North America

The US airline industry continues to restructure

The US airline industry continues to evolve into a financially stable industry due to the merger activity and resulting capacity and fleet rationalization that have occurred over the past five years. The fourth and final legacy airline merger between American Airlines and US Airways is pending government approval. If the merger is approved, further capacity rationalization is expected. In the interim, airline consolidation continues as Southwest integrates AirTran into its system, and United and Continental continue to merge their operations. Once the American-US Airways merger has been consummated, the four largest US airline operators will dominate other domestic competitors with at least 80 percent of available capacity.

Low-cost carriers lead capacity growth

For the fourth consecutive year, the US commercial airline industry has posted an increase in traffic growth, as measured by revenue passenger-miles (RPMs). Total RPMs flown by the network and low-cost carriers grew 1 percent in 2012 compared to the previous year. The low-cost carriers posted a year-over-year capacity increase of 4 percent while capacity for the legacy carriers was flat. The average annual load factor of 83 percent for the US carriers was an increase of half a percentage point from 2011.

Financial results for US airlines continue to show improvement as the industry restructures. Excluding American Airlines, which was engaged in corporate restructuring, the US airline industry had a net profit of US$1.9 billion for the year. Net margins, however, averaged slightly above 1 percent. With jet fuel representing between 35 and 40 percent of operating expenses, the airline industry will continue to focus on revenue growth and cost reductions to further improve financial performance that is necessary to fund future capital investment.

Passenger traffic to slightly outpace GDP growth

Long-term moderate capacity growth, renewed focus on financial returns, ongoing investment in the fleet, and further product and technological enhancements are expected as US airline industry restructuring continues. North American passenger traffic growth will slightly outpace GDP and grow at an annual rate of 2.7 percent over the next 20 years. Both GDP and traffic were revised downward slightly from the previous year's forecast due to the expectation of a long-term US economic recovery. Cargo revenue ton-mile projections were also revised downward to 3.8 percent per year compared to the previous forecast of 4.5 percent as the air freight industry undergoes its own fleet and capacity rationalization.