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US Airlines market report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Airlines market, and the behaviours, preferences and habits of the consumer.

Mintel has the answers you’re looking for

What are the key challenges facing the industry and how fast are its rates of growth? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Definition

This Report focuses on US-based air carriers operating both domestically and internationally. Cargo/freight airlines and unscheduled/chartered passenger flights are not included in the scope of this Report.

The market size included in this Report covers domestic air carriers with annual operating revenues of at least $20 million. Operating revenues considered include:

  • Airfares
  • Baggage fees
  • Reservation change and cancellation fees
  • Transport-related revenue – revenues from incidental services, including in-flight onboard sales (eg food, liquor, pillows); code share revenues; revenues from associated businesses, such as aircraft maintenance, fuel sales, restaurants; fees for pet transportation; standby passenger fees; and public service subsidy

This Report builds on analysis presented in Mintel’s Airlines – US, August 2014 and the August 2012, June 2011, and May 2010 Reports of the same title.

Expert analysis from a specialist in the field

Written by Michael Gallinari, a leading analyst in the Travel and Leisure sector, his extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

The airline industry has enjoyed a period of record profitability, mostly due to low fuel costs and an economy and culture that enables and promotes air travel. However, market factors are starting to turn against airlines, and they will have to adapt and innovate to satisfy the demands of a consumer base that expects to pay bottom dollar to fly. Michael Gallinari
Travel & Leisure Analyst

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • Overview
          • The issues
            • Profits are under pressure
              • Figure 1: US gasoline and diesel retail prices, January 2007-December 2017
              • Figure 2: US average domestic fares, 1995-2015
            • Pilot shortage
              • The tech race is on
                • More flyers, less frequency
                  • Figure 3: Flyer segments, by number of flights in the past 12 months, February 2018
                • The opportunities
                  • Parents are a prime target for building affinity
                    • Figure 4: Opinions of improved airport experience, any agree, by parental status of children under 18, February 2018
                  • Tech solutions are going to be vital for airlines
                    • Figure 5: Tech used to entertain while traveling, by generation, April 2017
                  • In-flight service should be in-flight enabling
                    • What it means
                    • The Market – What You Need to Know

                      • Airline industry has figured out profitability (for now)
                        • Air travel will be driven by Millennials and iGeneration
                          • The economy will continue to allow travel
                            • Market factors will put stress on airfare profits
                            • Market Size and Forecast

                              • Airlines take advantage of record flyers, strong economy and favorable operation costs
                                • Figure 6: Total US sales and fan chart forecast of market, at current prices, 2012-22
                                • Figure 7: US airline operating revenue and forecast, at current prices, 2012-22
                            • Market Breakdown

                              • Airfare still the workhorse
                                • Figure 8: US airline operating revenue, by segment, at current prices, 2015- 2017
                              • Average domestic fares
                                • Figure 9: US average domestic fares, 1995-2015
                              • Airfare revenues to glide forward
                                • Figure 10: US airline airfare revenues and fanchart forecast, at current prices, 2012-22
                              • Baggage fees are now the norm
                                • Figure 11: US airline baggage fee revenues and fanchart forecast, at current prices, 2012-22
                              • Reservation change fees declining
                                • Figure 12: US airline reservation change fee revenues and fanchart forecast, at current prices, 2012-22
                              • Other revenues picking up slack
                                • Figure 13: US airline other revenue and fanchart forecast, at current prices, 2012-22
                            • Market Perspective

                              • Rise in “bleisure” travel
                                • Demand for low fares keeps airlines in a bind
                                  • Millennials still have wanderlust – and now, kids
                                    • Be excellent to everyone – but mostly me
                                      • Driverless cars still developing
                                        • Figure 14: Opinions of driving versus flying, February 2018
                                    • Market Factors

                                      • The economy holds steady…for now
                                        • Figure 15: GDP change from previous period, Q1 2007-Q4 2017
                                        • Figure 16: Disposable personal income change from previous period, January 2007-December 2017
                                        • Figure 17: Unemployment and underemployment, January 2007-December 2017
                                        • Figure 18: Consumer Sentiment Index, January 2007-December 2017
                                      • Old headaches resurge
                                        • Fuel costs have been rising steadily since bottoming out in February 2016. Typically, fuel and labor costs represent the two largest expenditures for airlines.
                                          • Figure 19: US gasoline and diesel retail prices, January 2007-December 2017
                                        • Labor costs are also undergoing a change in the coming year, and the changes can negatively affect the bottom line.
                                          • Continuation of high load factors for carriers
                                            • Figure 20: Load factor on all us scheduled airlines (domestic & international), December 2010-May 2017
                                          • The heat is on
                                          • Key Players – What You Need to Know

