Airlines - US - August 2012

Published by: Mintel International Group Ltd.

Published: Aug. 1, 2012 - 148 Pages


Table of Contents

SCOPE AND THEMES
What you need to know
Definition
Data sources
Sales data
Consumer survey data
Direct marketing creative
Advertising creative
Abbreviations and terms
Abbreviations
Terms
EXECUTIVE SUMMARY
The market
Figure 1: Total operating revenue of U.S. airlines, at current prices with best- and worst-case scenarios,
2007-17
Market drivers
Consumer sentiment toward air travel increasing
Figure 2: Overall Traveler Sentiment Index March 2007-April 2012
Strategic moves independent of external factors also drive airline revenue
Leading companies
Figure 3: Share of total operating revenue and passenger counts of leading U.S. carriers, 2011
Perception of top legacy airlines indicates a lack of brand identity
Figure 4: Select brand qualities of each major U.S. airline, April 2012
Innovations
The consumer
Four in 10 have flown in the past year; household income is key determinant in use
Figure 5: Past 12-month airline use and number of trips, by gender, age, and household income, April 2012
Price is the most important factor in airline selection
Figure 6: Most important factors in airline selection, April 2012
Safety issues are a top reason to avoid an airline, bad experiences also a deterrent
Figure 7: Reasons to avoid an airline when flying for personal reasons, April 2012
Most flyers are familiar with the airport routine, but many think it’s a hassle
Figure 8: Select attitudes toward airline travel, by age, April 2012
The most frequent flyers welcome automation
Figure 9: Select attitudes toward airline employees, by flying frequency, April 2012
What we think
ISSUES IN THE MARKET
How can airlines turn a profit in the face of volatile fuel costs?
Will demand drive profits, or will airlines be forced to discount?
Will commercial air travel hassles outweigh the benefits?
Do ancillary fees really empower consumers to choose their service?
INSIGHTS AND OPPORTUNITIES
Passengers pay for priority boarding…so why not for early exit?
Do we have a bidder? Airlines begin auctioning upgraded seats
Bored (and captive) passengers have a new way to buy while they fly
Airlines can take advantage of new technologies to improve experience
TREND APPLICATION
Inspire Trend: Who Needs Humans
Inspire Trend: The Nouveau Poor
Inspire 2015 Trend: Brand Intervention
Brand Intervention
MARKET SIZE AND FORECAST
Key points
2011 operating revenue exceeds peak, increases expected through 2017
Figure 10: Total operating revenue of U.S. airlines, at current prices, 2007-17
Figure 11: Total operating revenue of U.S. airlines, at inflation-adjusted prices, 2007-17
Fan chart forecast
Figure 12: Total operating revenue of U.S. airlines, at current prices with best- and worst-case scenarios, 2007-
17
MARKET DRIVERS
Key points
Performance of U.S. airlines is dependent on the economy
Real GDP continues to make gains, bodes well for airline industry
Figure 13: Real gross domestic product, Q1 2007-Q1 2012
Airline fortunes are inextricably tied to the economy and business travel
Figure 14: Global Business Travel Association Business Travel Index Q1 2007-Q4 2013
Increased business travel spending drives airline profits…
…but European fiscal crisis poses a threat to business travel—and to airline profits
Passenger counts are up, demand appears strong
Figure 15: Overall Traveler Sentiment Index, March 2007-April 2012
Reducing supply to meet increasing demand likely to yield greater profits
Ancillary fees drive revenue
Open Skies Air Transport agreements boost international flights
COMPETITIVE CONTEXT
Wheels and rails offer varying levels of competition with airlines
Car travel is twice as popular as flying
Bus travel less common, but attracting more customers
Overall, rail travel poses little competition to airlines…for now
Figure 16: Domestic modes of travel in the past 12 months, by age, October 2010-November 2011
Private jets compete with airlines for premium service class passengers
SEGMENT PERFORMANCE
Ticket sales account for more than 92% of operating revenue
Baggage revenue relatively flat 2010-12, increases expected as fees rise
Industry leaders increase checked bag fees…other airlines are likely to follow
Cancellation fees and miscellaneous fees
Figure 17: Total operating revenue of U.S. airlines, by type of revenue, 2010 and 2012
