Monthly Labor Review • October 2008 3

Airline Employment

he airline industry in the United 

States has gone through major 

changes in recent years. After growing sharply throughout the late 1990s, the 

industry began to falter around the turn of 

the century.1

 An economic downturn compounded by the catastrophic events of September 11, 2001, induced the largest decline 

in air travel in modern aviation. By 2003, 

air travel was once again growing2

; however, 

the industry’s fi scal position continued to 

deteriorate. In the face of mounting fi nancial losses, the airlines aimed to reduce their 

expenditures on labor, leading to massive job 

losses in the industry. Airlines were hampered in their restructuring eff orts by historically high fuel prices, which added further pressure to reduce employment. During 

the period from 2003 to 2006, the historical 

relationship between passenger volume and 

employment in the industry broke down. 

From its peak in March 2001, employment 

in the industry declined for 5 straight years.3 

Th e industry did not begin to show signs of 

a recovery until 2007. 

Structure of the airline industry

Th e passenger airline industry can be divided roughly into three categories: network, 

or “legacy,” carriers; discount, or low-cost, 

carriers; and regional carriers. Legacy carriers constitute the industry’s largest airlines. 

Responsible for the majority of passenger 

transportation, they are longstanding airlines 

that began operations prior to deregulation 

in 1978. Noted for their large domestic networks, they have traditionally off ered many 

services not found on lower cost carriers, 

such as fi rst class seating and membership 

clubs. As a result, network carriers have continued to remain popular with business travelers. Th ey are also the primary conduit for 

international travel and are noted for their 

extensive hub-and-spoke networks. Each of 

these networks generally routes passengers 

to one of the airline’s major hubs, where 

the passengers then fl y on to their ultimate 

destination. Since 2000, these airlines have 

suff ered fi nancially as they have gradually 

lost market share to discount and regional 

carriers.

Discount carriers, the second major 

group, have arisen largely since the Airline 

Deregulation Act of 1978. Discount carriers are noted for off ering low fares and 

basic, or “no frills,” services. Eschewing the 

hub-and-spoke model of larger airlines, 

discounters concentrate on point-to-point 

service. Focusing on the domestic passenger 

market, these carriers typically fl y to fewer 

cities than the major airlines and do not ofTakeoff and descent 

of airline employment

After several years of growth, airline employment declined 

with the recession of 2001 and the attacks of September 11th; 

subsequently, although air travel began to rebound, the number

of jobs has not recovered fully; in 2008, the industry has faced, 

soaring fuel prices and a weakening economy

Christopher J. Goodman

Christopher J. Goodman 

is an economist in the 

Offi ce of Industry Employment Statistics, Bureau of 

Labor Statistics. 

E-mail: goodman.christopher@bls.gov 
Airline Employment

4 Monthly Labor Review • October 2008

 Table 1. able 1. Airline revenues, expenses, and net profi ts, 

 1995–2007 

[In millions of dollars]

 Year Revenues Expenses Net profi ts

1995 .......................... 95,117 92,804 2,314

1996 .......................... 102,444 99,717 2,727

1997 .......................... 109,917 104,799 5,119

1998 .......................... 113,810 108,963 4,847

1999 .......................... 119,455 114,178 5,277

2000 .......................... 130,839 128,352 2,486

2001 .......................... 115,527 123,802 –8,275

2002 .......................... 106,985 117,994 –11,008

2003 .......................... 117,920 120,291 –2,371

2004 .......................... 134,462 142,105 –7,643

2005 .......................... 151,255 157,037 –5,782

2006 .......................... 164,615 161,492 3,123

2007 .......................... 172,989 167,991 4,998

SOURCE: Air Transport Association. 

fer international fl ights. Discount carriers have proven to 

be popular with those traveling for leisure. 

Th e third group responsible for passenger services is 

the regional carriers. As their name implies, regional carriers generally lack a national presence and instead focus 

on serving particular geographic regions. Flying smaller 

airplanes, these carriers service many smaller markets not 

served by other carriers. Larger carriers often contract 

with regional carriers to provide service on less popular 

routes, where demand is not suffi cient to fi ll larger planes. 

