European airline margins 2023: ultra LCCs Pegasus and Ryanair at the top
Jet2 plc's mid Jul-2024 reporting of its annual results for the year ended Mar-2024 was the last of Europe's listed airline financial statements for 2023.
This has allowed CAPA - Centre for Aviation to compile a ranking of operating margins for Europe's leading airline groups and airlines in 2023 (or nearest financial year).
Pegasus Airlines, Turkey's ultra-low cost carrier, reported the highest operating margin in Europe in 2023, retaining the top spot from 2022. Ultra-low cost Ryanair was second overall, and the leader among the six biggest European airline groups.
Europe's leading airlines typically report margins above the average for the European market, but cannot escape the cycle as it starts to show signs of peaking in 2024.
- ULCCs Pegasus Airlines and Ryanair ranked first and second in Europe by operating margin in 2023.
- There were 12 of the 16 groups that had better margins in 2023 than in 2022.
- Lufthansa Group's SWISS had the highest margin among the legacy group subsidiaries.
- Ryanair was top among Europe's six biggest airline groups.
- IAG was first among the big three legacy groups.
ULCCs Pegasus and Ryanair ranked first and second in Europe by operating margin in 2023
CAPA - Centre for Aviation analysed the financial statements of 16 leading European airline groups and airlines. The resulting ranking of them by operating margin (pre-exceptional operating profit, or EBIT, as a percentage of revenue) for 2023 is shown in the chart below.
Note that 2023 includes financial year ends ranging from Sep-2023 to Mar-2024.
The 16 companies comprise 14 that have stock market listings, plus SunExpress and TAP Air Portugal.
The highest 2023 operating margin among this cohort for 2023 was achieved by Pegasus Airlines, with 18.3%.
The Turkish ultra-low cost carrier maintained the top spot that it had occupied in 2022, in spite of a 5.4ppt decline in its margin.
Ryanair Group, also an ultra-low cost operator, came second in 2023, with an operating margin of 15.3% (for its financial year ended Mar-2024).
Four others also recorded double digit operating margins in 2023: namely Aegean Airlines Group (14.6%), Turkish Airlines (12.8%), IAG (11.9%), and the LCC SunExpress (10.3%).
Three of this top six were operators from Turkey (Pegasus Airlines, Turkish Airlines and SunExpress).
TAP Air Portugal (9.2%) - a potential privatisation candidate - was seventh, just ahead of Norwegian Air Shuttle (8.9%) and the ultra LCC Wizz Air (8.6%).
The top 10 was completed by Lufthansa Group (7.0%).
The next four all achieved operating margins above 5%: LCC Jet2.com (6.8%), Finnair (6.2%), LCC easyJet (5.8%), and Air France-KLM (5.7%).
Icelandair's margin was just 1.4%, while 16th placed SAS was the only one in the ranking with a negative margin (-6.4%).
Pre-exceptional operating margins for leading European airlines and airline groups, 2022 and 2023
There were 12 of the 16 groups that had better margins in 2023 than in 2022
Margin improvement versus 2022 was achieved by 12 of the 16 airline groups, with only four reporting a year-on-year decline (Pegasus Airlines, Turkish Airlines, Jet2.com and Icelandair Group).
The biggest year-on-year improvement in operating margin was generated by Wizz Air (up 20.6ppts), followed by Finnair (up 13.2ppts).
The top 10 included five LCCs and five legacy groups, but it included all three ultra LCCs - two of which were first and second.
Among the big three legacy groups, the long standing order of IAG, then Lufthansa Group, and then Air France-KLM was maintained for the 11th successive year. Nevertheless, all three fell short of Turkish Airlines' margin.
The majority beat IATA's estimates of average 2023 margins in Europe and the world
Well over half of the airline groups - 11 of them - achieved a margin above IATA's estimate of the average European airline operating margin of 6.5% for 2023.
IATA's estimate of the average global airline operating margin of 5.7% was beaten or equalled by all but Icelandair and SAS.
Lufthansa Group's SWISS had the highest margin among the legacy group subsidiaries
In the following chart, rather than showing the three big European legacy groups as a single result, the operating margins of their principal airline subsidiaries are ranked alongside the other airlines and airline groups.
This ranking comprises 25 leading European airline brands.
Pegasus Airlines, Ryanair and Aegean Airlines retain the top three places, but Lufthansa Group's SWISS is the highest ranked subsidiary of the big three, with a 2023 margin of 13.7% - just ahead of IAG's Iberia, with 13.5%.
IAG has two other airlines with double digit margins: Iberia, with 13.5%, and British Airways, with 10.0%. Aer Lingus is only just behind, with 9.9%.
Other than SWISS, Lufthansa Group's subsidiary airlines' margins were muted: Austrian Airlines achieved 5.4%, Lufthansa Passenger Airlines 5.3%, Brussels Airlines 3.4% and Eurowings 3.1%.
Air France-KLM's Air France reported an operating margin of 5.9%, and KLM made 5.4%. However KLM's LCC brand, Transavia, was loss-making, with an operating margin of -3.7%, and ranked higher than only SAS.
Pre-exceptional operating margins for leading European airline brands, 2022 and 2023
Ryanair was top among Europe's six biggest airline groups
Among Europe's six biggest airline groups, Ryanair's operating margin returned it to familiar territory at the top in 2023, after falling behind Turkish Airlines during the COVID pandemic and its immediate aftermath.
IAG resumed double digit margins, as it had achieved in the five years before the pandemic.
Air France-KLM reported the lowest margin of the six in 2023 - as it has done in the majority of years for more than a decade.
However, Air France-KLM's 5.7% margin was only fractionally below the 5.8% recorded by easyJet, which has been unable to return to the double digit margin range it occupied in five of the six years between 2013 and 2018.
Lufthansa Group's 7.0% margin was only a little better than Air France-KLM's and easyJet's, but it was the Group's third best margin since at least 2005, bettered only in 2017 and 2018.
This group of six, which comprises the big three legacy groups plus Turkish Airlines, Ryanair and easyJet, are all listed on the stock market.
Operating margins (percentage) for Ryanair, Turkish Airlines, IAG, easyJet, Lufthansa Group, Air France-KLM, 2005 to 2023
Europe's leading airlines outperform, but cannot escape the cycle
The majority of Europe's leading airlines reported improved margins in 2023 compared with 2022, and compared with 2019, the last year before the pandemic.
They have outperformed the improvement in the cycle, emerging from the COVID-19 pandemic, experienced by the European airline sector as a whole.
According to IATA, average margins for all European airlines were 4.7% in 2019, 3.7% in 2022, and 6.5% in 2023.
For the leading 16 airline groups and airlines included in this CAPA - Centre for Aviation report, the straight arithmetic average margin for the 16 was 7.0% in 2019, 4.9% in 2022 and 8.5% in 2023.
However, IATA's most recent forecast (published in Jun-2024) predicts that Europe's average margin will slip slightly, from 6.5% in 2023 to 6.4% in 2024.
Recent noises from European airlines add to the suggestion that the upswing in the profit cycle - even if it is not quite turning significantly downwards - is losing momentum.
These include profit warnings from Lufthansa Group and Norwegian (issued since IATA's forecast), and comments from a number of airlines that pricing is not as strong as it had been over the past year or two.
Europe's leading airlines are likely to continue to outperform against the average, but cannot escape the cycle.