Context on the global airline industry

As we move into the holiday season, which for many people means the travel season, or the why-the-hell-am-I-putting-myself-through-this season, here is some context on the industry that moves millions of people around the world. Much of this comes from the book The Global Airline Industry.

Don’t cry for airlines:

  • Air travel industry around the world has averaged 5 percent growth during the previous three decades, posting twice as much growth as global gross domestic product (GDP).
  • Yet the biggest driver for air travel is a growing global economy, and passenger traffic has grown for the past three decades, outside of three periods: 1991, after the Gulf War; immediately after the 2001 attacks in the United States; 2009 during the global financial crisis.
  • Experts predict global airline growth continuing at 4-5 percent over the next 15 years. This estimate is partly due to a predicted 2-3 percent annual GDP growth.

The US airlines and their international counterparts

  • In 2013 US airlines operated 10 million flights and carried 743 million passengers, making up nearly a quarter of the world’s total air passengers. In the mid-1980s, the percentage of passengers flying US carriers was 40 percent.
  • US airlines (including passenger and cargo) employed more than 580,000 people, operated 6,700 aircraft and flew over 25,000 flights per day. These airlines reported $200 billion in total operating revenues. Commercial aviation contributes 5 percent of the US GDP.
  • Delta Airlines, American and United have the highest revenue per passenger of all airlines. However, in the last decade, Emirates Airlines, Qatar, Etihad and Turkish Airlines have posted faster growth than the three large US-based carriers.
  • Since the start of US airline deregulation in 1978, which spurred loosening of rules around the world, airlines outside the US have seen a variation of profits.

How do you measure ‘profits’

  • Load factor is an important airline industry metric that measures “the percentage of available seats that are filled with paying passengers, or of freight capacity that is utilized.”
  • Higher load factor generally translates into higher profits
  • By 2013, the average load factor for US airlines reached 83 percent, more than 10 percentage points higher than the beginning of the century.
  • During that period, world airlines as a group increased load factors to nearly 80 percent.
  • Many older, legacy airlines reported higher load factors, but had problems sustaining high profitability because a high proportion of seats are sold at discount prices.

Global growth of low-cost carriers