Regional airlines have experienced the most rapid passenger growth in recent years. Th e Federal Aviation Administration projects that the market share of regional carriers 

will expand from 11.9 percent of passengers in 2020 to 

19.9 percent in 2015, making these carriers an increasingly important component of air travel.4

Expansion in the late 1990s

Air transportation experienced a steady increase in passenger volume throughout the latter half of the 1990s, 

because a growing national population and a robust 

economy led more people to travel for business and pleasure.5

 Demand for air travel continued to grow as personal income in America rose and airline travel became 

relatively more aff ordable. Th e airline industry was by and 

large profi table, and it experienced healthy employment 

growth. From January 1995 until January 2000, employment in air transportation expanded by nearly one-fi fth, 

or 97,000 positions. 

By the late 1990s, the eff ects of Internet commerce 

were starting to be felt across the industry. Travel Web 

sites allowed consumers to more easily compare air fares, 

limiting the pricing power of airlines.6

 Th e Internet provided airlines with a low cost channel for selling tickets 

and allowed airlines to increase the total number of tickets sold. Given the low marginal cost of each additional 

passenger, airlines were able to profi t even when selling 

surplus tickets at greatly reduced rates. (See table 1.)7

 

Th roughout the 1990s, the airline industry was able to 

prosper thanks to historically low fuel prices and increases 

in passenger volumes. Both of these factors contributed to 

low per-passenger operating costs, which enabled airlines 

to reduce fares in an attempt to lure still more passengers.8

 From 1995 to 2000, revenue passenger miles, the 

most common measure of demand for air travel, rose 28.1 

percent. Revenue passenger miles are roughly equal to the 

number of tickets sold times the average mile per ticket 

sold.9

 Th e industry thrived fi nancially during this time 

period, recording a profi t every year from 1995 to 2000. 

Cumulatively, the airlines recorded profi ts of more than 

$20 billion in the second half of the 1990s and together 

experienced a 37.6-percent increase in revenue from 1995 

to 2000.10 

Rapid growth in discount carriers

Although all categories of air carriers expanded in response to growing demand for air travel, discount carriers, in particular, experienced robust growth. During the 

1990s, discount airlines grew both in size and in number 

as they successfully attempted to win market share from 

the larger companies. Responding to the competitive 

pressures posed by their upstart rivals, traditional airlines 

took steps to mimic discount carriers, including decreasing fares to remain competitive. Several sought to head off 

competition from low-cost carriers by introducing their 

own discount airlines. 

Two factors enabled the discount carriers to grow during this period. Nearly a generation earlier, deregulation 

had made entrance into the industry easier, giving airlines 

more latitude in setting prices and lessening the previously onerous process of acquiring regulatory approval 

to operate new airlines. Additionally, the growth of U.S. 

capital markets in the 1990s allowed upstart airlines to 

obtain the vast sums of fi nancial capital necessary to enter 

the marketplace. Investors eagerly funded new airlines on 

the premise that upstart airlines, fl ying direct fl ights with 

new fl eets and low unit labor costs, would easily unseat 

older airlines.11 

Also during the 1990s, many observers of the airline 

industry believed that the “legacy” carriers were ineffi cient 

and would be unable to compete with the newer, leaner 
Monthly Labor Review • October 2008 5

airlines in a price war. According to critics, traditional airlines were burdened with aging fl eets and ineffi cient huband-spoke networks. A study by the consulting fi rm Booze 

Allen Hamilton found that the discount carriers spent on 

average only 7 cents to 8 cents per seat-mile to complete 

a 500- to 600-mile fl ight, whereas the established carriers 

spent approximately 15 cents. Th e analysis also concluded 

that up to 65 percent of the diff erence in cost could be 

attributed to the operational complexity associated with 

managing a hub-and-spoke model.12 High labor costs 

were also seen as a competitive disadvantage for the legacy 

carriers. It was widely believed that the heavily unionized 

industry was paying its employees above market wages, a 

vestige of the prederegulation era.13 

Th e eff ect of discount carriers on the overall market 

for air travel was large, and it has generally been considered to have been fi nancially benefi cial for consumers. 

