Industrial and mobility (1 of 5)

Airlines and aviation

About 9 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Airlines sell seats on flights, using aircraft that they often rent from lessors and airports that charge them for every landing and passenger.

The big idea: A flight costs almost the same to run whether the plane is full or half empty, so airlines win by filling seats at good prices and by flying each aircraft as many hours a day as possible at a lower cost per seat than rivals. Margins are thin and exposed to shocks the airline cannot control, such as fuel prices and conflicts: IATA expects the whole industry to keep only about 2 cents of each dollar of revenue as net profit in 2026.

One unit, in numbers: One short-haul flight of a European low-cost airline: EUR 13,350 comes in, and EUR 2,314 (17%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: About 2 to 7 percent operating margin for the industry, and net margins of about 2 to 4 percent; the best low-cost carriers do much betterRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: Very highVery large sums must be tied up before the business earns anything, so the cost of that money weighs heavily on profit. More on capital intensity
The number to watch: ASK (available seat kilometres)Seats offered times kilometres flown: the airline's capacity.

Ask this first in a case

What kind of airline is the client: network, Gulf hub, low-cost, cargo? And is the problem on specific routes or everywhere?

Words used above (2)

ASK:: Available seat kilometres: seats offered times kilometres flown.
Low-cost carrier (LCC):: An airline with one aircraft type, dense seating, fast turnarounds and online sales, which charges for extras.

The industry's other words are explained in Words to know (12).

On this page (17 sections)

How money is made

Passenger tickets are the largest part: IATA expects about USD 839 billion of the industry's USD 1,165 billion of revenue in 2026, about 72 percent.
Ancillary revenue from bags, seat choice, priority boarding, food and change fees: about USD 165 billion in 2026, and vital for low-cost carriers.
Cargo carried in the belly of passenger aircraft or on freighters: about USD 162 billion in 2026.
Loyalty programmes: airlines sell miles to banks and partners who give them to their own customers.
Airports earn landing and passenger charges plus duty free, food, parking and property income.
Lessors earn monthly rent on aircraft and engines, and gains when they sell aircraft.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One short-haul flight of a European low-cost airline with the lowest costs in its market (per-passenger figures shaped by Ryanair's year to March 2026): a 190-seat aircraft, 94 percent full, so 178 passengers. Illustrative, rounded figures.
Line	Amount	ShareShare of revenue
Fares (about EUR 51 each) plus extras such as bags and seats (about EUR 24 each), for 178 passengers	EUR 13,350	100%
Minus Fuel (about EUR 26 per passenger)	EUR 4,628	35%
Minus Crew and other staff (about EUR 9 per passenger)	EUR 1,602	12%
Minus Aircraft ownership and maintenance (about EUR 9 per passenger)	EUR 1,602	12%
Minus Airport and ground handling charges (about EUR 8 per passenger)	EUR 1,424	11%
Minus Air navigation (route) charges (about EUR 6 per passenger)	EUR 1,068	8%
Minus Sales, marketing and other costs (about EUR 4 per passenger)	EUR 712	5.3%
What is left (contribution)	EUR 2,314	17%

Check: EUR 13,350 minus EUR 11,036 of costs leaves EUR 2,314.

So what: The flight keeps about EUR 2,314, or about EUR 13 per passenger, before interest and tax. That is well above the industry's forecast net profit of about USD 4.50 per passenger for 2026 (a different measure, after interest and tax, but the gap shows what a cost leader earns). It still needs about 148 passengers (78 percent full) just to cover its EUR 11,036 of cost. Fuel is the biggest line, so a fuel price shock or a drop of about 30 passengers wipes out the profit: load factor and fare, protected by fuel hedging, are the levers that move it most.

