In Europe, the strongest performers are still the large LCCs Ryanair and EasyJet. However, the most notable improvements in this region have come from some of the smaller airlines. In many cases they are rebounding from serious slumps, thanks to restructuring efforts.
Of the majors, Lufthansa is trending upward as it absorbs airline acquisitions. Turkish Airlines is also up, and its recent expansion appears to be bearing fruit.
The other two majors, however, have slipped further into the doldrums, as their mergers—which are somewhat limited in scope—have not produced enough benefits to offset Europe's shaky economic climate. The LCCs have also been causing the majors headaches in short-haul markets, leading them to reconsider their approaches to regional and short-haul networks, Jenks says.
The European majors are also much more vulnerable to the big Middle Eastern carriers, which are taking larger shares of long-haul traffic. The legacy airlines have been hurting on the cargo side too, thanks to the competition from the integrated cargo carriers and the Middle Eastern airlines, and the global downturn in the cargo market. In contrast to a relatively optimistic outlook for the U.S. majors, the large European airlines face “some inherent structural difficulties,” says Terry.
The Asia-Pacific region is seeing a wide range of trends, as befits such a vast and diverse area. Some LCCs such as AirAsia continue to perform strongly. But the large Asian airlines have not shown the strength they have in past TPA studies.
As well as the familiar culprits of global economic weakness and new competition from LCCs and other long-haul connecting carriers, Asian airlines are even more exposed to the cargo slump than their European peers.
China's slowing economic growth has also been a major factor. The Chinese carriers generally saw their scores decline in the TPA study, and other Asian airlines that are heavily reliant on Chinese routes also took a hit.
Rapid fleet expansion and over-reliance on domestic traffic have become problematic for Chinese airlines due to cooling demand. However, Terry points out that although it is not meeting expectations, growth is going on in China. It is still an “under-served market with tremendous upside,” he says. Because of this, the large number of aircraft orders by Chinese carriers is rational in the long term.
Of the airlines that use nearby hubs to connect traffic to China, the slowdown is a cautionary lesson. “It is good to have exposure to China, but that does not mean that your future should depend on it,” Jenks says. “If you are a really good long-haul hub operator, you have a portfolio of thousands of geographically diversified connecting markets, so if some are weak, this can be offset by other strong ones.”