IATA: New study on airline investor returns finds small group of airlines has lead improving ROIC

IATA and McKinsey & Company released (07-Feb-2020) an updated study on airline investor returns, compiling annual data up to 2018. Key findings include:

• During the past five years, the global airline industry's return on invested capital (ROIC) has improved significantly. Since 2014 industry-wide ROIC increased by 2.5pp to an average of 6.7% compared the previous five year period of 2009-2013;
• Airline ROIC decoupled from the economic cycle partly due to the fall in fuel prices, but also because of structural changes to the industry and product in some regions;
• A relatively small number of airlines (around 30) have driven the improvement in the aggregate industry-level profitability over the past decade. These airlines account for around 55% of the industry's operating profits and 45% of RPKs flown;
• Until 2014, industry-wide airline returns have not been as high as the industry's cost of capital in any of the regions. However, in the last five years, the picture has improved, albeit with considerable regional differences. North American and European airlines have created value for their investors since 2014. Regions including Asia Pacific, Latin America, Middle East and Africa continued to destroy investor value in aggregate;
• Even though the carriers in North America and Europe created value for their investors, at the aggregate level the study found that the industry as a whole has not returned its cost of capital to the investors;
• Despite the improvement in airline industry profitability in recent years, there has been little change in the ranking of the returns along the value chain. Airlines remain near the bottom despite improved profitability. [more - original PR]