Table of Contents
Overview
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- What you need to know
- Definition
Executive Summary
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- Overview
- The issues
- Profits are under pressure
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- Figure 1: US gasoline and diesel retail prices, January 2007-December 2017
- Figure 2: US average domestic fares, 1995-2015
- Pilot shortage
- The tech race is on
- More flyers, less frequency
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- Figure 3: Flyer segments, by number of flights in the past 12 months, February 2018
- The opportunities
- Parents are a prime target for building affinity
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- Figure 4: Opinions of improved airport experience, any agree, by parental status of children under 18, February 2018
- Tech solutions are going to be vital for airlines
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- Figure 5: Tech used to entertain while traveling, by generation, April 2017
- In-flight service should be in-flight enabling
- What it means
The Market – What You Need to Know
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- Airline industry has figured out profitability (for now)
- Air travel will be driven by Millennials and iGeneration
- The economy will continue to allow travel
- Market factors will put stress on airfare profits
Market Size and Forecast
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- Airlines take advantage of record flyers, strong economy and favorable operation costs
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- Figure 6: Total US sales and fan chart forecast of market, at current prices, 2012-22
- Figure 7: US airline operating revenue and forecast, at current prices, 2012-22
Market Breakdown
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- Airfare still the workhorse
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- Figure 8: US airline operating revenue, by segment, at current prices, 2015- 2017
- Average domestic fares
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- Figure 9: US average domestic fares, 1995-2015
- Airfare revenues to glide forward
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- Figure 10: US airline airfare revenues and fanchart forecast, at current prices, 2012-22
- Baggage fees are now the norm
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- Figure 11: US airline baggage fee revenues and fanchart forecast, at current prices, 2012-22
- Reservation change fees declining
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- Figure 12: US airline reservation change fee revenues and fanchart forecast, at current prices, 2012-22
- Other revenues picking up slack
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- Figure 13: US airline other revenue and fanchart forecast, at current prices, 2012-22
Market Perspective
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- Rise in “bleisure” travel
- Demand for low fares keeps airlines in a bind
- Millennials still have wanderlust – and now, kids
- Be excellent to everyone – but mostly me
- Driverless cars still developing
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- Figure 14: Opinions of driving versus flying, February 2018
Market Factors
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- The economy holds steady…for now
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- Figure 15: GDP change from previous period, Q1 2007-Q4 2017
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- Figure 16: Disposable personal income change from previous period, January 2007-December 2017
- Figure 17: Unemployment and underemployment, January 2007-December 2017
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- Figure 18: Consumer Sentiment Index, January 2007-December 2017
- Old headaches resurge
- Fuel costs have been rising steadily since bottoming out in February 2016. Typically, fuel and labor costs represent the two largest expenditures for airlines.
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- Figure 19: US gasoline and diesel retail prices, January 2007-December 2017
- Labor costs are also undergoing a change in the coming year, and the changes can negatively affect the bottom line.
- Continuation of high load factors for carriers
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- Figure 20: Load factor on all us scheduled airlines (domestic & international), December 2010-May 2017
- The heat is on
Key Players – What You Need to Know
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- Fare wars continue
- Airlines teching up
- The good: Airlines are getting more efficient
- The bad: Americans aren’t flying enough to build loyalty
- The ugly: The road ahead is rocky
Airline Overview
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- Legacy Carriers
- The “Big 3” of American Airlines, Delta Air Lines, and United Airlines, large airlines that were in operation prior to the 1978 industry deregulation
- Regional Legacy Carriers (RLCs)
- Alaska Airlines and Hawaiian Airlines, which were also in operation prior to deregulation but serve only limited areas
- Low-cost Carriers (LCCs)
- Southwest Airlines and JetBlue Airways
- Ultra-low-cost Carriers (ULCCs)
- Spirit Airlines and Frontier Airlines
- JetBlue, the tech company?
Marketing Tactics of Airlines
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- Paid internet advertising
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- Figure 21: Paid online advertising, by airline, March 2017-March 2018
- Figure 22: Paid advertising spend, by airline, top domains and platforms, March 2017-March 2018
- Root for the away team
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- Figure 23: Delta Air Lines, desktop display ads – 2017
- Taking on OTAs on their turf
- Mobile video worth paying attention to
- Hawaiian acts on its own
What’s Working?
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- Previous struggles, improving
- Best year for bags
- Overbooking improved
- Delta: the choice of a new generation
What’s Struggling?
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- Previous struggles, persisting
- Broader, but shallower base
- Trouble making connections
- Digital spending missing the mark
- New revenue streams needed
What’s Next?
