OIG Releases Aviation Industry Performance Review Report For 2008

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OIG Releases Aviation Industry Performance Review Report For 2008 - 2011

September 23, 2012 - The Office of Inspector General (OIG) has issued the 11th in a series of periodic updates to their Aviation Industry Performance Report. This report provides a comprehensive analysis of aviation industry trends in the 2008 to 2011 period and their impact on aviation system performance, demand, and capacity.

The report includes an overview followed by exhibits with more than 40 statistical charts (or metrics) organized in five areas: airline finances, air traffic, flight service, delays and cancellations, and customer service.

The trends presented in the report portray an industry that has been in flux since 2008 one that is transforming to restore profitability and adapting to survive the challenges of a sustained economic downturn, high and volatile fuel prices, and a reduced demand for travel.

The industry has responded to these challenges by more aggressively adjusting fares and flight schedules, as well as dramatically consolidating through a series of airline mergers. Over the past decade, the airline industry has faced significant changes in its operating environment, including high and volatile fuel prices and an economic recession that reduced demand for travel.

For example, while airlines spent only 10 percent of their operating costs on fuel in 2001, by 2011 this had risen to 35 percent, near the all time high of 40 percent in 2008. As a result of these and other factors, the industry has experienced considerable financial strain that has led to more than 50 U.S. passenger and cargo airlines filing for bankruptcy in the last 12 years.

Ultimately, these changes to the operating climate have fundamentally challenged the industry’s ability to sustain itself using its old business models. The trends presented in this report portray an industry that has been in flux since 2008, one that is transforming to restore profitability and adapting to survive the challenges of a sustained economic downturn.

For instance, airlines have responded to the changing economic landscape by introducing new passenger fees (e.g., baggage fees), reducing the number of scheduled flights, and filling vacant seats. Moreover, the recent series of significant airline mergers has reduced the number of airlines serving the bulk of the domestic passenger market from 10 in 2000 to 5 in 2012, which has dramatically consolidated control of the industry.

These and other airline actions have had a significant impact on the industry as a whole, as well as the traveling public. Specifically, airlines have become more aggressive in adjusting fares and flights to respond to fluctuations in fuel prices and demand and have become more profitable as a result. At the same time, the travel experience for the flying public has changed both positively and negatively. For example, there has been a significant reduction in flight delays.

Further details of these changes in business conditions, airline actions, and their impacts are described in the report. Ultimately, the trends presented in this report suggest that the changes in the number of airlines controlling the industry, fare increases, and capacity reductions that began in 2008 are not a brief phase, but rather are signs of a greater shift in the industry that will remain for years to come.

The airline industry remains one of the most important in the American economy, with wide-reaching impacts on consumers and the workforce. However, significant and frequent challenges to the economic and operating environment appear to be the new norm for the airline industry, causing airlines to innovate and take drastic action to survive. Although the industry is still in transition, the data in this report suggest that some of the most significant trends of recent years—including but not limited to a more consolidated industry with less competition, fewer flight options for small communities, and revenue-enhancing baggage and other fees may continue for the foreseeable future as airlines further improve their adaptability to changing market forces. (see report)