Growth driven by fare affordability; airlines making more seats available to accommodate demand
WASHINGTON, August 17, 2016 – Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, today projected that 15.6 million passengers will fly in scheduled service on U.S. airlines over the Labor Day holiday period, a 4 percent increase from the 2015 Labor Day period. Airlines will accommodate the growth in travel demand by offering 2.54 million seats per day, an increase of more than 98,000 from the same period last year.
During the seven-day Labor Day travel period (from Wednesday, August 31, through Tuesday, Sept. 6), A4A expects 2.23M air travelers a day will take to the skies, up approximately 82,000 per day from the same period in 2015. Friday, Sept. 2 and Thursday, Sept. 1, respectively, are expected to be the busiest days of the period. Expanded schedules and continuing declines in air fares are driving the projected increase.
“On the heels of this summer’s record volumes and falling ticket prices, A4A anticipates a commensurate increase in the number of flyers for the Labor Day period,” said John Heimlich, A4A Vice President and Chief Economist. “U.S. airlines are well positioned to meet the growing demand for air travel and are responding by increasing the number of seats available by 4 percent.”
Air travel remains one of the best consumer bargains out there given its superior speed and price versus other modes of travel, as fares were down 5.2 percent systemwide in 2015 and down 6 percent the first so far in 2016.
First Half 2016 Financial Performance
Ten U.S. passenger airlines – Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and Virgin America – collectively reported a pre-tax profit of approximately $12 billion, up from $11.3 billion during the same period of 2015. This translated to a profit margin of 15.5 percent, or 15.5 cents on every dollar of revenue. The year-over-year improvement was fueled by a 1.9 percent drop in operating expenses, with falling fuel prices making up for the increased labor, aircraft and airport costs.
Since the 2008-2009 recession, U.S. airlines have been closing the gap to achieve average corporate profitability. The 2015 period was the narrowest gap on record, with U.S. airlines at 14.1 percent and all U.S. corporations with an average of 16.5 percent.
“For the first time since the Great Recession, airlines are finally achieving profit margins on par with the average U.S. corporation,” said Heimlich. “Customers, employees and investors are benefiting every day from a financially healthy airline industry that is able to invest in the products, technologies and amenities the traveling public values.”
In the first half of 2016, these 10 airlines collectively reinvested $9 billion – $1.5 billion per month – to enhance the customer experience, primarily through the acquisition of new aircraft. These carriers alone are taking delivery of 366 new aircraft over the course of 2016. Onboard investments include larger overhead bins, lie-flat seating in selected cabins, AC and USB outlets, expanded Wi-Fi and inflight entertainment systems, among others. Additionally, airlines are investing in the passenger experience on the ground, with improved airport check-in areas, gate amenities, ground equipment and baggage systems. Investment in the workforce has also increased substantially with employee wages and benefits rising 35 percent since 2010, from $2.55 billion per month to $3.44 billion.
Passengers have responded positively to these new investments, with J.D. Power in May reporting airline customer satisfaction at a 10-year high and the American Customer Satisfaction Index® (ACSI) in April reaching its highest level in 22 years. The findings of these two independent reports are consistent with those of the December 2015 Ipsos survey commissioned by A4A, which indicated that 80 percent of 2015 flyers were satisfied with their overall travel experience.
First Half 2016 Operational Performance
U.S. airlines improved operational performance in the first half of the year to post a completion factor of 98.75 percent (up from 97.83 percent in 2015) and an on-time arrival rate of 82.02 percent (up from 77.67 in 2015). According to the Department of Transportation, 99.74 percent of passengers had their bags properly handled and oversales decreased to 0.62 per 10,000 customers.
“In the first half of 2016, U.S. airlines bolstered performance in each of DOT’s core operational metrics, in part because of the investments carriers continue to make in newer, larger aircraft, enhanced IT systems, procedures and staffing,” said Heimlich. “These investments are a reflection of the U.S. airlines strong commitment to continue innovating and growing to better meet the needs of the traveling public.”
A4A partnered with Global Eagle Entertainment to develop a new interactive data dashboard to aggregate flight operation information for U.S. airlines and airports across the country. The dashboard includes up-to-date information on airline performance metrics, including scroll-over maps, current flight departures, completions, cancellations, on-time performance and weather conditions.
As U.S. airlines continue to better their operational performance, they continue to urge Congress to address meaningful change for their customers that can be delivered by modernizing our nation’s Air Traffic Control (ATC) system.
“U.S. airlines serve 2.2 million customers on 27,000 flights each day, and every effort must be made to modernize our nation’s skies, which would have the greatest impact on consumers, by reducing delays, adding routes and improving safety,” said Sharon Pinkerton, A4A Senior Vice President, Regulatory Policy. “A4A and our members remain committed to working with the Administration, Congress and all stakeholders on the benefits of transforming the system.”
Airlines for America (A4A) advocates on behalf of the leading U.S. airlines, both passenger and cargo carriers. A4A works collaboratively with industry stakeholders, federal agencies, the Administration, Congress, labor and other groups to improve aviation for the traveling and shipping public.