US Low-Cost Airline Revenue on Top
Network Carriers Nearly Cut Unit Costs to Low-Cost Carrier Level
NEW YORK -- November 7, 2013
This year, for the first time ever, U.S. low-cost airline unit revenue on
domestic routes exceeded that of network carriers. Oliver Wyman’s annual
Airline Economic Analysis report, released today at the Raymond James Global
Transportation Conference, highlighted this and other important shifts taking
place in the global airline market.
While low cost carriers fly shorter routes, inherently generating higher unit
revenue, this unprecedented spike in domestic revenue per available seat mile
among U.S. low-cost carriers is still evidence of a major change.
“With both network and low-cost carriers focused on generating higher revenue,
the result may be higher profitability in the short term,” said Oliver Wyman
Partner Bob Hazel. “However, this environment could also facilitate the
emergence of a new group of lower fare airlines.”
Other highlights from Oliver Wyman’s 2013 report include:
*Asia strengthening its position as the world’s largest airline market,
surpassing Europe and the U.S. Just a few years ago, the U.S. was still
No. 1, Europe second, and Asia third. The shift in the airline market
shows why manufacturers are focusing on Asia.
*A narrowed cost gap between U.S. network airlines and low cost airlines
during the past five years from 34 percent to less than 4 percent. Even
so, ultra-low-cost airlines modelled after Europe’s Ryanair operate at
costs that are a step below even traditional low-cost carriers and are a
growing challenge to both network and low-cost carriers.
*Increasing pressure from ultra-low-cost carriers. Some ultra-low-cost
airlines unbundle their products to the maximum extent and charge low base
fares and high ancillary fees. Added together, these low fares and high
fees can equal the higher fares and lower ancillary fees at traditional
airlines. Is this situation sustainable, or will traditional airlines find
ways to regain their historic revenue premium?
About the Airline Economic Analysis
Oliver Wyman’s Airline Economic Analysis report is in its fifth generation.
The 45-page report covers a range of industry analyses including: CASM/RASM
comparisons, stage-length-adjusted and long-term trends, fuel prices,
break-even load factors, ancillary revenues, and fleet composition and global
capacity growth by region.
About Oliver Wyman
Oliver Wyman is a global leader in management consulting. With offices in 50+
cities across 25 countries, Oliver Wyman combines deep industry knowledge with
specialized expertise in strategy, operations, risk management, and
organization transformation. The firm's 3,000 professionals help clients
improve their operations and risk profiles and accelerate their organizational
performance to seize the most attractive opportunities. Oliver Wyman is a
wholly owned subsidiary of Marsh & McLennan Companies [NYSE:MMC]. For more
information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter
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