High fuel costs will constrain profit, but rising consumer sentiment will spur modest growth
Los Angeles, CA (PRWEB) September 27, 2012
The Domestic Airlines industry has remained flat over the five years to 2012, with revenue growing marginally at an estimated annualized rate of 0.3% to $156.4 billion. Rising fuel prices and the corresponding increase in ticket prices have threatened industry profitability and demand. Nonetheless, the industry experienced growth throughout the period, with the exception of 2009, when the recession decreased demand. “Rising unemployment rates and falling disposable income resulted in a stark decrease in revenue,” says IBISWorld industry analyst Radia Amari. “In 2009, industry revenue dropped about 16.8%. However, in 2010 and 2011, more passengers boarded domestic flights as economic conditions improved, allowing revenue to rise.” As demand continues to rebound, revenue is anticipated to increase 4.7% from 2011 to 2012, with a greater number of Americans choosing to travel by air.
Domestic Airlines industry participation has declined over the past five years, with the total number of firms contracting at an estimated average annual rate of 0.6% to 350 as a result of mergers and acquisitions, consolidations and bankruptcies. In 2008, major player Delta Air Lines merged with Northwest Airlines, and in 2010, United Airlines and Continental Airlines merged, creating the world's largest airline. “These trends indicate that many companies are having difficulty sustaining operations,” adds Amari. “Market share concentration has increased as a result of this merger and acquisition activity, and additional consolidation and mergers are expected over the next five years.” Airline profitability has been in the red for most of the period, causing many firms to leave the industry. In 2010 and 2011, the industry moved back into the black. In terms of profit, low-cost airlines such as JetBlue Airways Corporation have come out as winners, with most companies recording positive earnings.
Over the five years to 2017, industry revenue is forecast to exhibit positive growth. Heavy passenger traffic will return as consumer and business sentiments recover and spending increases. Also, the US dollar is expected to go through another cycle of depreciation during the next five years, increasing demand from foreign tourists. The industry will likely experience further structural changes in the form of mergers and acquisitions, given the competition from low-cost airlines. As a result, the number of industry firms is forecast to fall. For more information, visit IBISWorld’s Domestic Airlines in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
The industry provides air transportation of passengers and cargo over regular routes and on regular schedules. Network carriers operate a significant portion of their flights using at least one hub where connections are made for flights on a spoke system. Regional carriers provide service from small cities, mostly using smaller aircraft and jets to support the network carriers' hub and spoke systems. Airlines that transport mail are included in this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.