Malaysia Airports Holdings Berhad MD Tan Sri Bashir Ahmad, speaking at the CAPA Australia Pacific Aviation Summit, stated (09-Aug-2013) “medium-haul is working” for Asian LCCs, adding that capacity “growth has been a bit more balanced” of late between FSCs and LCCs in the region.
MAHB MD: Capacity growth 'has been a bit more balanced' between FSCs and LCCs
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Flybe: largest regional airline in Europe leads the airline capacity growth charge in winter 2016/17
The surprise departure of Flybe CEO Saad Hammad on 26-Oct-2016 "by mutual agreement" raises questions about the future strategic direction of Europe's largest regional airline. Mr Hammad joined in Aug-2013 and implemented a restructuring programme, returning Flybe to profit in FY2016 (March year end).
Capacity reduction during the restructuring has been followed by a period of accelerating growth. So much so that Flybe is Europe's fastest-growing airline group among the top 20 in Europe by seat numbers this winter, with an increase of 19%. CAPA has identified 45 new Flybe routes in calendar 2016 (compared with a late summer total of 165), on the majority of which Flybe has no airline competitor.
Despite low competition on its network, Flybe's FY2016 operating margin was one of the lowest among listed European airlines and coincided with weakening unit revenue. Pricing has softened further, not least due to uncertainties such as Brexit, just as Flybe's capacity growth has accelerated.
Until a replacement for Mr Hammad is found, Flybe's Chairman Simon Laffin will assume executive responsibility. Significant strategic change may be unlikely in the interim, but a key question for the next CEO will be whether to continue with such aggressive capacity growth in the face of falling fares.
CAPA airline profit outlook: 2016 was top of cycle, but margins to stay above past cyclical peaks
The CAPA world airline industry operating margin model forecasts that margins will fall from 2016 to 2018, suggesting that the estimate of 8.3% in 2016 may have been a cyclical peak. This six monthly update of CAPA's world airline profit outlook, which adds 2018 to the model for the first time, attributes the expected declining margin trend to increases in oil prices and in the rate of fleet growth.
Moreover, although global economic growth is forecast by the IMF to pick up in each year from 2016 to 2018, there are many uncertainties surrounding the world economy. The IMF's Jan-2017 outlook warns that risks to global growth are skewed to the downside.
However, previous cyclical peak margins did not exceed 6%, and the CAPA model forecasts that the industry's operating margin will remain higher than this throughout the forecast period, provided that the downside risks to the global economy do not materialise. Putting the forecast into a historical context – the world's airline industry is set to remain in a period of unprecedentedly high profitability, at least until 2018.