Readers who have followed my writings thus far will note that I rarely do peer comparison. This is because of my belief that there are no two identical apples in this world and peer comparison is potentially misleading, at least on a pure financial basis. However, a holistic view of peer comparison across financial variables and operating metrics would be more useful.
The operating margins of airlines are significantly affected by the complexity of the fleet structure. The more aircraft types an airline has, the higher its maintenance costs because of the use of different type of parts.
From the charts, it can be seen that US Airways has the lowest operating margins, while Southwest Airlines has the highest margins. If we analyze the fleet structure for the different airlines, the disparity in margins is easily understood. Southwest Airways only has one type of aircraft — the B737 for both its short-haul and medium-haul flights. In contrast, US Airways has four different types of aircraft (A319, A320, A321, B737) for its short-haul flights; the A330 and A350 aircraft for its medium-haul and long-haul flights, respectively.
I was doing a comparison of a few Asia-listed luxury retailers a few months ago and found that one of the retailers had consistently lower gross profit margins. After I did further investigation, I found out that was because that retailer had a greater proportion of wholesale business than its peers. Although that retailer had lower margins, it had a shorter cash cash conversion cycle because of lower inventory days for its wholesale business. Also, its wholesale business was more resilient than its retail business during the financial crisis.