After rising moderately during the early 1990s, airfares 

remained relatively fl at over the course of the late 1990s 

as low-cost carriers introduced lower fares and legacy carriers responded in kind. Only by 1999, after several years 

of growth in air travel, did real airfares begin to rise again. 

(See chart 1.)14 One study that examined the competitive eff ect of Southwest Airlines, a large discount carrier, 

estimated that in 1998 the increased price competition 

induced by the airline’s low-cost model had saved consumers more than $12.9 billion in airfares across all carriers. Total consumer savings in 1998 were estimated to 

have been equal to 20 percent of the industry’s domestic 

scheduled passenger revenue and more than half as large 

as the savings associated with deregulation.15 

Th e addition of extra capacity by both large and small 

carriers caused employment to rise across the airline industry. By March 2001, employment in all of air transportation reached its peak, at 634,000 positions.16 In the previous 5 years, air transportation had added 110,000 jobs. 

While they were under pressure from the smaller airlines, 

the legacy carriers still continued to report healthy fi nancial results and continued plans for further expansion. 

Available seat-miles, the most widely accepted measure 

of supply in the airline industry, expanded by nearly onefi fth (18.6 percent) between 1995 and 2000.17 Record levels of demand for air travel caused the additional capacity 

to be utilized quickly. Industry load factors, a measure of 

capacity utilization, continued to rise as passenger growth 

exceeded the industry’s expansion in carrying capacity.18 

The recession of 2001

By the second half of 2000, the U.S. economy began to 

show signs of slowing. In the third quarter of 2000, gross 

domestic product (GDP) contracted for the fi rst time 

in nearly a decade.19 As the economy weakened, businesses began to reduce staffi ng levels. Th e downturn in 

the broader economy was a major factor in the decline in 

the demand for air travel, especially the decline among 

business travelers. Employment in air travel, which had 

been steadily increasing over the previous 5 years, peaked 

in March 2001. Over the course of the next 5 months, 

employment in air transportation edged down as airlines 

attempted to adjust to the changing market conditions. 

Th e ongoing weakness in the airline industry was compounded by the terrorist attacks of September 11, 2001. 

Following the attacks, airline travel across the Nation 

was halted for nearly a week as a precautionary measure. 

When air travel did resume, airlines experienced a dramatic reduction in passenger traffi c; passenger volume on 

domestic fl ights declined by 5.9 percent during 2001.20 

Th e events of September 11th dramatically changed 

the public’s view of fl ying. Widespread concerns over the 

safety of airline travel led Congress to enact new security 

measures meant to restore the public’s confi dence. While 

doing much to assuage lingering fears of fl ying, the new 

security procedures dramatically increased the time and 

eff ort associated with fl ying. Passengers were required to 

arrive earlier and go through enhanced security procedures. 

Th e increased security procedures appeared to have eff ectively calmed the fears that the public had been having 

about fl ying. A Gallup survey conducted shortly after the 

attacks found that more than 80 percent of Americans felt 

that air travel had become safer since September 11th.21 

However, the increased security appears to have come at 

a cost to overall customer satisfaction. Th e University of 

Michigan’s American Customer Satisfaction Index for 

Airlines, which had been falling in the years prior to the 

attack, reached its nadir in 2001.22 Th e increased time 

and eff ort associated with fl ying not only inconvenienced 

travelers but also weakened the competitive position of 

fl ying relative to other modes of transportation, such as 

driving or taking a train. Avoiding travel altogether also 

became more appealing as communication technology, 

such as teleconferencing, advanced and became more 

widely available. 

Airlines sought to minimize their losses in the face of 

declining passenger volumes and higher costs. Not only 

increased security but also higher fuel prices caused this 

decrease in clientele and increase in costs. Within weeks 

of the attacks, virtually every major airline had announced 

drastic layoff s. Th e BLS Mass Layoff Statistics program 

reported 75 major layoff events in the 2 months follow-
Airline Employment

6 Monthly Labor Review • October 2008

Chart 1. Index of real airline fares, 12-month moving average, not seasonally adjusted, 1990–2008 

Index 

 (January 1997 = 100)

Index 

(January 1997 = 100)

115

110

105

100

95

90

85

80

115

110

105

100

95

90

85

80

 Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan.

