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Airlines - US - June 2011

  • To what extent are fees helping airlines survive – is this tenable in the long-term?
  • What consumer groups are most willing to invest in value-adds?
  • Are frequent flyer programs as effective as they can be?
  • What changes are there likely to be in the way air tickets are found and booked?

This report builds on the analysis presented in Mintel’s Airlines—U.S., May 2010. It discusses the market for air travel purchased in the United States and presents sales figures reported by U.S. carriers. Cargo airlines and chartered passenger flights are not included in the scope of this report.

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data Sources
          • Sales data
            • Consumer survey data
              • Advertising
                • Abbreviations and terms
                  • Abbreviations
                    • Terms
                    • Executive Summary

                      • Airline industry rebounds from 2009 but may enter another downswing
                        • Airfares rise as airlines consolidate and constrain supply
                          • Ancillary fees become substantially greater share of revenues
                            • Airlines adopt mobile technology and build brands through green practices
                              • Southwest holds strong position in both personal and business travel
                                • Online distribution dominates but continues to evolve
                                  • Low-cost carriers promote no-fees and other points of differentiation
                                    • High-income households lead the airline recovery
                                      • Price, schedule, and baggage fees are most important in airline selection
                                        • Large majority of air travelers don’t always purchase lowest-fare option
                                          • Frequent flyer programs remain largely unchanged
                                          • Insights and Opportunities

                                            • Fees help airlines survive but solution is untenable in the long-term
                                              • Younger consumers are more willing to pay for value adds
                                                • Frequent flyer programs can be made more effective
                                                • Inspire Insights

                                                    • Inspire Trend—Who Needs Humans?
                                                    • Competitive Context

                                                      • Car travel becomes more popular in 2010
                                                        • Figure 1: Means of travel used domestically, Jan. 2007–Nov. 2007, Nov. 2008–Dec. 2009, and Oct. 2009–Dec. 2010
                                                      • Proposed high-speed rail network may change airline focus in long term
                                                      • Market Size and Forecast

                                                        • Airline revenues rebound in 2010 but face more challenges in 2011
                                                          • Figure 2: U.S. revenues of leading airlines, at current prices, 2005-15
                                                          • Figure 3: U.S. revenues of leading airlines, at inflation-adjusted prices, 2005-15
                                                        • Fan chart forecast
                                                            • Figure 4: Fan chart forecast at 50-95% confidence levels, 2005-15
                                                        • Market Drivers

                                                          • Revenue passenger miles grow in 2010 but may face another downswing
                                                            • Industry restraints in supply growth drive prices higher
                                                              • Figure 5: Passenger yield on domestic flights, 2009-11
                                                            • Fees become an increasingly important source of revenue
                                                              • Branded service bundles
                                                                • Fuel prices threaten to dampen demand further
                                                                • Segment Performance

                                                                  • Fee revenues explode, while ticket prices are constrained
                                                                    • Sales by segment
                                                                      • Figure 6: U.S. revenues of leading airlines, by type of revenue, 2008 and 2010
                                                                      • Figure 7: U.S. revenues of leading airlines, by type of revenue, 2005-15
                                                                  • Leading Companies

                                                                    • Low-cost carriers see more traffic but lose out on fees
                                                                      • Figure 8: Operating revenues of leading carriers, 2009 and 2010
                                                                    • Economic forces drive industry consolidation
                                                                      • Airlines increase convenience through mobile technology
                                                                        • Mobile boarding passes
                                                                          • Mobile apps
                                                                            • Retrofitting for a more comfortable travel experience
                                                                              • Carriers gain goodwill, save money through eco-friendly operations
                                                                                • Airlines build their brands through philanthropy
                                                                                • Innovations and Innovators

                                                                                  • Internet-based discounting initiatives could potentially reshape pricing
                                                                                    • Ticket auctioning
                                                                                      • Group purchasing
                                                                                        • Carriers work to make security less onerous for travelers
                                                                                          • In-flight entertainment options expand
                                                                                          • Marketing Strategies

