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Airlines - US - May 2010

This report explores the airlines in the US, focusing on domestic flights but also including foreign travel originating in or arriving to US destinations. It provides insight into the external and internal factors affecting domestic travel sales, consumption and consumer trends, and how these trends affect branding and future sales, promotional campaigns and industry innovations.

Specific topics that are covered in this report include, but are not limited to:

  • The impact of the economic decline and the new frugality in consumer sentiment toward air travel
  • How the rise of video conferencing is affecting business travel, and means of responding to this challenge
  • How have airlines responded to economic pressures and how airlines products and pricing can evolve further in upcoming years
  • How the role of social media applies to promoting (or hurting) brand perception and how to use social media more effectively in the future
  • How consumers select which airline to fly
  • Potential brand responses and innovations in relation to the emerging trend of “a la carte” services
  • How consumers perceive airlines differently, and what can airlines do to further differentiate themselves
  • The role of frequent flyer programs in consumer behavior, and how airlines can grow enrollment and usage
  • Means for airlines to appeal to increasingly budget-conscious and eco-conscious travelers

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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 creative
                • Abbreviations
                  • Terms
                  • Executive Summary

                    • Airline industry starts to recover in 2009, despite lower revenues
                      • Travel market faces competition from online business meeting options
                        • Fees account for increasing share of the market
                          • Airline positioning more affected by mergers than changes in revenue
                            • Brand perception muddled by copycat tactics
                              • Social media creates brand differentiation—not always benefitting airlines
                                • Serving up premium perks
                                  • DOOH, product placement, sponsorship, sweepstakes driving branding
                                    • HH income primary driver of frequency
                                      • Nickels and dimes adding up…
                                        • … but majority of flyers not buying
                                          • Price remains primary
                                            • Frequent flyer programs have limited efficacy
                                              • Asians and online English-language Hispanics carry special weight
                                              • Insights and Opportunities

                                                • Key points
                                                  • Going Green
                                                    • Southwest lightens load
                                                      • Continental tests biofuel
                                                        • Expedia offering carbon offsets through TerraPass
                                                          • Environmental concerns motivate vocal minority of passengers
                                                            • Figure 1: Willingness to pay a premium for environmentally-sound practices, by age, February 2010
                                                          • Upgrades as sweepstake prizes
                                                            • Figure 2: Attitudes towards flying first class, by age, February 2010
                                                          • His and her tickets
                                                            • Figure 3: Factors in selecting airline, by gender, February 2010
                                                          • Branded food to lift in-flight sales
                                                            • Figure 4: Taking food on to the plane, by age, February 2010
                                                          • Branding around timeliness
                                                            • Figure 5: Checking on-time arrival record, by age, February 2010
                                                          • Flexibility to attract passengers
                                                            • Figure 6: Buying two one-way tickets, by age, February 2010
                                                          • First-time on board airline promotions
                                                            • Figure 7: Attitudes towards airline choice, by age, February 2010
                                                          • CBT to fight fear
                                                            • Figure 8: Flying less because of fear of flying, by age, February 2010
                                                          • Time and convenience add-ons
                                                            • Carry-on bags and early boarding
                                                              • Figure 9: Concern over carry-on space and interest in early boarding, by age, February 2010
                                                            • The quiet area
                                                              • Figure 10: Willingness to pay extra for a designated quiet area, by age, February 2010
                                                            • Re-thinking full fare ticket pricing
                                                              • Figure 11: Willingness to pay for extra for tickets that can be changed without penalty, by age, February 2010
                                                          • Inspire Insights

                                                            • Digital Natives Creating Mini Generations
                                                              • How it impacts the market
                                                                • Making the OTT connection
                                                                  • Freedom to experiment with web entertainment, for all ages
                                                                  • Market Size and Forecast

                                                                    • Decreased revenue masks story of decreased losses in 2009
                                                                      • Figure 12: U.S. sales and forecast of leading airlines at current prices, 2004-14
                                                                      • Figure 13: U.S. sales and forecast of leading airlines at inflation adjusted prices, 2004-14
                                                                  • Competitive Context