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

NOTE: Airline fares defl ated by CPI.

SOURCE: BLS Consumer Price Index for All Urban Consumers (CPI-U).

ing the attacks.23 From September 11th until the end of 

2001, overall employment in air transportation declined 

by an additional 59,000 positions as carriers adjusted to 

the decline in air travel. (See chart 2.) 

Th e industry, which had been losing money prior to 

September 11th, suff ered huge fi nancial losses in the 

wake of the attacks. In 2001, total losses among commercial airlines amounted to $8.3 billion.24 According to the 

industry, the fi nancial damage from the attacks was not 

confi ned merely to the losses associated with reduced air 

travel. Rather, it was argued that the attacks had the potential to threaten, at least in the short term, the fi nancial 

viability of the entire industry. Two large uncertainties 

hung over the industry: would the airlines be held legally 

liable for the attacks? and would insurers be willing to 

underwrite future policies for the airlines? Air carriers argued that they were near insolvency and would be forced 

to cease operations if they did not receive outside fi nancial 

assistance. Sensitive to those concerns, Congress enacted 

the Air Transportation Safety and System Stabilization 

Act of 2001. Th e legislation, which sought to ensure the 

fi nancial health of the domestic airline industry, provided 

direct government-backed loans to the airlines. Under the 

legislation, Congress granted the industry $5 billion in 

direct assistance and established a $10 billion loan fund 

for distressed airlines. Th e act also contained provisions 

designed to limit the airlines’ legal liability for the September 11th attacks.25 

Th e weak American economy caused air travel to continue its decline through 2002. In the deregulation era, demand for air transportation has generally risen and fallen 

in line with the broader economy. (See chart 3.) However, 

the decline in air travel from 2001 to 2002 was especially 

sharp when compared with previous downturns. Over 

the course of those 2 years, air traffi c, as measured by revenue passenger miles, suff ered its worst decline in history, 

falling by 7.3 percent. Th is marked only the second time 

since 1928 that air traffi c had declined for 2 consecutive 

years.26 

Decreasing numbers of customers caused some airlines 

to attempt to raise revenue through fare increases, but 

these increases in price were stiffl y resisted by consumers. 

Unable to raise prices, the airline industry was forced to 

reduce expenses both through cutting its costs per passenger and by reducing overall capacity. Th e major expenses 

that the airline industry regularly faces are labor, fuel, and 

planes and equipment. In the short term, airlines are constrained in what they can do to limit fuel and equipment 

costs. With limited room to reduce expenses, airlines 

attempted to control labor costs. Th roughout 2001 and 
Monthly Labor Review • October 2008 7

Chart 2. Air transportation employment, 1-month net change, seasonally adjusted, 2000–05 

Net change 

in thousands

Net change 

in thousands

10

5

0

–5

–10

–15

–20

–25

–30

–35

Jan. Jan. Jan. Jan. Jan. Jan. 

2000 2001 2002 2003 2004 2005

September 11th

10

5

0

–5

–10

–15

–20

–25

–30

–35

Chart 3. Indexes of revenue passenger miles and real gross domestic product, 1980–2006

SOURCES: Air Transport Association and Bureau of Economic Analysis.

200

180

160

140

120

100

80

60

40

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

200

180

160

140

120

100

80

60

40

Index

 (1990 = 100)

Index

 (1990 = 100)

 Revenue passenger miles

 Gross domestic product
Airline Employment

8 Monthly Labor Review • October 2008

2002, employment tracked closely with passenger volume, 

falling 10.0 percent. However, the employment declines 

were concentrated in 2001, with employment ticking back 

up in 2002. (See chart 4.) Overall, the general relationship between employment and revenue passenger miles in 

2001 and 2002 appears relatively normal when compared 

with the historical relationship between the two; as usual, 

the two series were moving roughly in line with each other 

during that period. (See chart 5.) 

Air travel recovers, job losses continue

By the end of 2002, passenger volume began growing 

once again, helping the airlines to recover to some extent. 

