The IATA recently downgraded its 2019 growth and profit outlook for the global Airline market and 2020 looks set to continue the declining trend. Rising fuel prices, political and economic turmoil, uncertain demand and high competition are squeezing the market more than at any time since the financial crisis.
From trade wars to Brexit, fuel prices to environmental responsibilities pressure on sales and margins is going to increase in 2020. White-hot competition on many key routes means that Airlines remain unable to pass on their cost increases in their fares. With the lack of pricing power and continuous pressure on Airlines’ business models, cracks are already starting to appear in the market:
- Rumours continue to swirl around the longevity of Tigerair
- Hong Kong Airlines’ owner has secured $568M loan to keep flying
- Many of the world’s most famous “Flag Carriers” are in serious financial trouble
- The low-cost model, particularly in mature markets, appears to have peaked with most airline failure coming from this area of the market
- Orders for new planes at the 2019 Dubai Airshow was just 298 – down from 874 in 2017
With such an uncertain future in mind, leading market analysts Plimsoll have produced a special study on the world’s 345 leading Passenger Airlines, separating those already in financial difficulty from those powering ahead regardless. The Plimsoll Analysis assesses each Airline individually, looking at their short- and long-term financial health, overall trend in performance, future durability and potential for acquisition. Based on the latest financial data for each company, this new analysis shows:
- 222 of the world’s 345 leading Airlines are already rated as Caution or Danger – the former suggests growing issues whereas the latter indicates urgent improvements are required
- 80 of the companies included are ripe for takeover or merger – If the market consolidates in 2020, Plimsoll considers these Airlines to be the most attractive targets
- 41 Airlines have lost more than a quarter of their value – As profit margins are increasingly under pressure across the Global market, valuations have fallen again in the latest period
Our premise at Plimsoll is simple. Financially strong companies survive even the most uncertain conditions. Companies already under financial strain do not. The companies most likely to be brought down by unfavourable market conditions are already visible in the Plimsoll Analysis.
Political and economic uncertainty has the Global Airlines market is in a state of flux. Once the future becomes more certain the shape of the industry and the companies remaining could have changed significantly. The Plimsoll Analysis provides an easy means of highlighting those companies ill-prepared to ride out the current storm, those well placed to make a strategic acquisition or two and the players powering ahead in spite of it all.