Airline Cost Performance

Airline Cost

Performance

IATA ECONOMICS BRIEFING No 5

An analysis of the cost base of leading

network airlines versus no-frills,

low-cost airlines (LCCs)

IATA Economics Briefing No 5:

AIRLINE COST PERFORMANCE

Mark Smyth

Brian Pearce

IATA, July 2006

Contents

00

Executive Summary

01

Introduction

02

The Low-Cost Challenge

03

Airline Cost Performance for US Airlines

04

Airline Cost Performance for European Airlines

05

Airline Cost Performance in Asia and South America

06

The Cost Efficiency Challenge

07

Service Quality – The Other Side of the Equation

08

Conclusions

09

Foreword by Giovanni Bisignani

page 03

page 04

page 10

page 12

page 16

page 22

page 28

page 32

page 36

page 40

Appendix A Appendix B

00 Foreword

Every airline is now

a lower-cost airline.

The worst financial crisis in

the industry’s history over

the last five years has forced

all carriers to achieve cost

efficiencies and higher

productivity if they are to

survive.

Significant progress has been made in reducing non-fuel

costs and in improving the efficiency of fuel use, but the

challenge is on-going and central to the future prosperity

of the industry.

While network airlines have made significant progress in

restructuring their cost base, they are often faced with a

moving target. Low barriers to entry to the industry, combined with national or regional deregulation, have seen

1

new or restructured no-frills, low-cost operators (LCCs) 

capture a fast-growing share of regional airline markets.

IATA will continue to represent, lead and serve the airline

industry in identifying and delivering cost efficiencies

through campaigns such as Simplifying the Business

(StB) and the Fuel Action Campaign. This report provides

a useful insight into where cost gaps exist and where

further action is possible. It provides interesting lessons,

not just for regions with a history of competition with

LCC airlines but also...