Q: How are airlines grouped?
A: The U.S. Department of Transportation classifies airlines by their annual operating revenues. ATA maintains a list of U.S. airlines organized accordingly.
Q: What is the breakdown between business and leisure travel?
A: Since we do not survey every passenger as to the purpose of his/her trips, we cannot measure this empirically. However, thanks to annual surveys commissioned by the Travel Industry Association (TIA), we can provide estimates for the domestic air travel market. According to its Domestic Travel Market Report (2007 Edition), 60 percent of the 156.8 million domestic person-trips by airplane in 2006 were taken primarily for leisure purposes, versus 40 percent for business/convention travel. Combined business/leisure constituted 12 percent of trips. [Note: Domestically, business passengers demand greater frequency and typically fly shorter distances than leisure passengers.]
Q: When did economic "deregulation" take place?
A: In 1977, Congress lifted the economic regulation of domestic cargo operations. In October 1978, it enacted legislation deregulating domestic airline passenger service. Air services between international points are governed by bilateral treaties under the parameters established in the Chicago Convention of 1944.
Q: What are the busiest airports?
A: ATA tracks the performance of airlines, not airports. For information about airports, please consult Airports Council International or view the publications of the FAA Office of System Capacity.
Q: Who pays for airports?
A: Our analysis of FAA Form 5100 data shows that airlines and their customers are responsible for more than 80 percent of airport revenues. This category includes the following items: terminal, cargo and hangar rents, landing fees, passenger facility charges (PFCs), the Airport Improvement Program (AIP), concessions, retail, parking and rental cars.
Q: What portion of my ticket includes taxes? What are they used for?
A: Depending on your itinerary, a substantial fraction of a ticket includes taxes levied by local, federal or foreign governments. The stated purposes of the taxes vary widely, including maintenance and enhancement of the nation's airports and airways and funding for various federal agencies.
Q: What is "elasticity"?
A: In the economics of air travel, the term “elasticity” surfaces most commonly when evaluating or describing the “price elasticity of demand.” That ratio is defined as the percent change in quantity of air travel in response to a percent change in the price of air travel. For example, in a given city pair, if a 10% increase in the price of air travel caused a 10% reduction in the number of passengers, the price elasticity of demand would be -1.0. The ratio may vary by market segment, trip purpose, and other factors. It also may be influenced by the availability of substitutes to commercial air travel (e.g., videoconferencing, bus, car, train, private jet). The results of studies offering specific estimates of elasticity can be found in Appendix B (see Table B-1) of The Taxation of Air Transportation (April 2005).
Q: How are pilots compensated?
A: Pilot compensation is a function of many variables, principally seniority, rank, aircraft, and airline. As highly skilled employees, pilots are certified by aircraft type and typically compensated both for block hours flown and for commuting hours. Productivity also varies widely, but hard hours typically range between 50 and 80 hours per month at a major airline. Whereas several years ago pilots came predominantly from the military, many now begin their careers in private flight schools. According to the 2008 FAA Aerospace Forecast (Table 29), there are approximately 145,000 certificated airline transport pilots in the United States.
Q: How safe is flying compared to other modes? Have accident and fatality rates declined?
A: ATA tracks annual safety data published by the National Transportation Safety Board.
Q: How do airlines set fares?
A: Airlines set fares with the aim of making profits across their networks and, at a minimum, to cover costs. While ticket prices have closely tracked airline costs, prices are determined principally by economic conditions and the competitive environment. Airlines carefully mix yield (price) and inventory (volume) to maximize revenue per flight, rather than per person. [This is why it is not appropriate to look at yield or load factor in isolation. It is the multiplication thereof—revenue per available seat mile (RASM)—that airlines monitor to ensure that they are covering unit operating costs.] The result has been historic growth in load factors and the advent of a new contingent of flyers who could not afford to fly prior to deregulation.
The closer to the flight an airline holds a seat, the more it must typically charge to compensate for the risk of allowing the seat to perish unsold. This phenomenon is largely a function of the airlines incurring enormous fixed costs just by putting a schedule in place. Although the marginal cost of accommodating an additional passenger is very low, the airline must recoup its substantial fixed costs in order to continue to schedule a wide array of flights.
Q: What are airlines' biggest costs?
A: Consistently, labor and fuel have ranked as airlines' top two costs, forming half of operating expenses. While traffic commissions were once a close third, they have fallen over the years as more cost-efficient distribution channels have prevailed. Purchased services, fleet, and maintenance material are also significant expense items.
Q: What is the cost of a delay?
A: For a discussion of ATC system delays and costs, see our Cost of ATC Delays page.
Q: What is the size of U.S. domestic airspace?
A: According to FAA, including radar coverage over Bermuda and the Caribbean, U.S. domestic airspace totals 3,288,000 square miles.
Q: What are some examples of "Other Revenue"?
A: In addition to transporting goods and people, airlines may generate revenue from several ancillary activities, including, for example, collecting fees for ticket changes or overweight bags, performing airframe or engine repair for another airline, renting out corporate real estate or flight simulator/training facilities, selling goods at the company gift shop, selling liquor, food or movie headsets onboard the airplane, selling memberships in airport clubs/lounges, selling frequent flyer miles to third parties.
Q: What's the relationship between regional airlines and their mainline partners?
A: The most common model is known as contract flying, in which the mainline carrier pays a flat rate per operation, buying capacity from the regional as a subcontractor. The mainline carrier bears the financial risks, managing capacity (i.e., schedule) and revenues generated from regional operation. The regional carrier enjoys guaranteed revenue stream, assuming costs are contained, with incentives/penalties to ensure operational integrity. All sales and marketing functions are handled by the mainline carrier. Under a prorate model, the two airlines share the financial risk, with passenger revenues split by mileage or base segment fares. The regional airline controls its own schedules but tends to synchronize operations with its mainline partner, and it may or may not have sales/marketing responsibilities independent of the mainline carrier.
Q: What is a "hub"?
A: As with certain other aviation terms, DOT defines hubs in an economic context, whereas FAA defines hubs in an operational or capacity planning context. FAA classifies airports according to national enplanement share. A "large hub" enplanes more than one percent of passengers at all U.S. airports in a given year. From the perspective of airline networks, a "hub" is an airport where one or more airlines organize a substantial number of departures in concentrated banks to facilitate connecting traffic flows. The result is a wide array of flights not only for connecting passengers, but also for local passengers, who benefit from significantly more flights than warranted by local demand alone.
Hubs help achieve economies of scale, scope and density with respect to passenger and cargo traffic. They allow airlines to use fewer airplanes, personnel and facilities to offer a more extensive network of service. Over the years, as the economy has globalized, U.S. airlines have extended their networks by allying with foreign carriers and increasing frequencies between U.S. hubs and their allies' foreign hubs.