Low-cost carrier traffic, revenues and profits continued to grow in 2015 as the spread of the model showed no sign of abating.
The latest Flightglobal/Airline Business low-cost carrier survey shows strong growth among leading carriers in the sector. Passenger numbers among the top 100 low-cost and leisure carriers in 2015 topped 1.1 billion. That is an increase of almost 11% on the previous year.
Low-cost carrier revenues and profits, especially among the sector's biggest carriers, were also up sharply in local currencies – though big exchange rate movements against the strong US dollar mean this growth does not show when these figures are converted into dollars for comparison purposes.
TRAFFIC GROWTH
When Ryanair ended the 2015 calendar year passing the 100 million passenger mark, it further underlined the huge growth the low-cost sector has continued to experience over recent years.
The Irish carrier became the second operator in the segment to reach the milestone and had 106 million passengers on an earned-seat basis for its financial year to March 2016. That reflects its return to double-digit passenger growth, after a relative hiatus ensuing from delays in sealing a follow-up aircraft order. It has added 25 million passengers in the last two years after putting its foot back on the accelerator. During this period, its fleet has increased from just under 300 Boeing narrowbodies to almost 350 today.
Southwest Airlines remains the largest low-cost carrier in the world, carrying just shy of 145 million passengers in 2015. Its own passenger levels were sharply increased after its acquisition of AirTran – which was fully integrated at the end of 2014.
But growth has been strong across the sector. The latest Airline Business low-cost and leisure carrier traffic rankings shows that in 2015 the 20 biggest operators in the sector carried 713 million passengers. By contrast, the 20 biggest operators in the sector in 2008 handled some 420 million passengers.
More striking still is the growth of the 20 biggest low-cost carriers in 2015 compared with their own performance in 2008. The biggest carriers last year had more than double the passengers they had in 2008. Indeed, Brazilian carrier Azul – the 12th biggest low-cost carrier, handling over 20 million passenger in 2015 – only launched flights in December 2008.
Azul, aided by its acquisition of Brazilian regional carrier Trip, is among the fastest-growing carriers over this period, together with Indian carrier IndiGo and Indonesia's Lion Air. IndiGo, which listed on the Mumbai stock exchange last year, has grown from just below five million passengers in 2008 to over 31 million. Lion, meanwhile, has grown from around seven million in 2008 to an estimated 31 million passengers last year – its expansion tempered by more recently checked capacity.
This illustrates the rapid growth of low-cost carriers from the emerging markets. In 2008, only four Asia-Pacific carriers ranked in the 20 biggest low-cost operators. That had reached six carriers by 2015. Virgin Australia – which has since repositioned as a network operators – was the only Asian carrier among the top 10 in 2008, but IndiGo, Lion and AirAsia were all among the biggest carriers last year. AirAsia, which has doubled in size since 2008, has also developed a series of affiliate carriers in the region.
Not that European carriers have been left behind. Alongside the established pan-European pair of Ryanair and EasyJet, the likes of Norwegian, Pegasus, Vueling and Wizz Air have each more than trebled passenger levels since 2008. North American carriers, too – including JetBlue Airways, Virgin America, WestJet and the ultra-low-cost pair of Allegiant Air and Spirit Airlines – have all grown significantly during this period.
Over the last year, passenger numbers among the top 100 low-cost and leisure carriers increased 10% to almost 1.1 billion passengers – more than 250 million of which were accounted for by Southwest and Ryanair combined. That is despite some slowdown in some key growth markets in Asia and Brazil.
This growth will further increase the budget sector's share of overall traffic, which has already grown from representing less than 10% of passengers carried by the top 150 global airlines in 2008 to more than a quarter in 2014.
The largest share of passengers for low-cost and leisure carriers among the leading 100 operators comes from Europe – which represents almost 38% of the sector. That is followed by the Asia-Pacific and the North American markets.
IMPROVED FINANCES
Revenues for all but six of the 50 biggest airlines in the sector in 2015 covered by the report increased in local currency – though the sharp movements in foreign currencies against the strong US dollar mean that, in several cases, they fall when converted into dollars for comparison purposes.
Revenues in local currency were down at only one carrier among the 20 biggest low-cost sector operators, Gol, as it battled Brazil's economic challenges – though figures are not available for another of the country's major low-cost operators, Azul.
Profits also continue to rise. At a net level, the 20 most profitable low-cost carriers at a net level for which figures are available made collective profits of $8.2 billion in 2015. That compares to $5.1 billion among the 20 biggest airlines by net profit in 2014.
The sector's four biggest carriers – EasyJet, JetBlue, Ryanair and Southwest – all posted operating profits topping $1 billion for their most recent financial years and collective operating profits of $8 billion.
Southwest remains the biggest low-cost carrier, generating revenues of almost $20 billion in 2015 and, in line with the strong profits across US airlines in the year, an operating profit of over $4 billion for the year.
Revenues were also up sharply at the fourth-biggest airline by revenue, JetBlue, which more than doubled its operating profit for 2015. North American carriers, echoing the wider airline picture, led the way in LCC profitability in 2015. Six of the nine most profitable carriers were from North America, as Allegiant, Spirit, Virgin America and WestJet join Southwest and JetBlue among the most profitable carriers at a net level.
European budget carrier Ryanair increased its operating profit 40% and net profit 43% in local currency for the year ended March 2016 to a new high – even before accounting for the one-off gains from the sale of its largely written-down Aer Lingus stake.
The full report, covering the 100 biggest low-cost and leisure carriers by passenger number and the 50 biggest low-cost carriers by revenue, is available in the Reports section of Dashboard.
Source: Cirium Dashboard