Figure 18: Total operating revenue of U.S. airlines, by type of revenue, 2007-17
Globally, ancillary revenue worth $22.6 billion in 2011
Ancillary revenue metrics of leading U.S. airlines
Figure 19: Ancillary revenues compared to total sales, by top 10 airlines by share, Q3 2011
Figure 20: Ancillary revenues of top 10 airlines by revenue, Q3 2011
LEADING COMPANIES
Key points
Top five airlines account for more than eight in 10 passengers
Figure 21: Passenger counts of leading U.S. carriers, 2010 and 2011
Operating revenues up—top five airlines account for about 80%
Figure 22: Operating revenues of leading U.S. carriers, 2010 and 2011
Leading companies’ key issues relate to fuel prices, labor agreements
Delta Air Lines
United Airlines
American Airlines
US Airways
Southwest Airlines
Allegiant Air
INNOVATIONS AND INNOVATORS
IN THE AIR
Airlines offer a range of new service classes for all types of travelers
Upgrading the passenger experience: living the dream on United Airlines
Figure 23: Boeing 787 “Dreamliner” interior, 2011
Airbus develops a wider-seat concept for overweight passengers
Virgin, Southwest, and Delta innovate in-flight entertainment
ON THE GROUND
Airlines upgrade airport lounges to drive loyalty
Delta experiments with a streamlined boarding process
Commercial and government programs speed up the security process
Venturing into the world of virtual customer service representatives
BEHIND THE SCENES
Airlines seek to slash operating costs
New navigation technology and aircraft for increased flying efficiency
Airlines upgrade aging aircraft to boost operating efficiency
Delta and US Airways take different approaches to managing fuel costs
Delta buys oil refinery to save costs, earn profits
US Airways bucks hedging, pays market value, sees benefit in current environment
MARKETING STRATEGIES AND BRAND POSITIONING
Delta Air Lines
Figure 24: Delta Air Lines, “Taming Air Travel” TV ad, 2012
Figure 25: Delta Air Lines, “Economy comfort” print ad, November 2011
United Airlines
Figure 26: United Airlines, “Expectations” print ad, November 2011
Figure 27: United Airlines, “Game is Set” TV ad, 2012
Figure 28: United Airlines, “Olympics” print ad, May 2012
American Airlines
Figure 29: American Airlines, “Saving Your Sanity” TV ad, 2012
Southwest Airlines
Figure 30: Southwest Airlines, “Lowest Fares” TV ad, 2012
Figure 31: Southwest Airlines, “Below the Belt” TV ad, 2012
JetBlue Airways
Figure 32: JetBlue Airways, “Relax” print ad, January 2011
Figure 33: JetBlue Airways, “You Above All” TV ad, 2012
Alaska Airlines
Figure 34: Alaska Airlines, “Customer satisfaction” print ad, July 2012
Hawaiian Airlines
Figure 35: Hawaiian Airlines, “Hawaii Flies With Us” TV ad, 2011
Frontier Airlines
Figure 36: Frontier Airlines, “The Next Animal” TV ad, 2012
Virgin America
Figure 37: Virgin America, “In the Moment” TV ad, 2012
Figure 38: Virgin America, “Evolution” print ad, August 2011
Spirit Airlines
Figure 39: Spirit Airlines, “Low Cost Out” TV ad, 2012
Allegiant Air
Figure 40: Allegiant Air, “Best Deals” TV ad, 2012
Top carriers most engaged in direct marketing
Figure 41: Direct marketing pieces by leading U.S. carriers, by type, July 2011-June 2012
Figure 42: Leading U.S. carriers’ direct marketing activity, by share of type, July 2011-June 2012
AIRLINE BRAND PERCEPTION AND DIFFERENTIATION
Overview of the brand landscape
Perception of most airline brands indicates low appeal
Figure 43: Select brand qualities of each major U.S. airline, Part 1, April 2012
Figure 44: Select brand qualities of each major U.S. airline, Part 2, April 2012
Brand perception map
Methodology
Legacy carriers are lumped together
Figure 45: Airline brand perception map, April 2012
“Big name” airlines preferred, but experience can be a blur
Figure 46: Attitudes toward airline brand differentiation, by household income, April 2012
AIRLINE USE IN THE PAST 12 MONTHS
Key points
Personal plane travel more common; business travelers take more trips
Figure 47: Past 12-month airline use, personal vs. business travel, April 2012
Household income is key determinant in airline use
Figure 48: Past 12-month airline use and number of trips, by gender, age, and household income, April 2012
AIRLINE BRANDS USED
Key points
Legacy air carriers are (generally) the most popular
Figure 49: Airline brands used and brand familiarity, April 2012
