Service Cuts in the 

U.S. Airline Industry

What have been the factors at play?

William S. Swelbar

Executive Vice President
2

Consolidation is but one factor at work impacting 

the route service map

Source: InterVISTAS analysis of Innovata schedule data via Diio Mi
3

We are now in our fifth straight year of domestic capacity discipline

-20%

-15%

-10%

-5%

0%

5%

10%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Year

-over

-Year % change in available 

domestic seats

AA

DL + NW

UA + CO

US + HP

WN + FL

Pre-recession

Rationalization

Capacity Discipline

Source: InterVISTAS analysis of Innovata schedule data via Diio Mi
4

What are rationalization and capacity discipline?

• Rationalization (2007-2009): an active reduction of 

available seat capacity as a result of macroeconomic 

shocks to the airline industry and a “new normal” of higher 

fuel prices.

• Capacity discipline (2010 – present): a restriction of 

seat capacity growth by network carriers (and Southwest) 

even as passenger enplanements have continued to 

increase.

• “[Yield growth between 2007-2012] would have been 

impossible without capacity discipline.” 

–John Gebo, SVP Financial Planning, United Airlines, August 2013
5

In the past year, capacity discipline has remained the status quo

 Airlines continued to cut domestic flights by 2.4% from 

2013-2014.

7.6

7.7

7.8

7.9

8

8.1

8.2

8.3

8.4

8.5

8.6

2009 2010 2011 2012 2013 2014

Millions of Scheduled Domestic 

Flights

-2.4%

Source: Innovata schedule data via Diio Mi
6

Air service in the U.S. faces significant challenges

In the wing oil 

in excess of 

$100 per barrel

40,000 cycle

decision

Prevalence of 

low/ultra low 

cost carriers in 

primary 

catchment areas

Pilot shortage 

surely to impact 

regional sector 

of the business

Flight Time/Duty 

Time 

regulations 

causes staffing 

challenges

Capacity

discipline at 

major carriers 

has reduced 

frequencies 

and seats

Smallest new 

production

aircraft likely 

to be at least

100 seats

No 50 seat and 

less replacement 

aircraft in the 

pipeline

GovernmentInduced

Operational Economic

Strategic
7

Small airports continue to be the most affected by airline 

capacity rationalization and capacity discipline

 Smaller airports saw a disproportionate share of the cuts in 

flights and available seats as a result of capacity discipline.

0

1

2

3

4

5

6

7

8

9

Millions of Scheduled Domestic Flights

Non-Hub

Small Hub

Medium Hub

Large Hub

% change in domestic flights 

by hub type

Airport Type

% change in 

domestic flights 

(2007- 2014)

Large Hub -10.1%

Medium Hub -30.0%

Small Hub -25.1%

Non-Hub -21.4%

All Smaller

Airports

All Airports

-26.8%

-17.4%

Source: Innovata schedule data via Diio Mi
8

Despite cuts in service, U.S. airports remain wellconnected to the globe

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

Large Hub Medium Hub Small Hub Non-Hub

% Changes in Scheduled Domestic Flights and Airport 

Connectivity Quality Index Score

2007-2014

% Change Flights % Change Connectivity

Source: Innovata schedule data via Diio Mi and

MIT Airport Connectivity Quality Index
9

Domestic seat capacity has finally begun to grow 

along with the U.S. economy—a return to normal?

 Capacity discipline has not been the natural state of the industry.

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

19911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013

2014*

% Change U.S. GDP % Change Domestic Seats

Source: BTS T-100 via Diio Mi, BEA, OECD (2014 US GDP Estimate)
10

In today’s consolidated industry, there are more 

questions than answers

 What will cause the legacy carriers to grow 

frequencies?

 Where will that growth be?

 What will be the future of Southwest and jetBlue? Can 

hybrid carriers find a sweet spot in the system?

 What is the future of Ultra Low Cost Carriers? 

 WILL THERE BE A REGIONAL INDUSTRY?

 Some airports will be winners, others will struggle
11

I was asked to briefly mention labor

in the context of a consolidated industry

 Many more positives than negatives this time around

 Labor navigated the deal environment very nicely

 Industry not competing on labor costs

 For the first time in history, average airline salary 

and benefits per full time equivalent is greater the 

$100,000

 More stable industry provides employee with sense of 

security

 Modest growth in employment after years of deep 

job cuts

 Profitable industry makes it more an employee market 

than an employer market as in the prior decade