My Speech About the State of the US Airline Industry


Today is a holiday here in the US, so I normally wouldn’t post, but this seemed like a good opportunity to put up a video of a speech I gave recently. The Destination Marketing Association International (DMAI) brought me in to their annual convention in Austin this July and asked me to speak to their attendees. The topic? Trends in the airline industry and what that means for destinations.

The group posted the 22 minute video on YouTube and you can watch it here.

A couple of caveats here. You only see me for the first minute or so before they instead show my PowerPoint slides. I didn’t have a lot of slides, so the visuals aren’t very interesting after the first few seconds of looking at them. Treat this like a podcast and listen in the background. Also, I apologize for the quality of the slides. At the last minute the A/V people told me they used a different aspect ratio so they had to convert it. I tried furiously to fix the images, but you’ll see the text doesn’t exactly format right.

Thanks to DMAI for bringing me out to have me speak. And Happy Labor Day to all!

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15 comments on “My Speech About the State of the US Airline Industry

  1. Good job Brent.
    When you mention the better networks made possible with consolidation, do you mean within alliances, which are now bigger; or, do you see better networks overall. I’m seeing more and more impediments to inter-alliance flights (baggage transfers, customer service, continuity of rules, etc.) and, thus, poorer connectivity overall. Thoughts?
    On your first charts showing increase or drop in airport capacity at hubs, mid-size and small airports; are the percentages based on flights or numbers of passengers?
    Do you think that the new aircraft that will allow smaller more nimble carriers to start international routes may be a reason for a reexamination of the current slot control rules from FAA?

    1. Charlie Leocha – Better networks are within airlines and with their joint venture partners. But primarily within airlines. I haven’t seen any issues between alliances. The biggest issue is between legacy carriers and low cost carriers. The low cost carriers want to play nice but the big guys have none of it. That’s why Virgin America wants it to be regulated, as I wrote last week.

      The numbers on my slides are seats, since that’s what a destination cares about.

      I don’t see what new aircraft and smaller carriers have anything to do with slots controls. Slots are a function of capacity at an airport and there are very few in the US that was slot controlled. This is what Virgin America considers its number 1 priority – airport access issues. But if airports are full, then that’s a problem. My favorite solution is to promote expansion of airports that are slot controlled. It’s in the national interest to make that happen so that there’s room for everyone.

  2. Charlie… Consolidation reduced the market from 6 lossy/barely-profitable network carriers to 3 healthier ones. The profits and scale have enabled a better product and a much better network. It’s not just overlaying two networks, it’s also about new routes. Ten+ years ago, it’s hard to imagine DL doing 7x daily LGA-DFW or 5x LGA-IAH or LGA-ORD. Or even imagine the DL build up at SEA to compete vs. AS. I remember UA and AA just dominating transcon, now there are 3 majors duking it out. AA-BA JV means AUS-LHR is possible, VS-DL JV means DL can fly LHR-SEA, providing proper competition to BA.

    Consolidation begat profits begat investment in network; routes that past airlines wouldn’t have dreamt about starting due to losses are now feasible.

    1. There is no doubt however that consolidation, like Brett pointed out, has negatively impacted small and mid size airports, and that has become an issue as far as economic development in some of these metro areas (though not as bad as some airport commissions like to make out). I don’t see a real good way out of that, unless the smaller players decide to pony up and fly their own regional fleets or choose to make a hub out of an oddball mid-sized city. Options like Surf Air make sense in California, where road traffic is the worst and population size makes it feasible. I have a hard time seeing it work in the Midwest or the NYC area.

  3. CF – I’d be very interested in knowing what you think on this topic, I really do mean that. The problem is that I just don’t have the time to listen to a podcast for 22 mins. Is it at all possible to add a link to the Powerpoint slide deck so I can have a read ?

    1. David – Sorry, but that’s not my property to post independently. I personally hate presentations that rely on Powerpoint, so I’ll tell you that it’s not going to tell much of a story on its own.

  4. I wonder if you looked at growth rates in the decade or so prior to hub closures if you might be able to predict, which, if any, might be the next hub to close.

    1. Eric Morris – I don’t have that info, but I’d be surprised if that told us much. I mean, often these hubs would grow because the airline had no other way to grow in the region. So it was consolidation that meant they died, not anything about the way they grew previously.

      1. Thanks for responding, though “you” was more general to readership. I’m thinking the purpose of these mergers might have been to kill competing hubs, even though announcements usually said all will stay. For instance, did Delta just want to kill CLT through proposed merger? Even WN’s mergers and proposed mergers were meant to kill competition, even though stated otherwise.

  5. Do you see more frequency flexibility coming?

    My question on twitter, that at what time does an airline’s decision not to operate a specific is no longer a schedule change and becomes a cancellation, was related to a discussion on another board, where the poster suggested that airlines (American in this case) might prefer to run two A321s instead of one A330, since they’d have some flexibility to cut one of the flights, whereas cutting half of an A330 doesn’t seem to work. (The answer to the cancellation vs schedule change is if its in the airline’s system seven days before the flight operates, and the airline chooses not to operate the flight, its a cancellation. If an airline chooses not to operate a flight eight days before its supposed to operate, its a schedule change.)

    Do you see this becoming more of a possibility in the network? Perhaps where airlines have whole lines scheduled that are duplicated by other flights within say 90 minutes, and the airline will decide to just cancel a line eight days in advance and reaccomadate passengers on other flights? Its potentially a bit of a risk, but it mirrors the startup that won’t fly a run if they don’t sell any seats on it.

    1. Nick – I doubt we’d see that, but anything is possible. What I do know is that American says it’s cheaper to run 2 A321s than an A330. So it’s not about the ability to cancel but it’s about costs, for the most part. I think airlines would really be playing with fire though if they went to the model you suggest. People would be kicked out of seat assignments. It could get ugly.

      1. Ah I was thinking more about a flight that’d be canceled say a month or so in advance or perhaps allowing the airline to have flexibility to run 2 A321s on Friday and Sunday, but just one on some other days or whatever.

        At least domestically aren’t the airlines really into this scheduling model where some days of the week have many more flights than others? I can see this making its way into the international market as well.

        1. Nick – Yes, airlines are all about flexing capacity by day-of-week, but they don’t like to cancel flights close-in, even if it’s 8 days in advance.

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