Flyers look to legacy carriers for personal and business travel
Southwest offers competition for business travelers
Figure 50: Airline brands used most frequently, personal vs. business travel, April 2012
Most affluent fly legacy; Southwest Airlines is most popular choice
Figure 51: Airline brands used most frequently, by household income, April 2012
FACTORS IMPACTING AIRLINE SELECTION
Key points
Price is paramount; scheduling important for business travelers
Figure 52: Most important factors in airline selection, personal vs. business travel, April 2012
Youngest flyers most price sensitive but also consider service quality
Figure 53: Most important factors in airline selection, by age, April 2012
Convenience and comfort more important to affluents
Figure 54: Most important factors in airline selection, by household income, April 2012
REASONS TO AVOID AN AIRLINE
Key points
Safety issues a deterrent, bad experiences also keep passengers away
Safety first! Recent news reports of safety problems are top reason to avoid an airline
Experience is everything, so it had better be good
In need of upgrades—not necessarily “new” aircraft
Figure 55: Reasons to avoid an airline when flying for personal reasons, April 2012
Affluent flyers will take their business elsewhere
Figure 56: Reasons to avoid an airline when flying for personal reasons, by household income, April 2012
AIRLINE RESERVATIONS
Key points
Self-booking online is the most common method of reserving tickets
Figure 57: How reservations for most recent flight were made, personal vs. business travel, April 2012
Even the oldest flyers are booking online
Figure 58: How reservations for most recent flight were made, by age, April 2012
Flyers’ use of travel agents pales in comparison to online booking
Figure 59: Booked travel online/used a travel agent in the last 12 months, by airlines used in the last 12 months,
October 2010-November 2011
Figure 60: Used a travel agent in the last 12 months, by household income, October 2010-November 2011
AIRLINE TICKETS ONLINE SEARCH METHODS
Key points
Online travel agencies vie with airline websites as the starting point
Figure 61: Initial online airline ticket search method, by age, April 2012
Online airfare searches often result in visits to multiple sites
Figure 62: Other online airline ticket search methods, by age, April 2012
ATTITUDES TOWARD AIRLINES AND AIRLINE TRAVEL
Key points
Most flyers are familiar with the airport routine, but think it’s a hassle
Figure 63: Attitudes toward airline travel and airline employees, by age, April 2012
Most affluent flyers least likely to feel airline employees are knowledgeable/helpful
Figure 64: Attitudes toward airline travel and airline employees, by household income, April 2012
In-flight connectivity more important to younger flyers
Figure 65: Attitudes toward in-flight internet connectivity, by age, April 2012
IMPACT OF RACE AND HISPANIC ORIGIN
Key points
Airline use in the past 12 months: Asians most likely to fly
Figure 66: Past 12-month airline use and number of trips, by race/Hispanic origin, April 2012
Airline brand perceptions and differentiation: blacks most discerning
Figure 67: Attitudes toward airline brand differentiation, by race/Hispanic origin, April 2012
Blacks and Hispanics should be targeted for frequent flyer programs
Figure 68: Frequent flyer program membership, by race/Hispanic origin, October 2010- November 2011
Airline brands used: use trends similarly overall, Asians most diverse
Figure 69: Airline brand usage, by race/Hispanic origin, April 2012
Figure 70: Airline brands used most frequently, by race/Hispanic origin, April 2012
Factors impacting airline selection: price is most important
Figure 71: Most important factors in airline selection, by race/Hispanic origin, April 2012
Reasons to avoid an airline: blacks most sensitive to safety issues
Figure 72: Reasons to avoid an airline when flying for personal reasons, by race/Hispanic origin, April 2012
Attitudes toward airlines and airline travel
Figure 73: Attitudes toward airline travel, airline employees, and in-flight internet connectivity, by race/Hispanic
origin, April 2012
CUSTOM CONSUMER GROUPS: FLYING FREQUENCY
Key points
Frequent flyer profile confirms general use trends
Figure 74: Key demographics, by flying frequency groups, April 2012
Heavy and Ultra flyers’ greater frequency of air travel is driven by business needs
