There was a time not that long ago when an air traveler on a US domestic flight could reasonably expect to find the adjacent seat empty. That seat was perfect for storing jackets, Cheetos and John Grisham novels. Back then, there was less confusion about whose seat belt was whose. There was less competition for precious space on the rock-hard armrest. And the dreaded middle seat was an easily avoidable fate.
Kiss those days goodbye.
More often than not, airplanes flown by major carriers are taking to the skies nearly full. That’s great news for airlines for whom every empty seat represents a lost revenue opportunity, but not so great if you’re one of the poor passengers crammed like sardines way back in the coach cabin.
In many ways, top airlines are laser-focused on improving the passenger experience. But this is one point where the interests of the airlines and their customers may never easily align.
“Everyone likes elbow room,” says John Heimlich, chief economist at Airlines 4 America (A4A), the trade group representing US carriers. “(But) it’s an inefficient use of the airways, the airports, the airplanes and the crews.”
According to A4A data, load factors, which are a percentage of airline seating capacity filled, reached 82.8 percent in 2012, the highest annual level in 67 years. It’s been a slow grind higher, helped by the hard work of airline managers responsible for planning fares, routes and fleets. For the last few years, airlines cut service on unprofitable routes. Frequently carriers put smaller planes on certain routes to better match seating capacity with passenger demand.
A4A reports that domestic airline capacity, as measured by available seat miles, fell 5.5 percent from the third quarter of 2007 to the third quarter of this year, roughly in line with the decline in the number of domestic passengers from 2007 to 2012. The number of domestic flights also declined by 13.9 percent in that time frame. Domestic traffic reached its peak in 2007 and remains robust by historic standards despite recent declines.
Obviously, the high load factors can result in packed planes and cramped seating conditions even for off-peak flights. By that measure, travelers are paying more and getting less.
“It is not as pleasant as it once was,” says Henry Harteveldt, a travel industry analyst at Hudson Crossing, noting today’s crowded departure gates at airports, competition for carry-on bin space and fewer options for standby passengers. “But in fairness, the volume of people who are traveling is larger that is was even pre-9/11.” A4A data show a 15 percent increase in the number of domestic passengers from 2001 to 2012.
But Harteveldt and other industry experts say it is unfair to judge the airline passenger experience solely through the load-factor prism. “Clearly, travel remains a great value. When you look at it, you can move a very long distance in a very short time and for a decent price,” he says.
FOR BETTER, FOR WORSE
A 5 June opinion piece by Bill McGee in USA Today complained that airlines are forcing customers to make too many sacrifices in pursuit of a robust passenger load. In the article titled “Overloaded! Crowded airline cabins reach new heights,” McGee explained that airline executives once targeted a “break-even” load factor that would result in enough revenue to cover the cost of the flight.
“Today, however, it’s not about breaking even, it’s about cramming as many of us as possible into those cabins,” he wrote. McGee ticked off a short list of burdens passengers now accept in the name of high load factors: boarding headaches, overhead bin shortages, uncomfortable seats, higher fares and being bumped from overbooked flights.
“These full airplanes also are contributing factors in countless in-flight disputes, and they certainly are systemic contributors to the inexcusable but rising number of air rage incidents. In short, packed airplanes are a key reason—perhaps the key reason—commercial flying has become so unpleasant for so many,” McGee added in his article.
Others note that while customers typically have acceptable flight options between well-traveled city pairs, capacity reductions in the last few years have eliminated flexibility in the system that might have helped absorb the shock of unexpected flight delays and cancellations. It has also limited the ability of travellers to fly standby, even if they are willing to pay the new hefty change fees.
“Standing by for flights is very very difficult unless it’s a route where the airline has a lot of capacity in the market,” Harteveldt says.
Michael Boyd, chairman of Boyd Group International, an aviation consulting company, dismisses many of the criticisms by those who say high load factors have diminished the travel experience. The flight experience is “not materially different than it was five years ago,” he says. Flights felt crowded back when load factors hovered near 70 percent, and even a full flight offers the same basic seat and storage space, he explains.
“They’re not more crowded in terms of your seat than they were before,” he says. “So the issue is you have fewer excess seats out there because airlines are controlling their capacity.”
He also notes that not all routes are feeling the same squeeze. Peak-hour flights on congested East Coast routes are no less comfortable than they ever were. The difference is felt more on off-peak flights and on routes between certain city pairs where airlines have cut service dramatically because demand was not there.
Airline advocates like A4A argue that, in fact, the passenger experience has actually improved in recent years and that capacity restraint and higher load factors has helped enormously. While it is true that passengers are in more direct contact with each other than in the past, several other metrics tell a happier tale.
