AIR TRANSPORTATION IN THE USA

Prepared by Yaqueline Hernandez

December 8th, 2020
TABLE OF CONTENTS
Table of Figures.............................................................................................................................2
Products and Services.....................................................................................................................3
Industry Revenue...................................................................................................................................3
Mainline Passenger Travel......................................................................................................................................3
Regional Passenger Travel......................................................................................................................................3
Cargo Transportation..............................................................................................................................................3
Other.......................................................................................................................................................................3

Projected Revenue..........................................................................................................................4
Marketing........................................................................................................................................4
Financials.......................................................................................................................................4
Investments.............................................................................................................................................4
Electric Aircraft Market..........................................................................................................................................4

................................................................................................................................................................. 5
Fuel..........................................................................................................................................................5
Leading U.S Airlines..............................................................................................................................5
Labor......................................................................................................................................................6
Conclusion......................................................................................................................................6
References.......................................................................................................................................7
TABLE OF FIGURES
FIGURE 1 -PERCENTAGE CHANGES LINE GRAPH...........................................................................5
FIGURE 2 – ELECTRIC AIRCRAFT MARKET WORLD MAP...............................................................6
FIGURE 3 – LABOR TABLE...............................................................................................................7
The air transportation industry in the United States is a multibillion-dollar industry with acquired
extensive information. This industry report will provide background on the collected information
to help clients better understand this specific market and decide on investments. The report will
cover a focus on the products and services it provides, the overall projected revenue, marketing,
and selected financials that make up the air transportation industry.

PRODUCTS AND SERVICES

Industry Revenue
The current products and services offered by air transportation are being limited due to COVID-
19. The projected revenue for the end of 2020 is 101.6 billion dollars, meaning there will be a
$23.4 billion loss compared to 2019. Due to the pandemic, there were also adjusted fares for
most passenger airlines, dropping an average of 41% (Pitrelli, 2020).
Mainline Passenger Travel
Mainline passenger travel hosted the largest revenue of the entire air transportation industry. This
type of travel “provided by an airline’s primary operating units” (O’Connor, 2020, Products and
Services, para. 2), totaled a 65% of the revenue, or $66.04 billion, for 2020. This is mainly from
large commercial aircrafts and airport hubs. Main airlines typically charge extra fees for dividing
the aircraft into classes; first-class, business, and economy. While some airlines, such as Spirit
Airlines and JetBlue Airways, only provide priority seating or extra room instead of separating
customers. Nevertheless, mainline passenger travel was still the biggest revenue generator.
Regional Passenger Travel
Despite scarce request for regional passenger travel, it was still the third biggest transportation
mode for 2020. With a total of $9.86 billion, regional passenger travel totaled 9.7% of revenue
(O’Connor, 2020). These sections of services are run by independent carries or divisions from
bigger airlines - areas where there is not enough demand for massive airports. These rural areas
typically transport passengers to mainline travel airports.
Cargo Transportation
Cargo transportation has decreased from past years in comparison to 2020. According to
O’Connor (2020), revenue made from cargo transportation was only 1.6% of the total. Cargo
transportation is only used for valuables and perishable items in order to vindicate for the high
expense. Some examples are electronics, flammable liquids and radioactive materials. The West
coast in the US is mainly responsible for most of this portion of cargo transportation for
exporting. However, with COVID-19, cargo transportation has decreased in general and is
expected to stay low until there are new regulations (O’Connor, 2020).
Other
Services other than transport totaled to the second largest revenue for air transportation in
products and services. Other services include food and drinks, reservations, cancellations,
baggage fees, and other various miscellaneous fees. These extra fees added up to $24.08 billion,
a total of 23.7% of the industry revenue (O’Connor, 2020). With COVID-19, most of the
revenue for cancellation fees was lost as airlines are waiving them. As well with food and drinks
on the airplane, revenue was lost as most customers are afraid of removing their mask. These
miscellaneous fees and revenue are expected to go up in 2021 compared to when COVID-19 was
introduced.
PROJECTED REVENUE
As seen in the chart below, the change in revenue from 2019 to 2020 was a -32.87%, while the
change of domestic trips by US residents from 2019 to 2020 was a -62.40%. The projected
revenue for 2021 is an increase of 15.35%, while domestic trips is projected to have an increase
of 135.17%. While this is a huge gap, airlines target demographic for 2021 are anyone willing to
travel despite the circumstances, meaning they are expecting more leisure travel from customers.