Figure 75: Personal vs. business air travel in the past 12 months, by flying frequency groups, April 2012
Airline brand perception and differentiation
Figure 76: Attitudes toward airline brand differentiation, by flying frequency, April 2012
Airline usage
Figure 77: Airline brand usage, by flying frequency, April 2012
Figure 78: Airline brands used most frequently, by flying frequency, April 2012
Factors impacting airline selection
Figure 79: Most important factors in airline selection by flying frequency, April 2012
Reasons to avoid an airline
Figure 80: Reasons to avoid an airline when flying for personal reasons, by flying frequency, April 2012
Airline ticket reservations and online search methods
Figure 81: How reservations for most recent flight were made, by flying frequency, April 2012
Figure 82: Initial online airline ticket search method, by flying frequency, April 2012
Figure 83: Other online airline ticket search methods, by flying frequency, April 2012
Attitudes toward airlines and airline travel
Figure 84: Attitudes toward airline travel, airline employees, and in-flight internet connectivity, by flying
frequency, April 2012
APPENDIX: OTHER USEFUL CONSUMER TABLES
Airline use in the past 12 months
Figure 85: Past 12-month airline use and number of trips, by region, April 2012
Figure 86: Past 12-month airline use and number of trips, by gender and marital status, April 2012
Airline usage
Figure 87: Airline brand usage, by household income, April 2012
Figure 88: Airline brand usage, by presence and number of children in household, April 2012
Figure 89: Airline brand usage, by age, April 2012
Figure 90: Airline brands used most frequently, by age, April 2012
Factors impacting airline selection
Figure 91: Least important factors in airline selection, personal vs. business, April 2012
Figure 92: Most important factors in airline selection, by presence and number of children in household, April
2012
Figure 93: Most important factors in airline selection, by airline used most frequently, April 2012
Figure 94: Most important factors in airline selection, big four legacy vs. other carriers, April 2012
Reasons to avoid an airline
Figure 95: Reasons to avoid an airline when flying for personal reasons, by age, April 2012
Source: Mintel
Figure 96: Reasons to avoid an airline when flying for personal reasons, by presence and number of children in
household, April 2012
Attitudes toward airlines and airline travel
Figure 97: Attitudes toward in-flight internet connectivity, by household income, April 2012
APPENDIX: TRADE ASSOCIATIONS
APPENDIX: RESEARCH METHODOLOGY
CONSUMER RESEARCH
Primary Data Analysis
Sampling
Global Market Insite (GMI)
Secondary Data Analysis
Experian Simmons National Consumer Studies
Statistical Forecasting
Statistical modelling
Qualitative insight
The Mintel fan chart
Weather analogy
APPENDIX: WHAT IS MINTEL?
Mintel provides industry-leading market intelligence
Mintel Solutions:
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Mintel Beauty Innovation
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Abstract

A strong market for air travel in 2011 produced a 9.5% increase in operating revenue for 2011 vs. 2010. However, high fuel prices for the year caused U.S. airlines to see a 32% decline in overall profits. While revenues are expected to gain 9.9% in 2012, the European fiscal crisis and weak Asian economy could both impact profits for the leading “big four” legacy carriers (which account for more than two thirds of total industry revenue), and which have increasingly turned their attention to more lucrative international travel.

Airline industry revenues are forecast to continue to grow through 2017 based on the current economic indicators. However, the industry as a whole faces many challenges—including increasing competition from low-cost carriers, volatile fuel prices, unpredictable demand, extensive regulatory and legal oversight, and a hefty tax burden.

This report explores external forces shaping the airline industry and the challenges it faces, opportunities for growth, and innovations. This report also provides an in-depth consumer perspective of airlines and airline travel, including but not limited to use of major carriers and brand perceptions, factors driving airline choice, as well as reasons to avoid airlines.

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