Airline Rankings: Downward spiral

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Last year the Top 150 airlines underwent the sharpest and most dramatic downturn since the Airline Business rankings began. Operating losses totalled $15billion, marking a massive $44 billion swing from the $29 billion profit logged in 2007.

The last time the Top 150 posted an operating loss was in the wake of the 11 September 2001 terrorist attacks, when they sunk $5.7 billion into the red. This pales in comparison with the 2008 loss.

Net losses were even worse. At $33 billion, they sit in stark contrast against 2007's record $22 billion net profit. And things are not looking any brighter in 2009.

In the words of British Airways chief information officer Paul Coby: "This economic crisis which we are facing today is different to any other we have faced in our lifetime. It is hitting every region. What next? The four horsemen of the apocalypse?"

Revenues at least remained on the up. Turnover among the Top 150 rose 8.6% to $572 billion. But on the flip side, fuel raced to $140 per barrel during 2008, wiping out potential gains. Far from helping, hedging proved a dangerous sport, ultimately burning a hole in many carriers' bottom lines. "It's a very high stakes game," remarks Association of Asia Pacific Airlines director general Andrew Herdman. Indeed, the extreme depth of 2008's net losses, at more than double the operating figure, was in parthedging losses.

In summary, with an average net margin of minus 5.8%, yields are slipping and turnover growth is not being translated into profit.

Delta Air Lines occupied theunenviable position of racking up the largest operating and net losses,seeing its $1.6 billion net profit in 2007 evaporate into a $8.9 billion loss owing to merger and fuel costs. But Delta, aided by the inclusion of two months' worth of Northwest Airlines figures, wasthe highest climber among the top 10 by revenues, jumping from seventh to fourth position. It is also worth noting that Delta's transatlantic joint-venture with Air France-KLM, with estimated revenues of $12 billion annually, would rank around 14th place in its own right.

Several of Delta's US counterparts also languished in the bottom 15 by margin, net and operating profits this year, indicating just how badly North America has been impacted by the downturn. Indeed, North American carriers in the Top 150 recorded a net loss of nearly $20 billion in 2008, a swing of almost $26 billion on the profit of $6 billion in 2007.

Chinese and Indian carriers also struggled and likewise featurein the bottom 15. They make up over a third of the laggards by net and operating profits, demonstrating just how tough conditions in these markets really are.

Being ranked among the 15 worst performers is, to a degree, based on size. Butsmaller players, such as Midwest Airlines and Kingfisher Airlines, ranked 121 and 94 by revenues, also racked up heavyoperating losses for the year.

Notably, the best margins for 2008 were achieved by smaller carriers. Of the 15 best performers in this field, none ranked above 25 in terms of revenue. Instead it was AirAsia which led the field, with an impressive 28.6% margin. Of the bigger playersonly Chile's LAN Airlines and THY Turkish Airlines made it on to the operating margin leader board.

Lufthansa ranked as the most profitable carrier worldwide, booking a $2 billion operating profit, or $880 million after tax, which placed it top in both categories. Lufthansa's consolidation focus has also elevated it from the runner's up position to become the top carrier by revenue worldwide.

Low-cost carriers continued their strong growth in 2008 among the Top 150, with revenues growing a fifth to $49 billion.This makes them comfortably the second largest industry sector among the Top 150.

This year's rankings, though, come against the backdrop of volatile currency movements, meaning sharp differences between local and US dollar currency figures in some cases.