Airlines underperform norm for investors global study reveals

February 1st 2023

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The international Air Transport Association (IATA) recently has reported, in a study it commissioned from consultancy McKinsey & Company, “that in aggregate, airlines underperform on the financial return that investors would normally expect”. Read More »

Key findings of Understanding the Pandemic’s Impact on the Aviation Value Chain were:

• On average, the collective Return on Invested Capital (ROIC) generated by airlines was 2.4% below the Weighted Average Cost of Capital (WACC), destroying US$17 billion of capital every year.

• Pre-pandemic, all sectors of the value chain except airlines delivered ROIC in excess of WACC with airports “leading the pack in absolute value.”

• Assessing the impact of the pandemic, the study said “in absolute terms, airline losses led the pack with ROIC falling below WACC by 20.6% of revenues.”

“Airlines improved their profitability following the Global Financial Crisis (2008), but on average, they were not able to benefit financially to the same degree as their suppliers or infrastructure partners,” IATA director general, Willie Walsh, said. “Rewards across the value chain are disproportionate to risk. Airlines are the most sensitive to shocks, but have limited profits with which to build a financial buffer.”