Table of Contents
Scope and Themes
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- What you need to know
- Definition
- Data Sources
- Sales data
- Consumer survey data
- Advertising
- Abbreviations and terms
- Abbreviations
- Terms
Executive Summary
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- Airline industry rebounds from 2009 but may enter another downswing
- Airfares rise as airlines consolidate and constrain supply
- Ancillary fees become substantially greater share of revenues
- Airlines adopt mobile technology and build brands through green practices
- Southwest holds strong position in both personal and business travel
- Online distribution dominates but continues to evolve
- Low-cost carriers promote no-fees and other points of differentiation
- High-income households lead the airline recovery
- Price, schedule, and baggage fees are most important in airline selection
- Large majority of air travelers don’t always purchase lowest-fare option
- Frequent flyer programs remain largely unchanged
Insights and Opportunities
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- Fees help airlines survive but solution is untenable in the long-term
- Younger consumers are more willing to pay for value adds
- Frequent flyer programs can be made more effective
Inspire Insights
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- Inspire Trend—Who Needs Humans?
Competitive Context
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- Car travel becomes more popular in 2010
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- Figure 1: Means of travel used domestically, Jan. 2007–Nov. 2007, Nov. 2008–Dec. 2009, and Oct. 2009–Dec. 2010
- Proposed high-speed rail network may change airline focus in long term
Market Size and Forecast
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- Airline revenues rebound in 2010 but face more challenges in 2011
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- Figure 2: U.S. revenues of leading airlines, at current prices, 2005-15
- Figure 3: U.S. revenues of leading airlines, at inflation-adjusted prices, 2005-15
- Fan chart forecast
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- Figure 4: Fan chart forecast at 50-95% confidence levels, 2005-15
Market Drivers
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- Revenue passenger miles grow in 2010 but may face another downswing
- Industry restraints in supply growth drive prices higher
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- Figure 5: Passenger yield on domestic flights, 2009-11
- Fees become an increasingly important source of revenue
- Branded service bundles
- Fuel prices threaten to dampen demand further
Segment Performance
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- Fee revenues explode, while ticket prices are constrained
- Sales by segment
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- Figure 6: U.S. revenues of leading airlines, by type of revenue, 2008 and 2010
- Figure 7: U.S. revenues of leading airlines, by type of revenue, 2005-15
Leading Companies
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- Low-cost carriers see more traffic but lose out on fees
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- Figure 8: Operating revenues of leading carriers, 2009 and 2010
- Economic forces drive industry consolidation
- Airlines increase convenience through mobile technology
- Mobile boarding passes
- Mobile apps
- Retrofitting for a more comfortable travel experience
- Carriers gain goodwill, save money through eco-friendly operations
- Airlines build their brands through philanthropy
Innovations and Innovators
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- Internet-based discounting initiatives could potentially reshape pricing
- Ticket auctioning
- Group purchasing
- Carriers work to make security less onerous for travelers
- In-flight entertainment options expand
Marketing Strategies
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- Television advertising
- Southwest appeals to value-conscious consumers with down-to-earth campaign
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- Figure 9: Southwest Airlines—Baggage fee police, television ad, September 2010
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- Figure 10: Southwest Airlines—Singing in the city, television ad, October 2010
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- Figure 11: Southwest Airlines—New nonstop routes, television ad, February 2011
- Smaller low-cost carriers find other points of differentiation
- JetBlue
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- Figure 12: JetBlue—Free live television, television ad, October 2011
- AirTran
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- Figure 13: AirTran—Senior in Huntsville, television ad, February 2011
- Continental places emphasis on new jet fleet
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- Figure 14: Continental—Jet fleet, television ad, August 2010
- Online advertising
- Smaller airlines pioneer new uses of social media platforms
- JetBlue
- Southwest Airlines
- Virgin America
- Delta adds booking through Facebook
Airline Ticket Distribution
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- Online self-booking dominates both personal and business travel
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- Figure 15: Method of ticket purchase, by reason for travel, March 2011
- Airline websites nearly equal to online agencies as starting points for booking
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- Figure 16: Starting points for airline ticket searches, by age, March 2011
- Few respondents have a favorite online agency
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- Figure 17: Other attitudes toward online ticket booking, March 2011
- American Airlines’ Direct Connect challenges current distribution model
Airline Usage
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- Household income remains greatest determinant of domestic air travel
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- Figure 18: Likelihood and frequency of domestic plane travel, Oct. 2009–Dec. 2010
- Recovery in passenger traffic led by highest earners
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- Figure 19: Incidence of domestic air travel, by household income, Nov. 2008–Dec. 2009 and Oct. 2009-–Dec. 2010
Popularity of Major Airlines