However, in contrast to the late 1990s, growth in air travel 

did not translate into growth in airline employment. (See 

chart 5.) Despite a 24-percent rise in passenger volume 

from 2002 to 2005, employment in air transportation 

continued to fall, declining by 80,000;27 the relationship 

between employment and passenger volume had apparently frayed. Had the relationship between volume and 

employment witnessed in the late 1990s continued, by 

2006 employment in the industry would have been 47 

percent higher than it actually was. (See chart 6.)28 

Th e disconnect between employment and volume was 

a product of the large fi nancial losses the industry endured from 2002 until 2005. (See chart 7.) Unlike what 

happened in the late 1990s, increased passenger volume 

did not translate into an increase in profi ts during the 

2002–05 period. Th e continued fi nancial losses, despite 

rising volume, resulted from two main factors: a decline 

in airline ticket prices—resulting in less revenue per passenger—and rapidly rising fuel prices. Th e two forces converged to produce the largest fi nancial losses in the history 

of the industry. From 2001 to 2005, the airline industry 

lost more than $35 billion.29 According to a Brookings 

Institution study, this translated into a loss of roughly $13 

per passenger.30 Th e magnitude of the losses was so large 

that it exceeded all of the industry’s accumulated profits since 1947. By 2005, the airline industry’s cumulative 

losses since 1947 stood at $17.2 billion. Virtually every 

major airline suff ered fi nancially during this period, and 

the industry experienced 22 bankruptcies from 2000 to 

2004.31

Despite the recovery in passenger volume, airlines were 

again largely unsuccessful in their attempts to increase 

Chart 4. Indexes of total nonfarm employment and air transportation employment, seasonally adjusted, 

 1990–2008

Index 

(January 1990 =100)

Index

(January 1990 =100)

Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan .

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

130

125

110

100

90

80

130

125

110

100

90

80

 Total nonfarm employment

 Air transportation employment
Monthly Labor Review • October 2008 9

Chart 5. Indexes of annual airline employment and revenue passenger miles, 1995–2006

Index 

(year 2000 = 100)

Index

 (year 2000 = 100)

NOTE: Employment is based on nonseasonally adjusted annual averages.

SOURCES: Air Transport Association and BLS Current Employment Statistics.

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 

 Airline employment

 Revenue passenger miles

120

115

110

105

100

95

90

85

80

75

70

120

115

110

105

100

95

90

85

80

75

70

Chart 6. Actual scheduled air transportation employment from 1995 to 2006, compared with employment 

 fi gures estimated for the 2000–06 period

Annual employment 

not seasonally adjusted 

(in thousands)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 

750

700

650

600

550

500

450

400

 Actual employment

 Estimated employment

750

700

650

600

550

500

450

400

NOTE: Estimated employment fi gures were calculated on the basis of the relationship between airline employment and revenue passenger miles 

between 1995 and 2000, using revenue passenger mile data from the 1995–2006 period.

SOURCES: Air Transport Association and BLS Current Employment Statistics.

Annual employment 

not seasonally adjusted 

(in thousands)
Airline Employment

10 Monthly Labor Review • October 2008

fares. Th eir failure has been attributed to the existence of 

overcapacity in the industry. An industry is generally believed to suff er from overcapacity when there is “an excess 

of capability to produce goods or provide a service over 

the level of demand.”32 Much like the boom and subsequent busts seen in the telecommunications and information technology industries, airlines overestimated their 

ability to align capacity with future demand.33 In 2001, 

total real fi xed investment in air transportation was over 

300 percent higher than in 1991, despite the industry’s 

gross output only growing by 41.9 percent.34 Th e rapid 

expansion during the late 1990s left the industry with an 

abundance of air carriers. Th e high level of competition 

allowed consumers to shop around, thereby limiting the 

pricing power of airlines. 

