An analysis of CASK dynamics and cost-optimization on EU/ US-Asia routes
In CAPA's newly published article “CASK is still king”, perhaps not surprisingly, it is reaffirmed that low-cost carriers (LCCs) still have lower unit costs than full-service carriers (FSCs), while ultra-low-cost carriers (ULCCs) have even lower costs. We have taken a step further to highlight contrasts between carriers in different regions, comparing airlines with long-haul operations flying EU/US to Asia routes.
While our study confirms that most APAC carriers have a lower CASK (cost per available seat kilometre) than their European and North American counterparts, there are some surprising exceptions revealing the potential for innovation within long-haul operations.
CAPA’s analysis identified a few FSCs that are close to LCC territory when it comes to CASK ex-fuel - indicating significant opportunities for FSCs to leverage other mechanisms in order to drive cost efficiency. Our study has shown that e.g. Finnair stands out as a European airline with a CASK closer to APAC’s average compared to other non-Asian carriers, and its cost strategies deserve some serious recognition.
Competing with APAC airlines: Structural and operational factors influencing costs
APAC airlines are indeed better positioned to dominate international capacity. If we compare with EU/US carriers, cost structures reveal huge marked disparities due to various factors: APAC airlines count on reduced labor costs due to regulatory environments, lack of union structures, and lower social security contributions; Airport charges in Europe and North America are considerably higher, with (mainly) European airports imposing higher fees compared to hubs in other regions; and regulatory constraints, with North American and European carriers being subject to stricter environmental regulations.
If we were to include fuel costs in the list, the competitive advantage APAC carriers sit with is even more out of proportion. With significantly extended flight time and corresponding fuel expenses due to restrictions in Russian airspace for European and North American carriers, the landscape gives APAC airlines (mainly Chinese ones) a big competitive advantage.
Asia is too crucial – and one EU carrier excels with flying stars
Finnair was honored in July last year with The Executive Leadership: Europe award at the 2024 Airline Strategy Awards because of its successful turnaround. While many airlines started to cancel routes to Asia after the Russian airspace closure, the Finnish carrier responded with a new business plan instead.
Among its many initiatives, Finnair improved its digital services, leased out extra planes, and operated joint flights with Qatar Airways and Qantas Airways. In a flurry of EU-Asia route cancellations post pandemic, Finnair continued expanding its APAC presence by partnering with AAP Aviation to set up local crew bases in India, Singapore, Thailand, and Hong Kong - a move that allowed the airline to reverse traffic and utilize an economy of scale to achieve flexibility and agility. Its results? Astonishing CASK level that can truly compete with APAC carriers.
Our CASK analysis also showed a few other EU/US airlines that approach the average CASK for APAC airlines - such as British Airways, that increased its investments drastically last year - guess where? Yes, India, its second largest market where it boasts five local crew bases.
This disparity in CASK between EU/US and APAC carriers highlights the urgency for innovation beyond traditional cost-cutting measures. While unbundling has played a role for FSCs according to CAPA, immediate bolder strategies that offer transformative potential to lower CASK are imperative to enhance competitiveness. The key lies in adopting scalable and adaptable solutions tailored to the unique challenges of operating across diverse networks - and smart crew base positioning in strategic APAC markets is showing to be the right way to narrowing the gap, and thriving in a cost-conscious industry where “CASK is still king.”