Commercial airlines - global EBIT margin 2010-2020

Following a dramatic increase in 2015, the EBIT margin of commercial airlines has been falling, with the combined margin for all global airlines projected to be 5.5 percent in 2020. This is down from 5.7 percent in 2018, and 8.6 percent in 2015.

EBIT margin

EBIT stands for earnings before interest and taxes and is a measure of a company’s profitability. As the name suggests, it includes the income received by a company, less all expenses apart from tax and interest (either paid or received). The EBIT margin is then calculated by dividing the company’s EBIT by the company’s total revenue. Note that amortization and depreciation are included in the expenses deducted for the EBIT calculation, with the acronym EBITDA being used when these are also excluded. EBIT is an appropriate measure for comparing global airlines as it factors out regional differences such as local interest and tax rates.

Reasons for the declining EBIT margin

Globally, the EBIT ratio for commercial airlines has decreased at time when both industry revenue and passenger demandhave been increasing. One reason for this divergence is fuel costs, with the aforementioned 2015 increase to EBIT margins coinciding with a sharp fall in aviation fuel prices. Another reason may be the increasing market share of low cost carriers, placing downward pressure on ticket prices.