Key measures(9)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

ASK (available seat kilometres)
Seats offered times kilometres flown: the airline's capacity. Glossary: ASK (available seat kilometres)
RPK (revenue passenger kilometres)
Paying passengers times kilometres flown: the traffic actually sold. Glossary: RPK (revenue passenger kilometres)
Load factor
RPK divided by ASK: the share of seat kilometres that were sold. Glossary: Load factor
Typical: About 83.5 percent for the world industry in 2025 and 84 percent forecast for 2026; Ryanair about 94 percent[1]
Yield
Passenger ticket revenue divided by RPK: the average fare paid for each kilometre a passenger flies. Glossary: Yield
RASK (revenue per available seat kilometre)
Total revenue divided by ASK. It combines how full the planes are and how much each passenger pays. Glossary: RASK (revenue per available seat kilometre)
CASK (cost per available seat kilometre)
Total operating cost divided by ASK. Low-cost carriers win by keeping it below rivals; RASK minus CASK is the profit on each seat kilometre. Glossary: CASK (cost per available seat kilometre)
Break-even load factor
The load factor at which revenue exactly covers cost: CASK divided by total revenue per RPK. Glossary: Break-even load factor
Ancillary revenue per passenger
Money from extras such as bags and seat choice, per passenger.
Typical: About EUR 24 at Ryanair in the year to March 2026 (about EUR 75 of revenue per passenger minus an average fare of EUR 51)[2]
Net profit per passenger
Industry net profit divided by passengers carried: how little each trip earns.
Typical: About USD 9.10 in 2025 and USD 4.50 forecast for 2026, worldwide[1]

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

What kind of airline is the client: network, Gulf hub, low-cost, cargo? And is the problem on specific routes or everywhere?
Is the gap in revenue or in cost: how do RASK and CASK compare with the closest competitor?
If it is revenue, is it load factor (too few passengers) or yield (fares too low)?
How much of next year's fuel is hedged, and at what price?
What cannot change quickly: aircraft on order or on lease, crew contracts, airport slots?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Aircraft and engine makers
Medium margin
Airbus, Boeing, Embraer, COMAC; engine makers such as CFM, Pratt & Whitney and Rolls-Royce
Few makers and long order books; engine makers earn much of their money from servicing engines for decades.
Step 2: Aircraft lessors
Medium margin
AerCap, SMBC Aviation Capital, Avolon, Sumisho Air Lease (Air Lease until its April 2026 takeover)
Buy aircraft and rent them to airlines, often for 8 to 12 years, for steady monthly rent.
Step 3: Fuel, maintenance and ground handling
Thin margin
Oil companies, maintenance shops, ground handlers and caterers
Paid per flight, per hour or per tonne; many compete for each contract.
Step 4: Airports and air navigation
Fat margin
Airport companies such as Dubai Airports, Adani Airports and GMR in India, and national air traffic control
Landing and passenger charges are often regulated; shops, duty free and car parks add steady profit.
Step 5: Airlines
Thin margin
Network carriers, Gulf hub carriers, low-cost carriers (LCCs), cargo and charter airlines
The step that carries the most risk: IATA expects a net margin of about 2 percent in 2026.
Step 6: Distribution
Medium margin
Airline websites and apps, global distribution systems (booking networks used by travel agents), OTAs and travel agents
Step 7: Loyalty programmes
Fat margin
Frequent flyer programmes that sell miles to banks, card issuers and partners
Often one of the most profitable parts of a network airline.

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

Airlines carry most of the risk but keep the thinnest slice. Steadier money sits around them: airports with regulated charges and duty free, lessors with long contracts, engine makers with decades of servicing, and loyalty programmes that sell miles to banks.

Cost structure(7)

The main costs, each as a share of revenue (the money from sales).

Fuel: 25 to 35 percent of operating costs (IATA: about 25 percent in 2025, about 31 percent forecast for 2026)[1]
Labour: pilots, cabin crew, engineers, ground staff: 20 to 30 percent of operating costs
Aircraft ownership: lease rent, or depreciation and interest: 10 to 15 percent of operating costs
Airport and air navigation charges: 10 to 15 percent of operating costs
Maintenance: 8 to 12 percent of operating costs
Other: catering, insurance, IT, overheads: 5 to 10 percent of operating costs
Sales and distribution: 3 to 6 percent of operating costs; lower for airlines that sell online

Benchmarks(6)

Typical figures for the industry, to check a client's numbers against.

Industry net profit margin, worldwide: About 4.2 percent in 2025; about 2.0 percent forecast for 2026[1]
Industry operating margin, worldwide: About 7.2 percent in 2025; about 4.1 percent forecast for 2026[1]
Return on invested capital (profit as a share of all the money invested in the business), worldwide: About 6.6 percent in 2025; about 4.3 percent forecast for 2026[1]
Middle East airlines, net margin 2026 forecast: About minus 6.1 percent, a loss of about USD 21 per passenger[1]The only region IATA expects to lose money in 2026, after the conflict.
Operating margin before tax, US-listed air transport companies: About 5 percent[3]
Ryanair, year to March 2026: About 208 million passengers, 94 percent load factor, EUR 15.54 billion revenue, EUR 2.26 billion profit after tax before an exceptional item[2]A cost leader: its cost per passenger excluding fuel was about EUR 36, and fuel about EUR 26.

