Chapter 1: Annual Highlights

Matthew Chambers

Commercial Aviation and Airline Industry Highlights

The U.S. airline industry has experienced major changes since 2000when total passengers enplaned, the total number of employees, and airline profits were at all-time highs. Since 2000, the growth of the low-cost carriers has brought a shift to smaller aircraft and an accompanying industry-wide reduction in average aircraft size. With the network carriers operating with high load factors, they entered into more code-sharing partnerships with regional jet carriers, shifting the operation of many shorter segments to smaller aircraft. The combined effect of this trend was a higher frequency of service into mainline hubs.

The effects of 9/11 caused a sudden decrease in demand for air travel and a reduction in total airline operations in 2001. Ultimately, mainline airlines turned over more service to partner regional airlines flying smaller aircraft, which better matched the lower passenger demand. Some short-haul service disappeared in response to passengers changing to other transportation modes or not traveling at all, especially when faced with increased travel times due to the Transportation Security Administration (TSA) implementing enhanced security measures at airports.

The industry experienced record fuel price increases in 2008, quickly followed by an economic downturn. Fuel costs in 2008 were $3.06 per gallon. In 2009, the average price per gallon dropped to $1.89. However, for the first 6 months of 2010, the average price per gallon rose to $2.22 (Table A-7: Domestic and International U.S. Airline Fuel Cost and Consumption). U.S. airlines, in the face of rising fuel costs, have improved operational efficiency through increased direct-flight routing, incorporation of new aircraft and engine technologies to reduce fuel burn and emissions, and accelerated retirement of older, less fuel efficient aircraft.

Since 9/11, competition from low-cost carriers has remained strong and ticket prices have remained depressed. In the face of continuing depressed ticket prices, the industry sought other funding sources, called ancillary revenues. Airlines added separate fees for checked baggage, aisle seats, cancellation of tickets, changes to previously purchased tickets, seats with more legroom, snacks, pillows, and blankets so that ticket prices could remain competitive. Charges for checked baggage and other ancillary fees rose significantly (Table A-8: U.S. Airline Industry Ancillary Fees) beginning in 2008. Baggage fees tripled from 2007 to 2008, then doubled from 2008 to 2009. By June of 2010, baggage fees were up more than 10 percent over 2009. Cancellation fees for changing or refunding previously purchased tickets also increased. This unbundling of ticket prices with a base price and an " la carte" menu of service amenities continued during 2010.

Airline employment dropped steeply in the wake of 9/11 and since that time has steadily decreased. Subsequent events also decreased airline employment levels as the industry weathered the 2008 fuel crisis and the 2009 recession. Early in the decade, there was some employment growth within low-cost carriers, but recently employment at these carriers has also dropped. Since 2000, the number of total U.S. airline industry employees decreased every year but 2007, a clear indication of cost cutting initiatives by the airlines (Table A-9: Average Annual U.S. Airline Industry Full Time Equivalent Employees).

The past decade saw increased code sharing, and the end of the decade was marked by airline consolidations and mergers. In 2009, Delta Air Lines acquired Northwest Airlines, and Midwest Airlines and Frontier Airlines combined to form Republic Airlines, although Frontier Airlines maintained its own identity. In 2010, United Airlines announced a merger with Continental Airlines, while Southwest Airlines announced a merger with AirTran Airways. When these actions are completed in 2011, United Airlines will become the world's largest airline as measured by Available Seat-Miles (ASMs). Southwest Airlines will continue to be the largest low-cost carrier. On the regional airline level, Atlantic Southeast Airlines, a wholly owned subsidiary of SkyWest Airlines, completed the purchase of ExpressJet Airlines in November 2010; the expanded regional carrier is one of the largest operators of regional aircraft, operating nearly 4,000 combined departures per day.

The U.S. airline industry data reported by BTS in 2010 showed the industry beginning to recover from the fuel crisis of 2008 and the recession of 2009. Most airlines reported profits in 2nd Quarter 2010, a change from the reported losses in the 1st Quarter 2010 and the annual losses reported in both 2008 and 2009 (Table A-10: U.S. Airline Net Income (Profit)).

In terms of passengers, domestic and international combined enplanements were up 1.1 percent from January through July 2010 over the same 7-month period in 2009. U.S. airlines carried 0.5 percent more domestic passengers and 4.9 percent more international passengers in the first 7 months of 2010 than during the same period in 2009. This was a reversal of 2009, when total (domestic and international) enplanements dropped 7.2 percent from the first 7 months of 2008 (Table A-11: Annual U.S. Airline Passenger Enplanements).

While total passengers were up in 2010, the number of domestic flights was down 2.1 percent for the first 7 months. Combining the lower number of seats available with the number of miles flown, ASMs were down 0.3 percent (Table A-12: Domestic and International U.S. Airline Operating Revenue/Cost per Available Seat Mile (ASM)). The number of miles flown by revenue passengersRevenue Passenger-Mileswere up 1.3 percent. Increased passenger-miles flown coupled with fewer available seat-miles produced an all-time airline industry high average load factor of 82.3 percent, up from 81.0 percent during the same period in 2009. Airlines showed restraint in adding new seats and flights during 2010 in an effort to regain and maintain profitability.

On-time flight performance in the first half of 2010 was marginally better than 2009. The number of scheduled domestic airline flights arriving on time, i.e., within 15 minutes of the scheduled arrival time, was just slightly under 80 percent (Table A-13: Major U.S. Air Carrier On-Time Performance).

In summary, 2010 U.S. airline industry data showed a positive increase in passengers, profits, and a small increase in on-time flight schedule performance.

For latest airline data and statistics, please visit the Office of Airline Information program website at http://www.bts.gov/programs/airline_information/.