                                                                                            • Television advertising
                                                                                              • Southwest appeals to value-conscious consumers with down-to-earth campaign
                                                                                                • Figure 9: Southwest Airlines—Baggage fee police, television ad, September 2010
                                                                                                • Figure 10: Southwest Airlines—Singing in the city, television ad, October 2010
                                                                                                • Figure 11: Southwest Airlines—New nonstop routes, television ad, February 2011
                                                                                              • Smaller low-cost carriers find other points of differentiation
                                                                                                • JetBlue
                                                                                                  • Figure 12: JetBlue—Free live television, television ad, October 2011
                                                                                                • AirTran
                                                                                                  • Figure 13: AirTran—Senior in Huntsville, television ad, February 2011
                                                                                                • Continental places emphasis on new jet fleet
                                                                                                  • Figure 14: Continental—Jet fleet, television ad, August 2010
                                                                                                • Online advertising
                                                                                                  • Smaller airlines pioneer new uses of social media platforms
                                                                                                    • JetBlue
                                                                                                      • Southwest Airlines
                                                                                                        • Virgin America
                                                                                                          • Delta adds booking through Facebook
                                                                                                          • Airline Ticket Distribution

                                                                                                            • Online self-booking dominates both personal and business travel
                                                                                                              • Figure 15: Method of ticket purchase, by reason for travel, March 2011
                                                                                                            • Airline websites nearly equal to online agencies as starting points for booking
                                                                                                                • Figure 16: Starting points for airline ticket searches, by age, March 2011
                                                                                                              • Few respondents have a favorite online agency
                                                                                                                • Figure 17: Other attitudes toward online ticket booking, March 2011
                                                                                                              • American Airlines’ Direct Connect challenges current distribution model
                                                                                                              • Airline Usage

                                                                                                                • Household income remains greatest determinant of domestic air travel
                                                                                                                  • Figure 18: Likelihood and frequency of domestic plane travel, Oct. 2009–Dec. 2010
                                                                                                                • Recovery in passenger traffic led by highest earners
                                                                                                                  • Figure 19: Incidence of domestic air travel, by household income, Nov. 2008–Dec. 2009 and Oct. 2009-–Dec. 2010
                                                                                                              • Popularity of Major Airlines

                                                                                                                • Southwest leads in personal travel, also strong in business segment
                                                                                                                  • Figure 20: Most frequently flown airlines, by reason for travel, March 2011
                                                                                                                • Southwest appeals most to middle-income respondents
                                                                                                                  • Figure 21: Most frequently flown airlines for personal use, by household income, March 2011
                                                                                                              • Considerations in Airline Selection

                                                                                                                • Price, schedule, and baggage fees most important in personal travel
                                                                                                                  • Price and baggage fees matter less for business travel
                                                                                                                    • Figure 22: Factors in selecting an airline, by reason for travel, March 2011
                                                                                                                  • Convenient schedule, direct flights, and FFPs draw highest earners
                                                                                                                    • Figure 23: Most frequently flown airlines for personal travel, by household income, March 2011
                                                                                                                  • Frequent flyer programs more effective for older travelers
                                                                                                                    • Figure 24: Most frequently flown airlines for personal travel, by age, March 2011
                                                                                                                • Reasons to Pay More for a Ticket

                                                                                                                  • Four out of five respondents don’t always purchase the lowest-fare option
                                                                                                                      • Figure 25: Reasons to pay more for a ticket for personal travel, March 2011
                                                                                                                    • Older travelers more likely to buy the lowest fare
                                                                                                                      • Figure 26: Reasons to pay more for a ticket for personal travel, by age, March 2011
                                                                                                                  • In-flight Purchases

                                                                                                                    • Consumers move away from in-flight entertainment toward digital
                                                                                                                      • Figure 27: In-flight purchases, February 2010 and March 2011
                                                                                                                    • Under-35s most likely to make in-flight purchases
                                                                                                                      • Figure 28: In-flight purchases, by age, March 2011
                                                                                                                  • Frequent Flyer Programs

                                                                                                                    • Penetration of FFPs remains unchanged in the last year
                                                                                                                      • Figure 29: Attitudes toward frequent flyer programs, Feb. 2010 and March 2011
                                                                                                                    • By household income
                                                                                                                      • Figure 30: Attitudes toward frequent flyer programs, by household income, March 2011
                                                                                                                  • Impact of Race and Hispanic Origin

                                                                                                                    • Racial differences in air travel linked to household income
                                                                                                                      • Figure 31: Likelihood and frequency of domestic plane travel, by race and Hispanic origin, Oct. 2009–Dec. 2010
                                                                                                                    • Whites and Asians more likely to redeem frequent flyer points
                                                                                                                      • Figure 32: Attitudes toward frequent flyer programs, by race and Hispanic origin, March 2011
                                                                                                                    • Blacks and Hispanics more likely to make in-flight purchases
                                                                                                                      • Figure 33: In-flight purchases, by race and Hispanic origin, March 2011
                                                                                                                  • Cluster Analysis

