2 |
|
0 |
1 |
With its 90 A380s, Emirates will likely soon top the ASK charts.
US mergers bring fewer RPKs
The decline in numbers in North America is representative partly of the consolidation that has taken place-there are fewer big carriers. But the US carriers have been particularly focused on keeping the supply and demand of seats in a better balance, with resulting higher load factors and improved economics.
Combined RPK 2000 vs. 2011
|
AA/TW |
-13.0% |
|
US/HP |
-11.0% |
|
UA/CO |
-3.5% |
|
DL/NW |
3% |
|
LH/SR |
5.5% |
|
AF/KL |
35.0% |
The combined RPK table that compares combined (merged) 2000 RPKs to the new 2010 figures makes it clear that the US mergers have overall resulted in far fewer RPKs. Only Delta/Northwest has a positive number, and a very small one at that.
In contrast, the numbers for Air France/KLM are up over a third. Lufthansa/Swissair is not exactly the same as the companies continue to operate and report as separate entities. However, Lufthansa's expansion over the decade is impressive; 5% more in 2010 for LH alone than that produced by the two rivals in 2000.
Next, passenger totals
While airlines will advertise their dominance using a variety of figures, most of the rest of the world looks at passengers carried as the primary indication of "bigness". And there are equally as many surprises by this measure as were seen in the RPK numbers.
Passenger Numbers: A decade of Growth
|
2000 |
2010 |
||
|---|---|---|---|
|
Rank |
Pax (000) |
Rank |
Pax (000) |
|
105,723 |
162,615 |
||
|
86,280 |
106,307 |
||
|
84,251 |
United (with CO) |
99,452 |
|
|
63,678 |
86,204 |
||
|
60,636 |
76,544 |
||
|
Northwest# |
58,722 |
72,100 |
|
|
49,887 |
71,320 |
||
|
46,896 |
64,878 |
||
|
41,300 |
58,916 |
||
|
39,204 |
51,853 |
||
|
38,261 |
48,800 |
||
|
33,857 |
Air China |
46,241 |
|
|
26,697 |
ANA |
45,743 |
|
|
TWA# |
26,392 |
34,795 |
|
|
24,543 |
34,553 |
||
|
Japan Air System# |
20,836 |
Air Berlin |
33,593 |
|
America West# |
19,954 |
32,122 |
|
|
Thai |
18,038 |
31,422 |
|
|
17,655 |
Turkish |
29,099 |
|
|
16,800 |
26,796 |
||
|
16,561 |
AirTran |
24,721 |
|
|
KLM# |
16,234 |
24,254 |
|
|
14,874 |
SkyWest |
24,218 |
|
|
Swissair# |
14,238 |
24,088 |
|
|
Alaska* |
13,525 |
23,615 |
|
In the case of passenger numbers, 11 out of 25 have exchanged positions and the degree of change in the industry is even more evdent by just which carriers are now garnering the traffic.
LCCs attract travellers
In 2010, there are five new generation airlines in the top 25 - one fifth - plus the sort-of LCC spot occupied by Air Berlin. Skywest, doing a great deal of flying for the US majors as a commuter carrier, has also made the cut.
Top passenger carriers by region
|
2000 |
2010 |
|
|---|---|---|
|
11 |
9 |
|
|
7 |
7* |
|
|
Asia/Pacific |
7 |
6 |
|
Gulf |
0 |
1 |
|
0 |
2 |
In terms of geographic distribution, there are also major variations, with Asia Pacific actually losing a spot but with China Southern, for example, showing a 456% increase.
Same US outcome
And mergers have had the same effect on the US carriers in terms of passengers as shown by the corresponding chart; with passenger numbers all down for the US merged airlines.
Some of that mainline decline has now been taken up by carriers like SkyWest, that are providing ever more seats for the legacy majors.
Passengers 2000 vs. 2010
|
US/HP |
-36% |
|
AA/TW |
-24.5% |
|
UA/CO |
-24.2% |
|
DL/NW |
-1% |
|
LH/SR |
6% |
|
AF/KL |
29% |
Again AF/KL has benefited by its new arrangement and Lufthansa's growth is reflected in a passenger count higher than the combined LH/SR totals of a decade ago.
Some notable declines
Others have not fared so well, with BA showing a passenger decline of almost 37%. Japan has also taken a significant hit over the decade, with the 3 carriers present in 2000 carrying a combined total of over 104 million passengers. In 2010, that combined total for ANA and JAL had declined by an aggregated 23%. And that was before the earthquake and tsunami.
Finally, the merger of AirTran and Southwest will keep the new group firmly in second place but will not be enough to overtake Delta in the near term, though others may.
A bit of crystal ball gazing
There are some trends that are relatively easy to predict. The US carriers, very reluctant to add domestic capacity, will likely have passenger numbers that are either flat or increase minimally. That means that they will not so much fall as be overtaken by those rising faster.
This group includes the Chinese carriers, airlines in the Gulf and South America as well as Turkish. Elsewhere in Europe, both AF/KL and Lufthansa appear to be on slow but steady growth curves and further consolidation is certainly possible.
The weak may weaken further
The future of BA is less clear. Two of the rising stars in the LCC subgroup are based in the UK and operate out of more airports while BA, with its primary base at (not expanding) Heathrow, has little capability to grow other than by using larger aircraft. The slot picture is bleak with no relief in sight and the APD, if not repealed, will encourage travel over other gateways.
The future is also unclear for the Japanese carriers with JAL just trying to stay above water, though ANA is on the cusp of a growth spurt. Increased interest in China could benefit the Japanese airlines which have a large connecting network to Chinese cities. But others have developed the same capability-especially the Korean airlines-and the ascendancy of Chinese carriers could cut the need for indirect routings to more Chinese cities.
India and Africa potential but…
The huge Indian market has been unable to move the Indian carriers up the list, but has been a definite factor in the rise of the Gulf airlines, which operate defacto long haul hubs to and from the subcontinent. While India surely has the potential for huge passenger numbers, a complex operating and regulatory environment has so far hampered the indigenous carriers.
Also yet to appear on either list is AirAsia, perhaps because of its multiple ownerships. But the group continues to expand and will bring additional challenges for the legacy carriers in Southeast Asia which do well with profitability and RPKs but have smaller passenger counts.
Finally, Africa, with a large population but in fragmented and generally poor nation states, will not soon appear on any of the top lists. However, passengers to/from the continent will continue to bring improved loads to those external airlines that build serviceable and reliable networks-again giving some advantage to the Gulf carriers and Turkish.
Outlook: Predictably unpredictable
The general patterns of growth over the next decade are clearly visible but that potential is subject to multiple factors beyond the control of the airlines. The SARS episode shows how quickly a viable operation can be hobbled, and that was essentially only a threat rather than a reality.
Global politics, natural events and disasters, fuel spikes; all of these have the potential to quickly unravel the trends and patterns. Airlines remain far more vulnerable to external forces than say, the continued increase in cell-phone use.
But absent such shocks, the global industry will continue to evolve in a vaguely predictable fashion. With shocks, all bets are off.