Figure 1 -Percentage Changes Line Graph

(Source: O’Connor, 2020)

MARKETING
With COVID-19 affecting the industry, there has not been much improvement in relation to
marketing. The projected revenues, as explained above, indicate that consumers are expected and
will be willing to travel in large amounts in 2021. However, according to Dean Headley (Pitrelli,
2020), airlines are currently not raising prices as their main goal is to fill seats. Some airlines are
even crediting accounts with cancelled trips and also offering more rewards for off-season
travelers, hoping to see an increase in revenue for 20201.

FINANCIALS
Investments
Electric Aircraft Market
One of the main investments in the airline industry today is the electric aircraft market.
According to the report from Research and Markets (ltd, R. and M., 2020), the market has
declined due to the recent events of the pandemic, but it is expected to “recover” at a CAGR of
17.06%. The overall decline from 2019 to 2020 was $50 million, and while that seems extreme,
it is small compared to the overall industry loss. As seen in the map below, the growth rate is
growing rapidly in places like the United States, Canada, Asia, and Australia. The best
investment for the entire airline industry is currently electric aircraft market because of the
projected profit in 2023 and the projected overall gain for the environment.
Figure 2 – Electric Aircraft Market World Map

Fuel
Fuel for airlines has become less expensive in 2020. The bill for fuel is projected to decrease a
total of $78 billion by the end of 2020. The kilometers flown has decreased immensely
worldwide for 2020 by 40.67% (U.S. Department of Transportation, 2020). However, this
decline in the bill can be used for “replacing fleet with new aircraft, better operations and efforts
to persuade governments to remove the airspace and airport inefficiencies that waste around 5%
of fuel burn each year” (IATA Economics 2020, para.18). While 2020 has proved a massive
decline in consumer traffic, the money the industry is saving on fuel can be used for other
improvements.

Leading U.S Airlines

The top two leading airlines in the United states for air transportation are American Airlines and
Southwest Airlines. American Airlines totaled with $45.77 billion for 2020 making it the top
grossing airline. The merge between this airline and U.S Airways has helped the company grow
in 55 countries with more than 1,500 aircrafts (Mazareanu (a), 2020). The second top competitor
is Southwest Airlines, with $22.4 billion in 2020. Despite being second to American Airlines, it
had the lowest complaint rate and had the best American Customer Satisfaction Index, with a 79
out of 100 score (Mazareanu (b), 2020). The two best United Sates to invest in would be
American Airlines and Southwest Airlines based on their revenues and rates.
Labor
Figure 3 – Labor Table

(Source: IATA Economics, 2020)

The economy directly affected the air transportation services in the Unites States, and therefore
millions of jobs were lost in the industry. As seen on the figure above, the total estimate is 1.9
million jobs lost at the end of 2020 for the airline industry.

CONCLUSION
The US air transportation industry is usually a thriving market, and despite the circumstances, it
still has made billions in revenue. This report included an overview on the products and services
it provides, the overall projected revenue, marketing, and selected financials that make up the air
transportation industry. If you have any question, please contact Yaqueline Hernandez at
yaquelineh@email.arizona.edu.
 REFERENCES
IATA Economics. (2020, June 9). Economic Performance of the Airline Industry. IATA.
Retrieved November 22, 2020, from https://www.iata.org/en/iata-
repository/publications/economic-reports/airline-industry-economic-performance-june-
2020-report/.

ltd, R. and M. (2020, June). Autonomous Aircraft Global Market Report 2020-30: COVID-19
Growth and Change. Research and Markets. Retrieved November 22, 2020, from
https://www.researchandmarkets.com/reports/5125030/autonomous-aircraft-global-
market-report-2020-30?utm_source=BW.

Mazareanu, E. (a) (2020, May 5). Transporation & Logistics, Aviation. Retrieved December
2020, from Statista: https://www.statista.com/topics/2425/american-airlines-group/.

Mazareanu, E. (b) (2020, May 4). Transportation & Logistics, Aviation. Retrieved December
2020, from Statista: https://www.statista.com/topics/3041/facts-and-figures-about-
southwest-airlines-co/.

O'Connor, C. (2020, October). Domestic Airlines In the U:S. IBIS World. Retrieved November
22, 2020, from https://my-ibisworld-
com.ezproxy2.library.arizona.edu/us/en/industry/48111b/industry-performance.

Pitrelli Buchanan, M. (2020, September 23). Global Traveler. Retrieved December 2020, from
CNBC: https://www.cnbc.com/2020/09/23/airfares-airlines-arent-raising-prices-amid-
covid-19-pandemic.html.

U.S. Department of Transportation. (2020, October). Bureau of Transportation. Retrieved

December 2020, from U.S. Department of Transportation:
https://www.transtats.bts.gov/fuel.asp.