Industry financial performance improved in Q1 2018, driven by European airlines
Despite the ongoing pressure on airline equities, the latest financial results from Q1 2018 have continued to point to a pick-up in industry-wide financial performance relative to the same period a year ago.
The EBIT margin in our sample of 73 airlines rose to 5.7%, from 4.7% a year ago. The improvement at an industry level was driven by a pick-up in performance in Europe (despite the first quarter of the year being a seasonally weak period for European airline profitability), alongside stronger showings from airlines based in Latin America and parts of the Middle East.
Our sample of 45 airlines indicates that free cash flow also improved at an industry-wide level in Q1 2018 compared to the same period a year ago (to 3.8% of revenues, up from 1.1% a year ago).
This outcome mainly reflected an increase in net cash flow from operations (to 18.4% of revenue in our sample, from 15.4%), offset by a 0.4 percentage point pick-up in capex spending (to 14.6%).
The industry-wide estimate masked a range in performance at the regional level. European airline free cash flow declined in annual terms following a sharp pick-up in capital investment, while airlines in Asia Pacific saw a moderate decline in net cash
flow generation in the quarter relative to Q1 2017.