Airlines Squeezing in Passengers as Costs Continue to Soar

As costs go up planes get crowded
As costs go up planes get crowded

Airlines today simply cannot afford to leave empty seats alone; as fuel costs and other expenses climb almost as quickly as a plane at take-off, airlines are being forced to push their load factors to the limits.

If you have felt that planes are becoming increasingly more crowded over the years, you are right. This past summer was one of the best summer seasons in airline history, with summer always being the busiest season for airlines. The US Airways Group stretched their load capacity up to a record 87.9 percent in August. This August record was just one more in a series of monthly records for load capacity for this airline. American Airlines, which is a proposed merger partner with US Airways, also had a load capacity record in May of 84 percent. Other airlines have similar figures: United Airlines hit 87.2 percent in July, and Delta soared to 87.3 percent in August.

Rising jet fuel prices are driving airlines to stuff in travelers. Over the past ten years the annual average load has climbed from 71.9 percent in 2002 to 82.8 percent in 2012. The increasing load capacity has not resulted in an increase in profits- the load capacity “break-even” point for US flights has gone from 69.4 percent in 2000 to a whopping 80.9 percent last year.

“One reason planes are fuller is because they have to be to avoid losing money,” says John Heimlich, chief economist at Airlines for America, the U.S. airlines’ trade group. “The airlines had to push really hard on the load-factor lever because they couldn’t push hard with the pricing.”

James Cannon

About James Cannon

James Cannon is an experienced hedge fund analyst. He has served on the advisory boards for various different Fortune 500 companies as well as serving as an adjunct professor of finance. James Cannon has written for a variety of Financial Magazines both on and off line. Contact James at james[at]businessdistrict.com