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- Pilot shortage
- United price war
- OTA conflict
- JVs get the start
- Dynamic pricing
- Putting data to work
The Consumer – What You Need to Know
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- Air travel is on the rise, but not done as frequently
- Consumers are still looking for cheap, convenient fares
- Individual experience is more important than public perception
- Millennials flying at a stressful time…
- …but airports can be a source of comfort
- Parents want more from their loyalty programs
Past 12-Month Air Travel
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- More people are flying…
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- Figure 24: Plane travel [domestic] in the last 12 months, by all and domestic travelers, February 2010-March 2017
- …less often
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- Figure 25: Flyer segments, by number of flights in the past 12 months, February 2018
- Figure 26: High-frequency and ultra flyers, by gender and age and by household income, February 2018
- Black Americans most likely to only travel once per year
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- Figure 27: Frequent flyer segments, by race/Hispanic origin, February 2016
- Younger people are more likely to fly more often
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- Figure 28: Frequent flyer segments by age group, February 2018
Factors Impacting Airline Selection
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- Cheap, convenient, and fun – pick two
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- Figure 29: Factors impacting airline selection, February 2018
- Change on the horizon?
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- Figure 30: Factors impacting airline selection, by generation, February 2018
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- Figure 31: Preference for JetBlue, by generation, February 2018
Passenger Booking and Flying Behaviors
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- It’s the economy
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- Figure 32: Fare classes by trip purpose, February 2018
- Direct tactics
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- Figure 33: Flight booking, airline website vs OTA, February 2018
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- Figure 34: Airline ticket travel booking methods – nets, by generation, February 2018
- TURF Analysis highlights customer desire for low price, security
- Methodology
- Consumers want price security
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- Figure 35: TURF Analysis – Desired flight booking services, February 2018
Consumer Perceptions of Airlines
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- The Southwest affection
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- Figure 36: Consumer airline preference, February 2018
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- Figure 37: Consumer preference of Delta versus Southwest, by generation, February 2018
- No such thing as bad press?
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- Figure 38: Influence of news on airline preference, February 2018
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- Figure 39: Influence of news on airline preference, by generation, February 2018
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- Figure 40: Preference of airlines of iGeneration and Millennials, February 2018
- Experience matters
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- Figure 41: Opinions of airlines based on experience, February 2018
Attitudes toward the Flying Experience
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- Turbulent experiences
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- Figure 42: Opinions on stressfulness of air travel by generation, February 2018
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- Figure 43: Opinions on stressfulness of air travel, by gender and age, February 2018
- Airport as destination
- Beyond security
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- Figure 44: Desire for improved airport experience, February 2018
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- Figure 45: Opinions of improved airport experience, any agree, by generation, February 2018
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- Figure 46: Opinions of improved airport experience, any agree, by parental status of children under 18, February 2018
Attitudes toward Technology
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- Great techspectations
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- Figure 47: Tech used to entertain while traveling, by generation, April 2017
- Figure 48: In-flight tech: Use and interest, April 2017
- Business travelers becoming iAcoccas
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- Figure 49: Tech used while traveling, by type of travel, April 2017
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- Figure 50: Airline and airport tech – any use and interest, by type of travel, April 2017
Attitudes toward Loyalty and Differentiation
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- Enrollment increasing
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- Figure 51: Frequent flyer enrollment and airline programs, 2009-2017
- Figure 52: Airline loyalty program membership, by generation, February 2018
- Delta coming on strong
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- Figure 53: Membership in Delta and Southwest loyalty programs, by generation, February 2018
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- Figure 54: Delta loyalty member emails, targeted to Baby Boomers – March-July 2017
- Figure 55: Delta loyalty member emails, targeted to Millennials – 2nd half 2017
- Turning experience into unique possessions
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- Figure 56: Heart of Travel case study video stills, March 2018
- Family loyalty
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- Figure 57: Airline loyalty membership by age of children in household, February 2018
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- Figure 58: Appeal of hypothetical airline amenities, parents vs. non-parents, February 2018
Appendix – Data Sources and Abbreviations
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- Data sources
- Sales data
- Fan chart forecast
- Consumer survey data
- Direct marketing creative
- Abbreviations and terms
- Abbreviations
- Terms
Appendix – The Market
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- Figure 59: US airline operating revenue and forecast, at inflation-adjusted prices, 2012-22
- Figure 60: US airline operating revenue and forecast, at current prices, 2012-22
- Figure 61: Total US retail sales of airlines, by segment, at current prices, 2015 and 2017
- Figure 62: US airline airfare revenues and forecast, at current prices, 2012-22
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- Figure 63: US airline airfare revenues and forecast, at inflation-adjusted prices, 2012-22
- Figure 64: US airline baggage fee revenues and forecast, at current prices, 2012-22
- Figure 65: US airline baggage fee revenues and forecast, at inflation-adjusted prices, 2012-22
- Figure 66: US airline reservation change fee revenues and forecast, at current prices, 2012-22
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- Figure 67: US airline reservation change fee revenues and forecast, at inflation-adjusted prices, 2012-22
- Figure 68: US airline other revenues and forecast, at current prices, 2012-22
- Figure 69: US airline reservation change fee revenues and forecast, at inflation-adjusted prices, 2012-22
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Appendix – Key Players
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- Figure 70: Net income of top 10 US carriers, 2011-2016
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