                                                                    • Key points
                                                                      • Business travel hurt by face-to-face online meetings
                                                                        • Corporate travel spending down
                                                                          • The role of video conferencing
                                                                            • Automotive travel most preferred option for domestic travel
                                                                              • Buses, recreational vehicles may have similar appeal but to different age groups
                                                                                • Figure 14: Means of travel used (car vs. plane vs. bus vs. boat vs. train), by age, November 2008-December 2009
                                                                            • Segment Performance

                                                                              • Key points
                                                                                • Incidentals rise as ticket sales fall
                                                                                  • Lower-cost tickets come with high change fees
                                                                                    • Figure 15: U.S. airline revenues, by segment, 2004-14
                                                                                    • Figure 16: U.S. airline operating revenue, by segment, 2007 and 2009
                                                                                • Leading Companies

                                                                                  • Key points
                                                                                    • Despite decreased revenue, positioning remains unchanged
                                                                                      • Merger makes United leading airline
                                                                                        • Low-cost airlines weather challenges, revenues turn black in ‘09
                                                                                          • Figure 17: Operating revenues of top airlines, 2008 and 2009
                                                                                      • Brand Qualities

                                                                                        • Key points
                                                                                          • Following the leader limits brand differentiation
                                                                                            • Brands perceived under the gaze of social media
                                                                                              • Easy access to digital distribution gives consumers a voice for complaints
                                                                                                • Low-cost carriers appear more on-the-ball with social media
                                                                                                  • United (and Continental) Airlines
                                                                                                    • Merger between Continental and United
                                                                                                      • Southwest Airlines
                                                                                                        • American Airlines
                                                                                                          • Jet Blue
                                                                                                            • US Airways
                                                                                                              • JetBlue, Southwest skew young
                                                                                                                • Figure 18: Airline used for last domestic trip, by age, November 2008-December 2009
                                                                                                              • Low-cost airlines benefited from weak economy
                                                                                                                • Figure 19: Airline used for last domestic trip, trended, January 2005-December 2009
                                                                                                              • Under-25s vacation in Mexico
                                                                                                                • Figure 20: Airline used for last foreign trip, by age, November 2008-December 2009
                                                                                                            • Innovation and Innovators

                                                                                                              • Key points
                                                                                                                • Segmented marketing
                                                                                                                  • American Airlines courts African-American flyers
                                                                                                                    • United specializes in college frequent flyer program
                                                                                                                      • New tiers for preferred customers
                                                                                                                        • In-flight cocktails
                                                                                                                          • Southwest donates with Medical Transportation Grant Program
                                                                                                                            • Jet Blue re-writes frequent flyer book
                                                                                                                              • Credit card programs innovating with super-premium options
                                                                                                                              • Advertising and Promotion

                                                                                                                                • Key points
                                                                                                                                  • United sweeps
                                                                                                                                    • The sport of flying
                                                                                                                                      • … and in the movies
                                                                                                                                        • Delta does DOOH
                                                                                                                                          • Television advertising
                                                                                                                                            • JetBlue: Entertainment options and seat pitch at a low cost
                                                                                                                                              • Figure 21: JetBlue television ad, 2009
                                                                                                                                              • Figure 22: JetBlue television ad, 2009
                                                                                                                                            • Delta chases local market
                                                                                                                                              • Figure 23: Delta television ad, 2009
                                                                                                                                            • American knows why business travelers fly
                                                                                                                                              • Figure 24: American Airlines television ad, 2009
                                                                                                                                            • Southwest trumpets bags flying free
                                                                                                                                              • Figure 25: Southwest Airlines television ad, 2009
                                                                                                                                              • Figure 26: Southwest television ad, 2009
                                                                                                                                          • Usage

