The prices that airlines are paying for fuel today are some of the lowest in the last decade, whether they are expected to last or not, there is no doubt they are having a significant effect on the airline industry. While the obvious impact is on lower costs for airlines, the story has some troubling twists – billions spent on new technology that doesn’t seem such a good investment in today's conditions, low cost business models undermined by handing lower costs to their competitors, and could the industry be heading for catastrophe when prices rise again?
In the current favourable environment of relatively cheap oil, Low Cost Carriers (LCCs) find themselves operating in the right consumer segmentation to accommodate growth of the middle class and the consequent increase worldwide in the propensity to fly. This has translated into a compound annual growth rate (CAGR) of 7.1% for LCCs in the last decade while the total global market (including all commercial flights) achieved only a 3.5% CAGR.
There is no doubt that the Low Cost Carrier (LCC) business model is a success. Measured by 2015 net profit margins for all carriers worldwide, the four airlines with the highest margin globally are all short-haul LCCs, namely Ryanair, Cebu Pacific, Allegiant and Spirit. Will the long-haul LCC prove to be just as successful?
This is the last of our mini-series of articles on the Chinese aviation market. After looking at China’s Propensity to Fly against GDP and urbanisation, here’s some key numbers to illustrate China’s growing aviation market between 2006 and 2015.
This is the second in our mini-series on aviation in China. Following on from part 1 where we showed how China’s GDP per capita and propensity to fly follow a classic developing economy upward trajectory, in this article we are illustrating the relationship between urbanisation and propensity to fly.