Even though the airline industry has arguably been the most integral in improving globalization across the last several decades, and even though it has a reputation of being too expensive, it is actually the industry with the lowest profit margins. Because of this, the airline industry is unable to adapt to downward pricing pressure or economic instability, as witnessed during the pandemic.
When the Covid-19 pandemic hit, most countries forbade travel and went into lockdowns, severely impacting the hospitality industry, with airlines being particularly hard hit. In fact, from 2020 to 2022, when the worst of the pandemic passed over, the airline industry is estimated to have lost more than $200 billion, resulting in tens of thousands of job cuts even among the most profitable airlines in the world.
However, 2022 saw the resumption of global travel as most countries removed restrictions which resulted in pent-up demand being released across summer and airlines recording one of the most profitable quarters in airline history in Q2 2022. Even though the Russian invasion of Ukraine and the ensuing year-plus war result in airspace issues, airlines have managed to persevere and the outlook is quite bright.
Of course, you can't discuss 2022 without discussing the economic uncertainty that dominated the year, resulting in a horrendous year for the stock markets, with rising inflation and aggressive interest rate hikes combined with an impending recession resulting in a negative mindset for investors. Despite this, airlines recorded the highest price per mile in history, and even though volume hasn't reverted to pre-pandemic levels, the rise in prices has resulted in higher revenues for airlines with many returning to profitability after a couple of years of losses, which is great news for the most profitable airlines in the world.
Many of the most profitable airlines in the world are also well-known for the level of service provided, and are often counted among the best airlines in the world based on assessments by various magazines and websites, with the World Airline Awards being considered the most prestigious. Some of the best airlines based on various categories include Singapore Airlines and Qatar Airways.
A large part of an airline's profitability depends on the routes it flies. Even at a time when profits have been under pressure, some routes will still earn airlines hundreds of millions of dollars, with the most lucrative route in the world being worth over $1 billion, according to Forbes. The top 10 most lucrative routes earn revenues of over $6 billion between 2018 and 2019, with British Airways earning $1.16 billion on its route between London and New York. In fact, half of the most profitable routes are based from London's Heathrow Airport, one of the most popular airports in the world in terms of number of passengers. Recently, the airport saw its busiest month since the pandemic started, and this is only bound to increase in the next few months as summer truly grips Europe.
However, one thing that investors in airline stocks are concerned about is the industry's contribution to climate change, with many governments emphasizing and preferring travel by train. In fact, France recently banned short-haul flights where a train journey of 2.5 hours would suffice. While many believe this is just lip service and doesn't impact climate change significantly, other similar bans could follow, which will be disastrous for European airlines.
While short-haul flights being banned in the future is a possible negative outcome in the future, the rest does seem quite positive. According to the International Air Transport Association (IATA), net profits of the airline industry are expected to double to nearly $10 billion in 2023, at a net margin of just over 1.2% while operating profits are expected to exceed $22.4 billion in the same time period. The current expectation is that over 4.35 billion people will fly in 2023, much closer to 4.54 billion people who flew in 2019. Further, revenues are expected to cross $800 billion in 2023 for the first time since the pandemic hit, all of which shows that the airline industry is well on its way to recovery. IATA's Director General stated "“Airline financial performance in 2023 is beating expectations. Stronger profitability is supported by several positive developments. China lifted COVID-19 restrictions earlier in the year than anticipated. Cargo revenues remain above pre-pandemic levels even though volumes have not. And, on the cost side, there is some relief. Jet fuel prices, although still high, have moderated over the first half of the year.” This has also resulted in a much more positive outlook by Delta's CEO Ed Bastian who said in the company's Q1 2023 earnings call "With solid first quarter performance and visibility into the strength of summer travel demand, we are confident in our full year guidance for revenue growth of 15% to 20% year-over-year, earnings of $5 to $6 per share and free cash flow of over $2 billion, the three main guideposts we shared with you last December. For the June quarter, we expect to deliver the highest quarterly revenue in our history, a 15% operating margin and EPS of $2 to $2.25 a share. Our forecast operating profit of $2 billion matches Q2 of 2019, demonstrating that the earnings power of this franchise is intact."