                                                                                                                                            • Key points
                                                                                                                                              • Domestic travel drops—particularly vacation
                                                                                                                                                • Figure 27: Trended domestic airline travel, January 2005-December 2009
                                                                                                                                              • Foreign travel remains more stable
                                                                                                                                                • Figure 28: Trended foreign airline travel, January 2005-December 2009
                                                                                                                                              • Half have flown in the last year
                                                                                                                                                • Figure 29: Flights taken in last 12 months, by age and income, November 2008-December 2009
                                                                                                                                              • Average two roundtrip flights per person
                                                                                                                                                • Income central driver in frequency of trips
                                                                                                                                                  • Figure 30: Domestic flights taken in last 12 months, by household income, November 2008-December 2009
                                                                                                                                                • Two fifths have traveled out of the U.S. in the last three years
                                                                                                                                                  • Figure 31: Foreign flights taken in last three years, by household income, November 2008-December 2009
                                                                                                                                                • Class flown: Men, under-35s more likely to fly high-class
                                                                                                                                                  • Figure 32: Class flown on most recent flight, by gender and age, February 2010
                                                                                                                                              • In-flight Purchasing

                                                                                                                                                • The nickel-and-dime business adds up
                                                                                                                                                  • Room for growth remains
                                                                                                                                                    • Figure 33: Items bought in-flight, by gender, February 2010
                                                                                                                                                  • Younger flyers make more purchases in-flight
                                                                                                                                                    • Figure 34: Items bought in-flight, by age, February 2010
                                                                                                                                                • Choosing an Airline

                                                                                                                                                  • Selection by price makes unbundling an industry priority
                                                                                                                                                    • Figure 35: Considerations in selecting airline, February 2010
                                                                                                                                                  • Under-35s more interested in food, entertainment
                                                                                                                                                    • Figure 36: Considerations in selecting airline, by age, February 2010
                                                                                                                                                • Booking Tickets

                                                                                                                                                    • Figure 37: How flight reservations were made, by age, February 2010
                                                                                                                                                • Frequent Flyers

                                                                                                                                                  • Key points
                                                                                                                                                    • Young passengers less enrolled in frequent flyer programs
                                                                                                                                                      • Figure 38: Any frequent flyer membership, by age, April 2008-June 2009
                                                                                                                                                      • Figure 39: Any frequent flyer membership, by household income, April 2008-June 2009
                                                                                                                                                    • Membership of specific programs
                                                                                                                                                      • Figure 40: Specific frequent flyer program memberships, by age, April 2008-June 2009
                                                                                                                                                      • Figure 41: Specific frequent flyer program memberships, by household income, April 2008-June 2009
                                                                                                                                                    • The need for lower-mileage awards
                                                                                                                                                        • Figure 42: Attitudes towards frequent flyer programs, by age, February 2010
                                                                                                                                                      • Encouraging lower-income flyers to sign up
                                                                                                                                                        • Figure 43: Attitudes towards frequent flyer programs, by household income, February 2010
                                                                                                                                                    • Impact of Race/Hispanic Origin

                                                                                                                                                      • Key points
                                                                                                                                                        • Asians, whites take more domestic flights
                                                                                                                                                          • Figure 44: Flights taken in last 12 months, by race and Hispanic origin, November 2008-December 2009
                                                                                                                                                        • Asians flyers lead in frequency
                                                                                                                                                          • Figure 45: Flights taken in last 12 months, by race and Hispanic origin, November 2008-December 2009
                                                                                                                                                        • Marketing to Hispanics online likely to yield more attractive demographic
                                                                                                                                                            • Figure 46: Items bought in-flight in the last year, by race/Hispanic origin, February 2010
                                                                                                                                                          • Black respondents seek legroom, online Hispanics/Asians want internet
                                                                                                                                                            • Figure 47: Considerations in selecting airline tickets, by race/Hispanic origin, February 2010
                                                                                                                                                        • Cluster Analysis

