The U.S. Department of Transportation’s Bureau of Transportation Statistics reported on June 16 that U.S. airlines’ system wide (domestic and international) scheduled service load factor fell to 82.3% in March, seasonally adjusted, falling for the third consecutive month. The DoT data reporting typically runs three months late. The chart below illustrates this decline. Does this portend another downturn?
First reaction would be to assume that traffic must be down. But it makes more sense to take a much longer view. After all this is an industry that has regular cycles. the next chart illustrates how regular these cycles are.
In fact when one tracks load factors from January 2003 through March 2016, the average is 79.1% for domestic flights and 79.7% for international flights. So when you look at the first chart which shows load factor in the 80s, the latest numbers are higher than average – but the differential is only about 4%. Flights have been relatively full for a long time.
A second view on this matter comes from the next chart. Typically for US air traffic there are about four domestic travelers for every international traveler.
The most recent data shows the seasonal uptick was doing what it has done every year. And following the spike it will come down again only to go up again. On average over the period, the US generated 54 million domestic air travelers per month and 13 million international air travelers. The trend on international is clearly growing though.
If load factors are falling, they may be adjusting back to long term averages. Besides the new (and increasingly) concentrated US airline industry will manage capacity to ensure maximum profits. It has taken a long time to realize the industry has profits for all or all make losses. Even a little profit is better than none. So even if load factors are coming off their recent peaks, with a consolidated airline industry we should expect the average to start to rise.