The 1% fall in U.S. domestic capacity between August 2014 and August 2013 is broadly composed of lower capacity among the three big U.S. majors (American/US Airways, Delta and United) and an increase in capacity among the larger low-cost carriers (LCCs) and larger full-service carriers.
LUTON, UK – U.S. domestic air travellers could face a summer of higher fares thanks to a reduction in airline capacity exacerbated by the U.S. government’s American Airlines-US Airways merger settlement.
This is the view of OAG, the leading provider of aviation intelligence, based on an analysis of U.S. domestic airline schedules for August 2014 and recent trends in airline load factors.
John Grant, executive vice president of OAG, says: “The North American domestic market is the only region in the world that will see a decline in airline capacity this month. Even though we are entering the peak U.S. holiday season, domestic seat capacity will be down 1% versus a year ago, meaning about 25,000 fewer seats per day. A contributory factor is slot divestitures by American Airlines-US Airways that were required by the Department of Justice, which other carriers are failing to fully absorb.”
As part of the merger settlement announced by the Department of Justice (DOJ) in November 2013, American Airlines and US Airways agreed to give up several hundred slots at seven constrained airports across the U.S., including La Guardia (New York), Miami and Chicago O’Hare.
Grant explains: “The DOJ intended the divested slots for low-cost carriers, such as JetBlue and Southwest Airlines, to keep prices low for consumers and offset airline consolidation. However, such policy actions are often blunt instruments, as this month’s schedules reveal: American/US Airways, Delta and United all show seat capacity reductions that might please policymakers, but, overall, low-cost carriers have failed to increase their capacity versus August 2013 in the domestic market.
“Meanwhile, domestic U.S. airline load factors have been rising steadily for the past five years. The combination of reduced capacity in the peak month of August and rising load factors may well lead to higher fares for passengers as carriers seek to manage demand.”
The 1% fall in U.S. domestic capacity between August 2014 and August 2013 is broadly composed of lower capacity among the three big U.S. majors (American/US Airways, Delta and United) and an increase in capacity among the larger low-cost carriers (LCCs) and larger full-service carriers. Between them, American/US Airways, Delta and United will offer 600,000 fewer seats than in August 2013. American Airlines will reduce seats by 196,000, while US Airways will actually increase capacity by 31,000 seats, leading to a net loss of 166,000 seats. The merged entity will therefore operate only 0.9% fewer seats this month compared to August 2013.
LCCs will maintain capacity at a similar level to last August, although increases are being made at Southwest Airlines (4%), JetBlue (2%), Spirit (15%) and Frontier Airlines (13%). AirTran will see capacity fall by more than 50% as it progresses towards full integration with Southwest; the combined Southwest/AirTran position will be a 3% reduction in seat capacity.
Grant comments: “Despite some significant additional seat capacity from some airlines, the sheer dominance of the biggest carriers means these increases make relatively little impact on airline market share. In fact, between August 2013 and August 2014 the share of domestic seats operated by the top 10 carriers grew from 94% to 96%, meaning the market is now more concentrated than it was a year ago.”
According to data from OAG’s DOT Analyser – the latest addition to the OAG Analyser product suite, which consolidates three key datasets (T100, Form 41 and O&D Reports) – load factors in the U.S. domestic market have been rising steadily year-on-year for the past five years. For example, United Airlines recorded an average load factor of 81.2% in the 12 months to April 2010, and this has risen in each subsequent 12-month period except one. At Spirit and Frontier, load factors have reached 87% and 91% respectively.
OAG’s analysis of the U.S. domestic airline market is outlined in OAG’s FACTS (Frequency and Capacity Trend Statistics) report for August 2014.
Tatiana is the news coordinator for TravelDailyNews Media Network (traveldailynews.gr, traveldailynews.com and traveldailynews.asia). Her role includes monitoring the hundreds of news sources of TravelDailyNews Media Network and skimming the most important according to our strategy.
She holds a Bachelor's degree in Communication & Mass Media from Panteion University of Political & Social Studies of Athens and she has been editor and editor-in-chief in various economic magazines and newspapers.
