The global airline industry is constantly chastised for its inability to earn a long-term profit, let alone generate economic profit. But this perception isn’t completely accurate. In its Aviation Insights Review (AIR) series, L.E.K. Consulting gives credit to those participants in the global aviation industry that have generated attractive returns to shareholders – be they full service carriers, low cost carriers or regional carriers.

As the leading strategy advisor to the aviation industry and expert on shareholder value analysis, L.E.K. uses economic profit as the relevant measure to gauge a company’s ability to meet the financial requirements of its stakeholders over time. While total shareholder returns are insightful, they are too dependent on the random start and end dates that can be adversely affected by any number of market conditions at the time. (L.E.K. broadly defines economic profit as the surplus the company generates after charging for the capital that it employs at its relevant cost of capital rate.)

This AIR report provides an update on the period ending in 2013 for the entire global industry. Given both the dramatic turnaround in the U.S. and the rapid pace of change across the entire industry over the past five years, we have provided two timeframes for comparison: the cumulative five-year financial performance ending in 2012 and ending in 2013. This comparison shows a growing divergence between the winners and laggards, and that the leading industry players generated significant returns in the five years ending in 2012.

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