Aegean Airlines: no longer Europe's highest-margin FSC. Competition and the economy weigh in

After two years in which the Aegean Airlines Group had the highest operating margin among European full service airlines, its crown slipped in 2015. Its financial results for the year show a fall in operating profit and in net profit.

Double-digit capacity growth in a very weak macroeconomic environment, and in the face of strong competition led by Ryanair, put downward pressure on unit revenue. Aegean was unable to cut its total unit cost enough to offset falling RASK, in spite of lower fuel prices and some progress with ex fuel unit cost reduction, including improved labour productivity.

Nevertheless, although Aegean's operating margin slipped it remained fairly healthy at very close to 10%. Moreover, given the very challenging conditions faced in 2015, the group did well to limit the decline in the way that it managed. In 2016, slower capacity growth may ease downward pressure on unit revenue and the bottom line should benefit further from lower fuel prices post hedging, but Aegean will be focusing on reducing ex fuel unit cost.