A4A says the on-time arrival rate was 81.9 percent for US carriers in 2012, up from 73.4 percent five years earlier. In fact, the first quarter of 2013 saw its second-best on-time arrival rate since 2003. A domestic flight is considered on time if it lands within 15 minutes of its scheduled arrival time. Some experts argue, however, that the on-time statistic is improved because carriers have padded their schedules with additional flight time. Nevertheless, on time is on time.
A4A also says the percentage of cancelled flights fell to 1.29 percent from 2.16 percent between 2007 and 2012. And the number of mishandled bags declined to 3.09 per 1,000 from 7.05 per 1,000 in that time frame.
Heimlich credits these improvements in service to less system congestion and fewer weather disruptions in 2012. But more importantly, he says, airline profitability has enabled carriers to reinvest in their operations. In 2012, airlines had their highest level of capital spending since the early 2000s. The correlation between profitability and effective operations is key.
“There’s been money put into training, staffing, software, conveyor belts and tugs,” Heimlich says.
TIMES ARE A-CHANGIN’
Heimlich noted that in the 1960s and 1970s, back before the airline industry was deregulated but still in the modern era, planes typically flew half full. In those years, the government regulated competition on routes and even set fares that were guaranteed to cover an airline’s costs. Many advocates of deregulation argued that this was not in the consumers’ interest.
The Airline Deregulation Act of 1978 made air travel accessible to more people by forcing airlines to compete with each other on costs and pricing. Heimlich refers to deregulation and the availability of air travel to the masses as the democratization of air travel. These days, however, it has become fashionable among well-heeled travelers to gripe about overcrowded and uncomfortable airplanes.
“That may be true for a few, but I think in the broader scheme, I would beg to differ,” Heimlich says, noting that even with the high load factors, airlines still have trouble covering their costs and earning profits. If customers want lower load factors, airline have only a few levers they can pull to address this desire, and those come with unsavory trade-offs, he says.
“I can raise fares to create more empty seats, or I can put more flights on the routes, which possibly creates more congestion and delays. Or I can buy larger airplanes,” Heimlich says. “If people would rather pay a lot more to see a lot fewer seats filled, then that’s an option. But I don’t think that’s what the masses want.”
In the years since the 9/11 attacks, the US airline industry has coasted from one crisis to another. The attacks themselves plunged the economy and the airline industry into turmoil that tipped several carriers into bankruptcy. United Airlines, Northwest Airlines, Delta Air Lines, US Airways and American Airlines have all filed for Chapter 11 since 2001.
High costs, especially fuel, have been a persistent anchor on airline earnings, especially in the low-fare post-9/11 world. In the early 2000s, airlines often could have filled every single seat on a plane and still lost money on that flight.
The plight forced airlines to take drastic measures to lower the break-even load factor. They initiated service cuts to unprofitable routes and sought the mergers that eliminated the Northwest Airlines, America West Airlines and Continental Airlines brands among others. The pending merger of US Airways and American Airlines is expected to jettison the US Airways name and cap the latest industry consolidation wave.
Meanwhile, airlines began tapping ancillary revenue streams generated by sales of travel perks like bag checks, meals, priority seating and inflight entertainment. Ancillary revenue has been a major help to cash-strapped airlines. These days, the break-even load factor hovers in the mid-70 percent range for many airlines, but the profit margins remain thin.
GETTING WHAT YOU PAY FOR
Undeniably, air travelers have had to absorb a lot of changes to the typical flight experience. But, by and large, fares stayed relatively tame over the years, and air travel remains affordable to many people.
“While airfares remain a great bargain, they are unquestionably more expensive than they were a year ago,” Harteveldt says.
According to Rick Seaney, Chief Executive of fare tracker FareCompare.com, ticket prices are up 1 percent year-over-year from last summer. He says that in the summer of 2012, fares hit their highest level in five years, and that does not include passengers’ bag-check expenses, which shot up in 2008. A4A data show that from 2000 to 2012, US domestic air fares rose 13.1 percent, lagging the 33.3 percent rise in the consumer price index and the 46.6 percent increase in disposable personal income.
“For those that live in metro cities (where top airlines have hubs) there is no doubt that travel is a decent bargain,” Seaney says. But he adds that travelers outside of those major cities see more frequent fare hikes because there is less competition to stifle them. In those places, air travel is less of a bargain, and many travelers are opting to drive on their shorter trips.
Seaney says that as airlines reconfigure their planes to reflect a new high-load-factor model, the flight experience is bound to suffer for some travelers, especially those in coach. “For those who are not elite and don’t have an extra $150 to buy upgrades, the experience is definitely downgraded,” Seaney says. “For elite travelers, it is a wash because they get more areas for free upgrades, but those upgrades are also available to non-elites.”
Harteveldt says there is a limit to how high airlines can push up the base fare, because at some point, customers will push back.
“When airlines start charging us more, as consumers, we’re going to start expecting more beyond just that seat and seatbelt,” he says. “And I think the airlines have to be very careful about how high up they push fares. Because I think that we are starting to see some resistance in the market.”
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