                                            • Fare wars continue
                                              • Airlines teching up
                                                • The good: Airlines are getting more efficient
                                                  • The bad: Americans aren’t flying enough to build loyalty
                                                    • The ugly: The road ahead is rocky
                                                    • Airline Overview

                                                        • Legacy Carriers
                                                          • The “Big 3” of American Airlines, Delta Air Lines, and United Airlines, large airlines that were in operation prior to the 1978 industry deregulation
                                                            • Regional Legacy Carriers (RLCs)
                                                              • Alaska Airlines and Hawaiian Airlines, which were also in operation prior to deregulation but serve only limited areas
                                                                • Low-cost Carriers (LCCs)
                                                                  • Southwest Airlines and JetBlue Airways
                                                                    • Ultra-low-cost Carriers (ULCCs)
                                                                      • Spirit Airlines and Frontier Airlines
                                                                        • JetBlue, the tech company?
                                                                        • Marketing Tactics of Airlines

                                                                          • Paid internet advertising
                                                                            • Figure 21: Paid online advertising, by airline, March 2017-March 2018
                                                                            • Figure 22: Paid advertising spend, by airline, top domains and platforms, March 2017-March 2018
                                                                          • Root for the away team
                                                                            • Figure 23: Delta Air Lines, desktop display ads – 2017
                                                                          • Taking on OTAs on their turf
                                                                            • Mobile video worth paying attention to
                                                                              • Hawaiian acts on its own
                                                                              • What’s Working?

                                                                                • Previous struggles, improving
                                                                                  • Best year for bags
                                                                                    • Overbooking improved
                                                                                      • Delta: the choice of a new generation
                                                                                      • What’s Struggling?

                                                                                        • Previous struggles, persisting
                                                                                          • Broader, but shallower base
                                                                                            • Trouble making connections
                                                                                              • Digital spending missing the mark
                                                                                                • New revenue streams needed
                                                                                                • What’s Next?

                                                                                                  • Pilot shortage
                                                                                                    • United price war
                                                                                                      • OTA conflict
                                                                                                        • JVs get the start
                                                                                                          • Dynamic pricing
                                                                                                            • Putting data to work
                                                                                                            • The Consumer – What You Need to Know

                                                                                                              • Air travel is on the rise, but not done as frequently
                                                                                                                • Consumers are still looking for cheap, convenient fares
                                                                                                                  • Individual experience is more important than public perception
                                                                                                                    • Millennials flying at a stressful time…
                                                                                                                      • …but airports can be a source of comfort
                                                                                                                        • Parents want more from their loyalty programs
                                                                                                                        • Past 12-Month Air Travel

                                                                                                                          • More people are flying…
                                                                                                                            • Figure 24: Plane travel [domestic] in the last 12 months, by all and domestic travelers, February 2010-March 2017
                                                                                                                          • …less often
                                                                                                                            • Figure 25: Flyer segments, by number of flights in the past 12 months, February 2018
                                                                                                                            • Figure 26: High-frequency and ultra flyers, by gender and age and by household income, February 2018
                                                                                                                          • Black Americans most likely to only travel once per year
                                                                                                                            • Figure 27: Frequent flyer segments, by race/Hispanic origin, February 2016
                                                                                                                          • Younger people are more likely to fly more often
                                                                                                                            • Figure 28: Frequent flyer segments by age group, February 2018
                                                                                                                        • Factors Impacting Airline Selection

                                                                                                                          • Cheap, convenient, and fun – pick two
                                                                                                                            • Figure 29: Factors impacting airline selection, February 2018
                                                                                                                          • Change on the horizon?
                                                                                                                            • Figure 30: Factors impacting airline selection, by generation, February 2018
                                                                                                                            • Figure 31: Preference for JetBlue, by generation, February 2018
                                                                                                                        • Passenger Booking and Flying Behaviors

                                                                                                                          • It’s the economy
                                                                                                                            • Figure 32: Fare classes by trip purpose, February 2018
                                                                                                                          • Direct tactics
                                                                                                                            • Figure 33: Flight booking, airline website vs OTA, February 2018
                                                                                                                            • Figure 34: Airline ticket travel booking methods – nets, by generation, February 2018
                                                                                                                          • TURF Analysis highlights customer desire for low price, security
                                                                                                                            • Methodology
                                                                                                                              • Consumers want price security
                                                                                                                                • Figure 35: TURF Analysis – Desired flight booking services, February 2018
                                                                                                                            • Consumer Perceptions of Airlines