However, despite the recovery posted by airlines, it is important to note that even some of the biggest airlines in the world have still not returned to profitability. This is why, some of the most profitable airlines in the world are still currently making losses, though if trends continue, that will not be the case for much longer. To determine our listing, we ascertained the 25 biggest airlines in the world through Fortune 500 and annual reports of each airline, and ranked them based on either their TTM net profit from continuing operations, or net profit as determined through their annual report, especially for airlines that aren't listed. Where the company's financials were in another currency, they were translated to the USD. Numbers in brackets indicia
Total net profit / (loss) (in millions): $(1,034)
All Nippon Airways, Japan's major carrier, recently entered a deal for a commercial partnership with El Al Israeli Airlines.
Total net profit / (loss) (in millions): $(554)
Spirit Airlines, Inc. (NYSE:SAVE) is an American ultra-low cost carrier which saw nearly 60% of its total flights delayed recently after an issue with its website, airport kiosks and app.
Total net profit / (loss) (in millions): $(378)
Cathay Pacific used to be a major competitor to Singapore Airlines but has stagnated in recent years, as evidenced by the fact that Singapore Airlines turned a huge profit while Cathay Pacific is still facing heavy losses, though still has seen significant improvement from 2020, where its losses were over $2.7 billion.
Total net profit / (loss) (in millions): $(362)
JetBlue Airways Corporation (NASDAQ:JBLU) is one of America's most popular low-cost airline carriers. Recently, JetBlue Airways Corporation (NASDAQ:JBLU) was forced to end its partnership with American Airlines by a court.
Total net profit / (loss) (in millions): $(66)
Japan Airlines is one of the country's biggest airlines, and is issuing a 10 billion Japanese Yen bond, after deciding to operate its own freighters.
Total net profit / (loss) (in millions): $ (1)
The flagship carrier for India, Air India recently launched flights to Amsterdam.
Total net profit / (loss) (in millions): $58
The first airline in our list of most profitable airlines in the world to actually make a profit is Alaska Air Group, Inc. (NYSE:ALK), which owns Alaska Airlines and Horizon Air. Alaska Air Group, Inc. (NYSE:ALK) has seen its stock price soar even as it adds more nonstop flights to several destinations.
Total net profit / (loss) (in millions): $73
SkyWest, Inc. (NASDAQ:SKYW) has been one of the best performing airlines in 2023, more than doubling its value in just 5 months, as demand for flights continues to increase while the airline is also working on fleet-modernization.
Total net profit / (loss) (in millions): $89
Owned by the United Arab Emirates, Emirates Airline is one of the most luxurious airlines in the world. In 2022, the airline engaged in a major row with Heathrow Airport after the latter set a limit of 100,000 passengers per day after being unable to deal with higher numbers during summer.
Total net profit / (loss) (in millions): $112
Air France KLM owns the flagship carriers of France and the Netherlands, and according to Simply Wall Street, low returns on capital for the company are likely to signify troubling times ahead.
Total net profit / (loss) (in millions): $127
American Airlines Group Inc. (NASDAQ:AAL), one of the biggest airlines in the U.S. and the world, was recently forced to end its partnership in the Northeast with JetBlue, though it was given more time by the judge to carry out the same. In the current year, American Airlines Group Inc. (NASDAQ:AAL) has gained 25% in share price already.
Total net profit / (loss) (in millions): $400
China Airlines, the state-owned flag carrier of Taiwan, has unveiled new international flight routes which should add to its profitability.
Total net profit / (loss) (in millions): $400
The Taiwan based airline is generally not counted among the largest airlines in the world, but in terms of profitability, its right up there, with only one loss making year in 2020.
Total net profit / (loss) (in millions): $539
Southwest Airlines Co. (NYSE:LUV), considered to be the biggest low-cost airline in the world, is also among the most profitable airline companies globally. One concern faced by Southwest Airlines Co. (NYSE:LUV), shared by other airlines, is the lack of airplanes as both Boeing and Airbus, two of the largest aircraft producers, fail to keep up with demand.
Total net profit / (loss) (in millions): $737
There are several American airlines among the most profitable airlines in the world, including United Airlines Holdings, Inc. (NASDAQ:UAL). United Airlines Holdings, Inc. (NASDAQ:UAL) recently became the front-of-shirt sponsor of Wrexham AFC, the football club purchased by Hollywood stars Ryan Reynolds and Rob McElhenney which earned a fairytale promotion in 2023.
Total net profit / (loss) (in millions): $854
The largest airline in Germany and its flagship carrier, recently agreed to purchase 41% of ITA Airways, Italy's premier carrier. Currently, Lufthansa's flights are at 70% of their pre-pandemic level.
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Disclosure: None. Top 20 most profitable airlines in the world is originally published at Insider Monkey.
