The resilience of air traffic demand

Throughout its history, the U.S. airline industry has proven itself to be highly dynamic, continuously adapting to changes in regulatory, economic, and competitive environments. Despite recent years being some of the most troubled in the history of air travel, this demonstrated resilience—along with the promise of steady economic growth— points to commercial air traffic returning to a sustained trajectory of  robust growth in the near future.

Looking back at historical US air traffic volumes, it is evident that growth in demand for air travel is closely tied to economic growth. Between 1990 and 2000, passenger air traffic grew by 4.1% annually. Demand fell sharply following the 9/11 terrorist attacks, but between 2003 and 2007, it increased 4.3% annually, returning to pre-9/11 levels by 2004. It decreased again with the global financial and economic crisis, and has since experienced slow growth, resulting in current traffic about 2.7% below the peak observed in 2007.

The constant, though modest, growth in US air traffic observed in the last few years can be attributed to several factors, most notably industry consolidation, rapid growth of low cost carriers (LCCs), and market liberalization. Though consolidation has resulted in fewer flights and higher fares on some routes, many routes between major airports have seen significant increases in traffic, due to the introduction of LCC service. At the same time, legacy carriers have been deploying capacity more efficiently, which has led to increased yields and record load factors. As a result, enplanements at major US airports have been growing faster than total enplanements. At the same time, market iberalization has stimulated competition on international routes, giving passengers more choices and generally lower fares.

It is worth noting that this continued upward trend contrasts sharply with that of auto travel in the US, which has plateaued and even begun to decline in recent years. Though both modes are helped by the increased face-to-face interaction demanded by a growing and increasingly global economy, the key difference is that many fewer  substitutes exist for high-speed long-distance travel than for local travel.

Looking forward, there is consensus among major industry stakeholders—including Boeing, Airbus, and the FAA—that continued economic growth will drive corresponding growth in air traffic, both in the US and worldwide. If history tells us anything, it’s that the airline industry is unpredictable in the short term. Over time, however, economic growth has always led to growth in air traffic, and by this measure, the future—in aviation terms—is bright.

Our aviation team leverages global experience to help clients evaluate the business and policy implications of the ever-evolving aviation sector. Our capabilities include traffic and revenue forecasting, strategy and policy review,transaction support, and market research.