                                                                                                                              • The Southwest affection
                                                                                                                                • Figure 36: Consumer airline preference, February 2018
                                                                                                                                • Figure 37: Consumer preference of Delta versus Southwest, by generation, February 2018
                                                                                                                              • No such thing as bad press?
                                                                                                                                • Figure 38: Influence of news on airline preference, February 2018
                                                                                                                                • Figure 39: Influence of news on airline preference, by generation, February 2018
                                                                                                                                • Figure 40: Preference of airlines of iGeneration and Millennials, February 2018
                                                                                                                              • Experience matters
                                                                                                                                • Figure 41: Opinions of airlines based on experience, February 2018
                                                                                                                            • Attitudes toward the Flying Experience

                                                                                                                              • Turbulent experiences
                                                                                                                                • Figure 42: Opinions on stressfulness of air travel by generation, February 2018
                                                                                                                                • Figure 43: Opinions on stressfulness of air travel, by gender and age, February 2018
                                                                                                                              • Airport as destination
                                                                                                                                • Beyond security
                                                                                                                                  • Figure 44: Desire for improved airport experience, February 2018
                                                                                                                                  • Figure 45: Opinions of improved airport experience, any agree, by generation, February 2018
                                                                                                                                  • Figure 46: Opinions of improved airport experience, any agree, by parental status of children under 18, February 2018
                                                                                                                              • Attitudes toward Technology

                                                                                                                                • Great techspectations
                                                                                                                                    • Figure 47: Tech used to entertain while traveling, by generation, April 2017
                                                                                                                                    • Figure 48: In-flight tech: Use and interest, April 2017
                                                                                                                                  • Business travelers becoming iAcoccas
                                                                                                                                    • Figure 49: Tech used while traveling, by type of travel, April 2017
                                                                                                                                    • Figure 50: Airline and airport tech – any use and interest, by type of travel, April 2017
                                                                                                                                • Attitudes toward Loyalty and Differentiation

                                                                                                                                  • Enrollment increasing
                                                                                                                                    • Figure 51: Frequent flyer enrollment and airline programs, 2009-2017
                                                                                                                                    • Figure 52: Airline loyalty program membership, by generation, February 2018
                                                                                                                                  • Delta coming on strong
                                                                                                                                    • Figure 53: Membership in Delta and Southwest loyalty programs, by generation, February 2018
                                                                                                                                    • Figure 54: Delta loyalty member emails, targeted to Baby Boomers – March-July 2017
                                                                                                                                    • Figure 55: Delta loyalty member emails, targeted to Millennials – 2nd half 2017
                                                                                                                                  • Turning experience into unique possessions
                                                                                                                                    • Figure 56: Heart of Travel case study video stills, March 2018
                                                                                                                                  • Family loyalty
                                                                                                                                    • Figure 57: Airline loyalty membership by age of children in household, February 2018
                                                                                                                                    • Figure 58: Appeal of hypothetical airline amenities, parents vs. non-parents, February 2018
                                                                                                                                • Appendix – Data Sources and Abbreviations

                                                                                                                                  • Data sources
                                                                                                                                    • Sales data
                                                                                                                                      • Fan chart forecast
                                                                                                                                        • Consumer survey data
                                                                                                                                          • Direct marketing creative
                                                                                                                                            • Abbreviations and terms
                                                                                                                                              • Abbreviations
                                                                                                                                                • Terms
                                                                                                                                                • Appendix – The Market

                                                                                                                                                    • Figure 59: US airline operating revenue and forecast, at inflation-adjusted prices, 2012-22
                                                                                                                                                    • Figure 60: US airline operating revenue and forecast, at current prices, 2012-22
                                                                                                                                                    • Figure 61: Total US retail sales of airlines, by segment, at current prices, 2015 and 2017
                                                                                                                                                    • Figure 62: US airline airfare revenues and forecast, at current prices, 2012-22
                                                                                                                                                    • Figure 63: US airline airfare revenues and forecast, at inflation-adjusted prices, 2012-22
                                                                                                                                                    • Figure 64: US airline baggage fee revenues and forecast, at current prices, 2012-22
                                                                                                                                                    • Figure 65: US airline baggage fee revenues and forecast, at inflation-adjusted prices, 2012-22
                                                                                                                                                    • Figure 66: US airline reservation change fee revenues and forecast, at current prices, 2012-22
                                                                                                                                                    • Figure 67: US airline reservation change fee revenues and forecast, at inflation-adjusted prices, 2012-22
                                                                                                                                                    • Figure 68: US airline other revenues and forecast, at current prices, 2012-22
                                                                                                                                                    • Figure 69: US airline reservation change fee revenues and forecast, at inflation-adjusted prices, 2012-22
                                                                                                                                                • Appendix – Key Players

                                                                                                                                                    • Figure 70: Net income of top 10 US carriers, 2011-2016