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- Southwest leads in personal travel, also strong in business segment
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- Figure 20: Most frequently flown airlines, by reason for travel, March 2011
- Southwest appeals most to middle-income respondents
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- Figure 21: Most frequently flown airlines for personal use, by household income, March 2011
Considerations in Airline Selection
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- Price, schedule, and baggage fees most important in personal travel
- Price and baggage fees matter less for business travel
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- Figure 22: Factors in selecting an airline, by reason for travel, March 2011
- Convenient schedule, direct flights, and FFPs draw highest earners
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- Figure 23: Most frequently flown airlines for personal travel, by household income, March 2011
- Frequent flyer programs more effective for older travelers
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- Figure 24: Most frequently flown airlines for personal travel, by age, March 2011
Reasons to Pay More for a Ticket
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- Four out of five respondents don’t always purchase the lowest-fare option
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- Figure 25: Reasons to pay more for a ticket for personal travel, March 2011
- Older travelers more likely to buy the lowest fare
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- Figure 26: Reasons to pay more for a ticket for personal travel, by age, March 2011
In-flight Purchases
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- Consumers move away from in-flight entertainment toward digital
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- Figure 27: In-flight purchases, February 2010 and March 2011
- Under-35s most likely to make in-flight purchases
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- Figure 28: In-flight purchases, by age, March 2011
Frequent Flyer Programs
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- Penetration of FFPs remains unchanged in the last year
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- Figure 29: Attitudes toward frequent flyer programs, Feb. 2010 and March 2011
- By household income
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- Figure 30: Attitudes toward frequent flyer programs, by household income, March 2011
Impact of Race and Hispanic Origin
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- Racial differences in air travel linked to household income
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- Figure 31: Likelihood and frequency of domestic plane travel, by race and Hispanic origin, Oct. 2009–Dec. 2010
- Whites and Asians more likely to redeem frequent flyer points
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- Figure 32: Attitudes toward frequent flyer programs, by race and Hispanic origin, March 2011
- Blacks and Hispanics more likely to make in-flight purchases
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- Figure 33: In-flight purchases, by race and Hispanic origin, March 2011
Cluster Analysis
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- Air Warriors
- Characteristics
- Demographics
- Opportunity
- Safety Firsts
- Characteristics
- Demographics
- Opportunity
- Infrequent Economizers
- Characteristics
- Demographics
- Opportunity
- Characteristic tables
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- Figure 34: Airline clusters, March 2011
- Figure 35: Frequency of air travel, by airline cluster, March 2011
- Figure 36: Method of ticket purchase, by airline cluster, March 2011
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- Figure 37: Factors in selecting an airline, by airline cluster, March 2011
- Figure 38: In-flight purchases, by airline cluster, March 2011
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- Figure 39: Reasons to pay more for a ticket, by airline cluster, March 2011
- Demographic tables
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- Figure 40: Airline clusters, by gender, March 2011
- Figure 41: Airline clusters, by age, March 2011
- Figure 42: Airline clusters, by household income, March 2011
- Figure 43: Airline clusters, by race and Hispanic origin, March 2011
- Cluster methodology
Custom Consumer Groups
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- Southwest attracts lower-frequency consumer segments
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- Figure 44: Frequency of air travel, by type and class of travel, by most-used airline, March 2011
- Selection factors reveal basis of differentiation among airlines
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- Figure 45: Most frequently flown airlines for personal travel, by most-used airline, March 2011
- Low-cost carriers train consumers to start search on home site
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- Figure 46: Starting points for ticket searches, by most-used airline, March 2011
- Low-cost carriers benefit less from FFPs
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- Figure 47: Attitudes toward frequent flyer programs, by most-used airline, March 2011
- Airline credit cards increases willingness to pay loyalty premium
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- Figure 48: Attitudes toward frequent flyer programs, by use of frequent flyer program and airline credit card, March 2011
Appendix—Other Useful Consumer Tables
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- By gender
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- Figure 49: In-flight purchases, by gender, March 2011
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- Figure 50: Reasons to pay more for a ticket, by gender, March 2011
- By age
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- Figure 51: Attitudes toward frequent flyer programs, by age, March 2011
- By household income
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- Figure 52: In-flight purchases, by household income, March 2011
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- Figure 53: Reasons to pay more for a ticket, by household income, March 2011
Appendix—Trade Associations
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