                                                                                                                                                            • High-class flyers
                                                                                                                                                              • Characteristics
                                                                                                                                                                • Demographics
                                                                                                                                                                  • Opportunities
                                                                                                                                                                    • Loyalists
                                                                                                                                                                      • Characteristics
                                                                                                                                                                        • Demographics
                                                                                                                                                                          • Opportunities
                                                                                                                                                                            • Infrequent flyers
                                                                                                                                                                              • Demographics
                                                                                                                                                                                • Characteristics
                                                                                                                                                                                  • Opportunity
                                                                                                                                                                                    • Characteristic tables
                                                                                                                                                                                      • Figure 48: Airline clusters, February 2010
                                                                                                                                                                                      • Figure 49: Frequency of air travel, by airline clusters, February 2010
                                                                                                                                                                                      • Figure 50: Class flown on most recent flight, by airline clusters, February 2010
                                                                                                                                                                                      • Figure 51: In-flight purchases, by airline clusters, February 2010
                                                                                                                                                                                      • Figure 52: Factors in selecting carrier, by airline clusters, February 2010
                                                                                                                                                                                      • Figure 53: Frequent flyer status and attitudes, by airline clusters, February 2010
                                                                                                                                                                                      • Figure 54: Attitudes toward air travel, by airline clusters, February 2010
                                                                                                                                                                                      • Figure 55: Opportunities in incremental sales, by airline clusters, February 2010
                                                                                                                                                                                    • Demographic tables
                                                                                                                                                                                      • Figure 56: Airline clusters, by gender, February 2010
                                                                                                                                                                                      • Figure 57: Airline clusters, by age, February 2010
                                                                                                                                                                                      • Figure 58: Airline clusters, by household income, February 2010
                                                                                                                                                                                      • Figure 59: Airline clusters, by race, February 2010
                                                                                                                                                                                      • Figure 60: Airline clusters, by Hispanic origin, February 2010
                                                                                                                                                                                      • Figure 61: Airline clusters, by employment, February 2010
                                                                                                                                                                                    • Cluster methodology
                                                                                                                                                                                    • Appendix: Enplanements Data

                                                                                                                                                                                      • Domestic enplanements dwarf international enplanements
                                                                                                                                                                                        • Figure 62: U.S. enplanements, domestic vs. international, 2004-09
                                                                                                                                                                                        • Figure 63: U.S. enplanements, domestic vs. international, 2007-09
                                                                                                                                                                                    • Appendix: Additional Useful Tables

                                                                                                                                                                                      • Interest in fast passes through security
                                                                                                                                                                                        • Figure 64: Interest in a priority line at security, by age, February 2010
                                                                                                                                                                                      • Limited changes seen in international airline selection 2005-09
                                                                                                                                                                                        • Figure 65: Airline used for last foreign trip, trended, November 2008-December 2009
                                                                                                                                                                                    • Appendix: Trade Associations

                                                                                                                                                                                      Companies Covered

                                                                                                                                                                                      • Air France
                                                                                                                                                                                      • Air Transport Association of America Inc., The
                                                                                                                                                                                      • America West Holdings Corporation
                                                                                                                                                                                      • British Airways Plc
                                                                                                                                                                                      • Continental Airlines Inc.
                                                                                                                                                                                      • Delta Air Lines, Inc.
                                                                                                                                                                                      • Deutsche Lufthansa AG
                                                                                                                                                                                      • Facebook, Inc.
                                                                                                                                                                                      • FedEx Corporation
                                                                                                                                                                                      • Frontier Airlines Inc.
                                                                                                                                                                                      • Interactive Travel Services Association
                                                                                                                                                                                      • International Air Transport Association
                                                                                                                                                                                      • JetBlue Airways Corporation
                                                                                                                                                                                      • Major League Baseball
                                                                                                                                                                                      • National Basketball Association
                                                                                                                                                                                      • Office of Travel and Tourism Industries
                                                                                                                                                                                      • Orbitz Inc.
                                                                                                                                                                                      • Qantas Airways Limited
                                                                                                                                                                                      • Southwest Airlines Co.
                                                                                                                                                                                      • Spirit Airlines Inc.
                                                                                                                                                                                      • The Bureau of Transportation Statistics
                                                                                                                                                                                      • Travelocity.com L.P.
                                                                                                                                                                                      • Twitter, Inc.
                                                                                                                                                                                      • U.S. Bureau of Labor Statistics
                                                                                                                                                                                      • U.S. Department of Transportation
                                                                                                                                                                                      • UAL Corporation (United Airlines)
                                                                                                                                                                                      • US Airways Group Inc.
                                                                                                                                                                                      • US Department of Commerce
                                                                                                                                                                                      • Virgin America
                                                                                                                                                                                      • Virgin Atlantic Airways Limited
                                                                                                                                                                                      • YouTube, Inc.

                                                                                                                                                                                      Airlines - US - May 2010

                                                                                                                                                                                      US $3,995.00 (Excl.Tax)