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Budget Airlines in the US - September 2015

Budget Airlines in the US - September 2015

“The low-cost airlines – Southwest, JetBlue, Virgin America, Spirit, Allegiant, and Frontier – are growing much faster than the mature network airlines which merged when they emerged from bankruptcy. They grow faster because of their low costs, specifically low labor costs, which in turn allow for lower fares. The faster they grow, the larger the percentage of new aircraft under warranty (which translates into lower maintenance costs) and of employees who have less seniority (are lower paid); the low-cost airlines do not have the ‘baggage’ or legacy costs of pension and health care costs that the much older and mature network airlines are burdened with.”

– Vaughn Cordle, founding partner and chief analyst, Ionosphere Capital, LCC

This report looks at the following areas:

  • What drives demand for budget flights in the US?
  • What is the size of the budget airline industry in the US?
  • Is there any diversity within the budget airline industry in the US?
  • Which airlines are the main budget carriers in the US and what are their market positions?
  • How did the protracted recession in the US (December 2007-June 2009) affect the budget airline industry?
  • How have budget airlines in the US performed post recession?
  • What are the issues facing budget airlines in the US?
  • What might the future of low-cost air travel in the US look like?


INTRODUCTION
DEFINITIONS
DATA SOURCES
OVERVIEW
MARKET DRIVERS
Population growth
Figure 1: Population of the US, 2003-19
A growing tourism industry
Figure 2: Size of the US tourism market, 2007-18
Economic trends
Figure 3: GDP of the US, 2003-19
Market trends
OVERVIEW OF THE AIRLINE INDUSTRY IN THE US
MARKET SIZE
Figure 4: Passengers transported by US carriers, 2009-15
MARKET SHARE
Figure 5: Available seat miles on US carriers, 2009-15
Figure 6: Available seat miles on US domestic routes by airline, 2009-15
Figure 7: Revenue passenger miles, US carriers, 2009-15
Figure 8: Revenue passenger miles on US domestic routes by airline, 2009-15
TYPES OF CARRIER
Budget airlines
Network airlines
A blurred distinction
Hybrid budget airlines and ULCCs
THE LEADING BUDGET AIRLINES IN THE US
LOW-COST CARRIERS
Southwest Airlines
Ancillary revenue
Differentiation
Operational statistics
Figure 9: Southwest Airlines’ operational statistics, 2010-14
Figure 10: Southwest Airlines’ operating statistics, first half of 2015
Fleet
Figure 11: Southwest Airlines’ fleet, 2015
Southwest Airlines going forward
ULTRA-LOW-COST CARRIERS
Allegiant Air
Operational statistics
Figure 12: Allegiant Air’s operational statistics, 2010-14
Figure 13: Allegiant Air’s operating statistics, first half of 2015
Fleet
Figure 14: Allegiant Air’s fleet, 2015-16
Allegiant Air going forward
Frontier
Operational statistics
Figure 15: Frontier Airlines’ operational statistics, 2010-14
Frontier going forward
Spirit Airlines
Operational statistics
Figure 16: Spirit Airlines’ operational statistics, 2010-14
Figure 17: Spirit Airlines’ operational statistics, first half 2014 and 2015
Fleet
Figure 18: Spirit Airlines’ fleet, by aircraft type, 2014-21
Spirit Airlines going forward
HYBRIDS
Alaska Airlines
Operational statistics
Figure 19: Alaska Air Group’s operational statistics, 2010-14
Figure 20: Alaska Airlines’ operational statistics, first half of 2014 and 2015
Fleet
Figure 21: Alaska Air Group’s fleet, 2014-17
Alaska Airlines going forward
JetBlue Airways
Figure 22: JetBlue Airways’ focus cities, Q4/2014
Operational statistics
Figure 23: JetBlue’s operational statistics, 2010-14
Figure 24: JetBlue’s operational statistics, first half of 2014 and 2015
Fleet
JetBlue going forward
Virgin America
Operational statistics
Figure 25: Virgin America’s operational statistics, 2010-14
Figure 26: Virgin America’s operational statistics, first half of 2014 and 2015
Fleet
Virgin America going forward
ISSUES IN THE MARKET
OIL PRICES AND AVIATION FUEL COSTS
Figure 27: Jet fuel refiner price to end user, 2002-16
FARE INCREASES
Figure 28: Airline ticket price index, 2002-16
FUEL EFFICIENCY
Figure 29: Fuel efficiency scores for US domestic airlines, 2010-13
INCREASING ANCILLARY REVENUE
COMPETITION
RELIABILITY
Figure 30: On-time performance of budget airlines in the US, Q2 of 2015
Figure 31: Complaints about budget airlines in the US, June 2015
SUPPLY AND DEMAND
AIRLINE BANKRUPTCY AND THE COLLAPSE OF A NUMBER OF LCCS
CONSOLIDATION AMONG LEGACY CARRIERS
INDUSTRY NEWS
WHAT NEXT?
MARKET GROWTH
Network expansion
An increasingly competitive marketplace
Ancillary revenue
OPERATING COSTS
Lower fuel costs
Figure 32: Budget airlines’ operating margins, first half of 2015
Other operating costs
FUTURE CHALLENGES FOR BUDGET AIRLINES IN THE US
External factors
Consolidations
Customer expectations
INDEX TO TRAVEL AND TOURISM ANALYST
Index grouped by geographic area
INDEX TO TTI DESTINATION REPORTS
Country reports
SPECIAL REPORTS INDEX
2003
2004
2005
2006

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