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Randy Tinseth

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What Fuller Airplanes Mean For Our Industry…

RANDY'S JOURNAL: A BOEING BLOG

The August global passenger traffic numbers that came out this week brought more encouraging signs for our industry. Passenger demand again grew at above the historical growth rate, increasing 6.4 percent compared to the same period last year.

The eye-opening statistic, though, was the global passenger load factor of 85.3 percent. That is the highest monthly percentage since at least 1990, according to IATA.

Now, July and August are traditionally the busiest travel months so load factors tend to be higher. But even when we account for seasonality and look at the rolling 12-month average, August was still the highest percentage – at 81.1% – that we have seen since at least 2010.

The numbers reflect a trend that we have seen and you have probably noticed: Airplanes are flying fuller than ever before.

Yes, more people are taking to the skies, but many airlines have tried to remain disciplined about adding capacity while leveraging advancements in revenue management methods and tools to better manage demand. This has driven higher load factors while maintaining healthy yields, all of which have contributed to the health and profitability of the airline industry.

A decade ago, the annual passenger load factor was 76 percent. This year, we’re on track to again exceed 81 percent. Five percentage points are significant when we are dealing with nearly 10 trillion in annual available seat kilometers (ASKs). By maintaining a load factor of 81 percent vs. 76 percent, we are talking about 500 billion of additional revenue passenger kilometers (RPKs) a year for the industry.

Another way to look at this is to consider the number of seats annually. Five percentage of the industry’s 5.5 billion seats translates to about 275 million additional passengers carried each year.

One might think that if airlines are becoming more productive with the airplanes they have, they won’t order as many new airplanes. While that may be the case in the short term, the longer-term result is a healthier and more profitable industry, one that can afford to order and take delivery of more jetliners.

Our team closely tracks regional and global load factors and factor that into our annual Commercial Market Outlook (CMO). And the performance in August, and so far this year, give us even more confidence that our industry is on solid footing and on track to take delivery of 42,000 airplanes over the next two decades. (Learn more about our CMO while on the go by downloading our handy app on the App Store or Google Play.

What do you think? How high can global passenger load factors go? There was a time when we thought 80 percent was not possible.

5 comment on “What Fuller Airplanes Mean For Our Industry…

  • Nick Janus
    October 6, 2018 | 11:55 am

    In the old days, I remember boarding and exiting via two doorways, the usual front and occasionally one in the back which was just a set of stairs, then there was also aft an upper door for replenishing the galley. I realize it would be a disruptive inconvenience to bring all this back, but loading via two doors, like the A380 top and lower deck, would go a long way to make the boarding process smoother.

    • Randy Tinseth
      October 12, 2018 | 7:10 pm

      Good question. Airlines are always experimenting with boarding strategies. They take into account the type of airplane, the existing infrastructure and schedule considerations. In some cases, widebodies are boarded via two doors to channel passengers to their specific cabins. There are many factors that play into this including the links between who gets priority boarding and where they sit as well as how the airline handles bag fees, and thus how many bags (and of what size) when they are brought onboard.

  • Dave Anderson
    October 7, 2018 | 9:45 pm

    Randy; we used to look at “spill theory” suggesting why some excess capacity is needed to avoid missing out in ticket sales because no seats are available. At some average load factor, the loss of willing fares exceeds the loss of empty seats, fleetwide. More people are familiar with “queuing theory” which is similar. Do you think airline load factors are becoming too high to maximize profits?

    • Randy Tinseth
      October 12, 2018 | 7:09 pm

      Thanks for your question. I would say that for the industry as a whole we have not quite reached that point yet. It’s important to remember that the load factor for a given month is an average. There is variability in day-to-day passenger demand and load factors. But, you are right that this is an issue that capacity planners need to watch. There is some “spill” effect. We project that when the average load factor hits 85%, about 40% of flights are full. So airlines have to strike the right balance and consider demand, which is dynamic, when setting capacity.

  • James Baloun
    October 8, 2018 | 10:07 pm

    Rather than flying with 5% empty seats, the airlines have worked hard to fill those seats with 5% more passengers. This benefits passengers, airline profits, airspace utilization, airport resources, and lower carbon emissions. Everybody wins!

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