Typical cases(7)

Case prompts you might hear in this industry.

Our client, a European network airline, is losing money on its short-haul routes. Why, and what should it do?
Should a Gulf airline open a new route from Riyadh to Nairobi?
A low-cost carrier is about to enter our home market. How should we respond?
Jet fuel prices have jumped by half. What should our airline do this year?
Should an airport build a new terminal?
An airline wants to grow its ancillary revenue. Where would you look?
Should our airline buy its next 20 aircraft or lease them?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Judging an airline by load factor alone. A full plane at low fares can still lose money; compare RASK with CASK.
Forgetting that connecting passengers on a hub pay one fare for two flights, so each leg earns less than a direct fare suggests.
Treating fuel hedging as a way to make money. It makes costs predictable; it does not make fuel cheaper on average.
Assuming capacity can be added fast. Aircraft deliveries are delayed and slots at busy airports are scarce.
Using 2025 Gulf traffic or fuel prices in a 2026 case without checking the conflict and the fuel shock.

What changed, 2024 to 2026(6)

Recent changes a case could turn on.

A fuel shock halved expected profits. In June 2026 IATA forecast industry net profit of USD 23 billion for 2026 (a 2.0 percent margin), about half of 2025, with jet fuel averaging about USD 152 a barrel against about USD 90 in 2025.[1]
The Gulf was hit hardest, then recovered. From 28 February 2026 a regional conflict closed airspace across parts of the Gulf and major Gulf airlines suspended most flights for about a week. By mid-June 2026 Emirates, Qatar Airways and Etihad were flying close to 90 percent or more of their pre-conflict flights, but in August the full-service Gulf carriers still had about 20 to 25 percent less capacity than in 2025.[11]
Hedging decided who felt the fuel shock. Ryanair had about 80 percent of its fuel for the year to March 2027 hedged at about USD 67 a barrel, and said the unhedged 20 percent doubled in price in April and May 2026.[2]
New Gulf capacity: Saudi Arabia's Riyadh Air began flights to London Heathrow in October 2025, part of the country's tourism and aviation plans.[6]
India's domestic market concentrated: IndiGo carried a record 66.3 percent of domestic passengers in June 2026, based on DGCA data, while the Air India group fell to about 24 percent.[5]
Aircraft stayed scarce because of delivery delays at aircraft and engine makers; AerCap reported that about 99 percent of its owned fleet was on lease through 2025.[4]

Players by region(6)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: Airbus
Boeing
CFM, engine maker
AerCap, aircraft lessor
SMBC Aviation Capital, aircraft lessor
IATA, the global airline association
Europe: Lufthansa Group
Air France-KLM
IAG, owner of British Airways and Iberia
Ryanair
easyJet
Wizz Air
Middle East: Emirates
Qatar Airways
Etihad
Saudia
Riyadh Air
flydubai
Air Arabia
India: IndiGo
Air India group
Akasa Air
Adani Airports
GMR Airports
Southeast Asia: Singapore Airlines
AirAsia
VietJet
Cebu Pacific
Thai Airways
United States: Delta
United
American
Southwest
Sumisho Air Lease, aircraft lessor (formerly Air Lease; bought in April 2026 by Sumitomo, SMBC Aviation Capital and partners)

Words to know(12)

Linked words have a fuller entry in the glossary.

ASK (glossary entry): Available seat kilometres: seats offered times kilometres flown.
RPK (glossary entry): Revenue passenger kilometres: paying passengers times kilometres flown.
Load factor (glossary entry): The share of seat kilometres sold: RPK divided by ASK.
Yield (glossary entry): Ticket revenue per passenger kilometre: the average fare per kilometre.
RASK and CASK: Revenue and cost per available seat kilometre; the gap between them is the unit profit.
Break-even load factor (glossary entry): How full the planes must be for revenue to cover cost.
Ancillary revenue: Money from extras sold on top of the fare, such as bags and seat choice.
Low-cost carrier (LCC) (glossary entry): An airline with one aircraft type, dense seating, fast turnarounds and online sales, which charges for extras.
Hub-and-spoke (glossary entry): A network that feeds passengers from many cities through one main airport to many others.
Slot (glossary entry): Permission to land or take off at a busy airport at a set time.
Fuel hedging (glossary entry): Fixing today the price of some future fuel with financial contracts, to make costs predictable.
Lease rate factor (glossary entry): Monthly aircraft rent divided by the aircraft's value.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Fill the assets

Sources(12)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

Practise it

Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.