ISTAT: Airlines look at the market and explain differences between the past and today

March 9, 2015: The top four players now are acting differently than previous eras, focusing on profits and return on capital instead of market share, says Mark Eliasen, vice president of finance and treasurer of Alaska Airlines.

Alaska returned 18% on its margin, the highest in the US industry, with low costs relative to its competitors. The company has grown at a rate of 7% year over year for several years. “We’re really happy with a single fleet.” The Boeing 737-focus allowed dramatic gains in lowering costs.

Of the five investment grade airlines, Eliasen notes that four of them are single-fleet carriers.

Nico Buchholz, EVP of Fleet Management of Lufthansa Airlines, said European carriers don’t have capacity discipline and the network carriers have to reinvent themselves. Lufthansa Group includes low cost carriers that are growing while Lufthansa itself strives to be the No. 1 choice for its traditional market.

Eurowings, a Lufthansa company, provides low cost service to short haul routes and soon is expanding to long haul. Eurowings prompted other LH airlines, including Austrian, Lufthansa and Swiss, to lower costs because if they didn’t, growth would happen at Eurowings.

Buchholz predicts consolidation in Europe and says Lufthansa Group and IAG (the British Airways group) will be two of the survivors. “But I wouldn’t go beyond that” in predictions, at least not before the crowd of 1,800 at the ISTAT conference where the remarks were made.

 

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