                                                                                                                      • Air Warriors
                                                                                                                        • Characteristics
                                                                                                                          • Demographics
                                                                                                                            • Opportunity
                                                                                                                              • Safety Firsts
                                                                                                                                • Characteristics
                                                                                                                                  • Demographics
                                                                                                                                    • Opportunity
                                                                                                                                      • Infrequent Economizers
                                                                                                                                        • Characteristics
                                                                                                                                          • Demographics
                                                                                                                                            • Opportunity
                                                                                                                                              • Characteristic tables
                                                                                                                                                • Figure 34: Airline clusters, March 2011
                                                                                                                                                • Figure 35: Frequency of air travel, by airline cluster, March 2011
                                                                                                                                                • Figure 36: Method of ticket purchase, by airline cluster, March 2011
                                                                                                                                                • Figure 37: Factors in selecting an airline, by airline cluster, March 2011
                                                                                                                                                • Figure 38: In-flight purchases, by airline cluster, March 2011
                                                                                                                                                • Figure 39: Reasons to pay more for a ticket, by airline cluster, March 2011
                                                                                                                                              • Demographic tables
                                                                                                                                                • Figure 40: Airline clusters, by gender, March 2011
                                                                                                                                                • Figure 41: Airline clusters, by age, March 2011
                                                                                                                                                • Figure 42: Airline clusters, by household income, March 2011
                                                                                                                                                • Figure 43: Airline clusters, by race and Hispanic origin, March 2011
                                                                                                                                              • Cluster methodology
                                                                                                                                              • Custom Consumer Groups

                                                                                                                                                • Southwest attracts lower-frequency consumer segments
                                                                                                                                                    • Figure 44: Frequency of air travel, by type and class of travel, by most-used airline, March 2011
                                                                                                                                                  • Selection factors reveal basis of differentiation among airlines
                                                                                                                                                      • Figure 45: Most frequently flown airlines for personal travel, by most-used airline, March 2011
                                                                                                                                                    • Low-cost carriers train consumers to start search on home site
                                                                                                                                                      • Figure 46: Starting points for ticket searches, by most-used airline, March 2011
                                                                                                                                                    • Low-cost carriers benefit less from FFPs
                                                                                                                                                      • Figure 47: Attitudes toward frequent flyer programs, by most-used airline, March 2011
                                                                                                                                                    • Airline credit cards increases willingness to pay loyalty premium
                                                                                                                                                        • Figure 48: Attitudes toward frequent flyer programs, by use of frequent flyer program and airline credit card, March 2011
                                                                                                                                                    • Appendix—Other Useful Consumer Tables

                                                                                                                                                      • By gender
                                                                                                                                                        • Figure 49: In-flight purchases, by gender, March 2011
                                                                                                                                                        • Figure 50: Reasons to pay more for a ticket, by gender, March 2011
                                                                                                                                                      • By age
                                                                                                                                                        • Figure 51: Attitudes toward frequent flyer programs, by age, March 2011
                                                                                                                                                      • By household income
                                                                                                                                                        • Figure 52: In-flight purchases, by household income, March 2011
                                                                                                                                                        • Figure 53: Reasons to pay more for a ticket, by household income, March 2011
                                                                                                                                                    • Appendix—Trade Associations

                                                                                                                                                      Companies Covered

                                                                                                                                                      • Air France-KLM Group
                                                                                                                                                      • Air New Zealand Limited
                                                                                                                                                      • Air Transport Association of America Inc., The
                                                                                                                                                      • Airbus S.A.S.
                                                                                                                                                      • AirTran Holdings Inc.
                                                                                                                                                      • Alaska Air Group Inc.
                                                                                                                                                      • American Society of Travel Agents
                                                                                                                                                      • AMR Corporation (American Airlines)
                                                                                                                                                      • Continental Airlines Inc.
                                                                                                                                                      • Delta Air Lines, Inc.
                                                                                                                                                      • Groupon, Inc.
                                                                                                                                                      • Interactive Travel Services Association
                                                                                                                                                      • International Air Transport Association
                                                                                                                                                      • JetBlue Airways Corporation
                                                                                                                                                      • Northwest Airlines Corporation
                                                                                                                                                      • Office of Travel and Tourism Industries
                                                                                                                                                      • Qantas Airways Limited
                                                                                                                                                      • Samsung Electronics (USA)
                                                                                                                                                      • Southwest Airlines Co.
                                                                                                                                                      • The Boeing Company
                                                                                                                                                      • UAL Corporation (United Airlines)
                                                                                                                                                      • Virgin America
                                                                                                                                                      • YouTube, Inc.

                                                                                                                                                      Airlines - US - June 2011

                                                                                                                                                      £2,684.63 (Excl.Tax)