Thursday , August 16 2018
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Up in the air : Air carrier capacity and use

Summary:
[embedded content] Business or pleasure. Domestic or international. Air travel is a frequent fact of life for more and more people, and booking a flight is much easier than it used to be: A couple of clicks and you have your ticket. Unfortunately, airline logistics and operations are much more costly and complicated. Air travel technology and airport capacity have not progressed as quickly as online commerce. Crowds, delays, cancellations, and long layovers in airports are still part of the travel experience. Deciding when or whether to fly is not always up to us, but some air travel decisions are entirely under our control. For psychological insights into the travel experience, consider the cinematic namesake of this blog post. But for some economic insights, let’s see what FRED

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Business or pleasure. Domestic or international. Air travel is a frequent fact of life for more and more people, and booking a flight is much easier than it used to be: A couple of clicks and you have your ticket. Unfortunately, airline logistics and operations are much more costly and complicated. Air travel technology and airport capacity have not progressed as quickly as online commerce. Crowds, delays, cancellations, and long layovers in airports are still part of the travel experience.

Deciding when or whether to fly is not always up to us, but some air travel decisions are entirely under our control. For psychological insights into the travel experience, consider the cinematic namesake of this blog post. But for some economic insights, let’s see what FRED data can tell us.

The blue line in the graph shows the number of scheduled “revenue passenger miles” each month for commercial U.S. air carriers, both domestic and international, from January 2000 through August 2017. A revenue passenger mile is equal to one paying passenger carried one mile. The red line shows the number of “available seat miles,” which is a measure of capacity. An available seat mile is equal to one available seat, occupied or not, carried one mile. The green line, which uses the right scale, shows the ratio of available seat miles to revenue passenger miles.

The graph reveals a number of interesting facts. First, albeit not too rapidly, the volume of air passenger transportation has been trending up. For businesses, online communication such as email, Skype, and Zoom have not been able to replace face-to-face meetings. For families, enhanced electronic entertainment has not replaced the full experience of visiting relatives or getting to know a new place. Second, business cycles do not appear to be a major factor of air passenger transportation: The behavior of all three series is similar in recessionary and non-recessionary periods. Although only two recessions are recorded during the sample period in the graph, one was major. Third, seasonality is a key factor. Americans travel much more during the summer than during the winter. Indeed, the volume of travel is very high in July and very low in February. Fourth, the airlines are clearly anticipating and responding to these seasonal fluctuations, as capacity (available seats) is highly synchronized with scheduled passengers, especially since 2005.

Despite this synchronization, airplanes are more crowded when there’s more travel occurring—that is, there are fewer available seats per passenger in the summer than in the winter. So, overbooked airplanes and overworked airline employees can disrupt summer travel, weather can disrupt winter travel, and all sorts of other disruptions can occur any time of year.

Last, but not least, there’s a clear trend in the seat-to-passenger ratios. The chances of having an overbooked flight have increased over time, consistent with recent and well-known unpleasant incidents.

How this graph was created: For the first two lines: Search for “passenger miles” and choose “Revenue Passenger Miles for U.S. Air Carrier Domestic and International, Scheduled Passenger Flights.” From the “Edit Graph” panel, use the “Add Line” feature to search for “seat miles” and choose “Available Seat Miles for U.S. Air Carrier Domestic and International, Scheduled Passenger Flights.” For the third line: Use the “Add Line” feature to search for and select the “Available Seat Miles…” series again. Then use the “Add data series” feature: Under “Customize data,” search for and add the “Revenue Passenger Miles…” series again; in the formula box, use the formula a/b. From the “Format” menu, select “Right” for the y-axis position for the third line, then choose the widths and colors you prefer for all the lines.

Suggested by Alexander Monge-Naranjo.

About FRED Blog
FRED Blog
The Federal Reserve Bank of St. Louis is the center of the Eighth District of the Federal Reserve System. This District includes Arkansas, eastern Missouri, southern Illinois and Indiana, western Kentucky and Tennessee, and northern Mississippi.

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