The eff ect of high fuel prices

Rising fuel prices have compounded the airline industry’s 

troubles. Still struggling to recover from the downturn in 

air travel, airlines have found themselves facing not only 

tight competition, which limits their ability to raise revenues, but also surging fuel prices. From the relatively low 

price levels of the late 1990s, airline fuel, a major expense 

for airlines, has risen dramatically in price. By the middle 

of 2006, the price of jet fuel had nearly tripled from its 

2001 level. (See chart 8.)35 As airlines were reducing labor 

costs, high fuel prices were forcing airlines to dramatically increase their fuel expenditures. By 2006, the cost 

of fuel had overtaken labor as the industry’s largest single 

expense, reversing the historical pattern.36 

Th e rapid rise in the price of fuel radically altered the 

economics of air travel. Because of the rise in the cost of 

each fl ight and the stagnation in ticket prices, airlines had 

to increase the percent of seats they sold on each fl ight 

in order to break even. Estimates generated by the Air 

Transport Association indicate that in the late 1990s airlines needed a load factor of 65 percent to break even. (See 

chart 9.)37 At the time the industry was averaging a load 

factor of around 70 percent, allowing airlines to profi t despite excess capacity. However, from 2000 to 2002, rising 

fuel prices pushed the industry’s average breakeven point 

up 20 percentage points. Unable to boost their load factors, the airlines faced soaring losses. Th e gap between the 

breakeven load factor and the actual load factor reached 

its widest point in 2002 and then narrowed over the next 

2 years as airlines streamlined operations and raised actual 

load factors to more than 75 percent. However, the narrowing proved to be short lived, because the rise in fuel 

prices continued unabated. 

Chart 7. Air transportation employment over-the-year-change and airline profi ts, not seasonally adjusted, 

 1991–2006

Employment change, 

(in thousands)

Profi t 

(in billions of dollars)

40

20

0

–20

–40

–60

8

6

4

2

0

–2

–4

–6

–8

–10

–12

1991 1994 1997 2000 2003 2006

Employment, over-the-year

Airline profi t

SOURCES: Air Transport Association and BLS Current Employment Statistics.

Employment, over-the-year change

Airline profi t
Monthly Labor Review • October 2008 11

Chart 8. Index of jet fuel prices, seasonally adjusted, 1986–2008

Index 

(1982 =100)

Index

(1982 =100)

SOURCE: Bureau of Labor Statistics Producer Price Index.

300

250

200

150

100

50

0

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

300

250

200

150

100

50

0

Chart 9. U.S. passenger airline industry load factor, four-quarter moving average, 1990–2007

SOURCE: Air Transport Association.

Percent Percent

90

85

80

75

70

65

60

55

50

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

 Breakeven

 Actual

90

85

80

75

70

65

60

55

50
Airline Employment

12 Monthly Labor Review • October 2008

With airlines stymied in their attempts to raise prices 

to cover surging fuel expenditures, airlines continued to 

focus on cutting costs instead. As a result, airlines dropped 

unprofi table routes and attempted to reduce expenditures 

on their remaining routes. Th e industry also made strides 

toward reducing its fuel consumption. Many airlines have 

tried to reduce the weight of their airplanes and thereby 

raise fuel effi ciency standards. Despite the industry’s efforts to conserve fuel, fuel consumption can only be reduced so much, particularly in the short term. 

Because of their limited ability to curtail fuel expenses, 

airlines have had to look to other areas to reduce expenses. 

Labor, being a major portion of any airline’s expense, has 

born the brunt of these cost-saving eff orts. Unlike jet 

fuel—a resource for which airlines have no alternative—

capital is a resource that can sometimes be substituted for 

labor. Advances in information technology have made 

it possible to automate many previously labor-intensive 

processes. Functions such as reservations and passenger 

check-in can now be handled electronically. In addition, 

many airlines have made greater use of outsourcing to 

handle jobs such as routine maintenance. During the 4 

years following 2001, the industry experienced a dramatic 

fall in unit labor costs as labor productivity rose by almost 

50 percent. (See chart 10.)38 

With the demand for labor in the airline industry 

decreasing, airlines have been able to reduce wages and 

increase work requirements. After 2001, eff orts to reduce 

labor costs have been a major point of contention in airline contract negotiations. Recognizing the industry’s 

fi scal situation, employees have generally been willing to 

accept pay cuts in exchange for continued employment. 

In addition to outright reductions in earnings, early retirement programs have also become commonplace across 

the industry. Because of turnover in the labor force, airlines have been able to replace experienced, higher salaried employees with less experienced and thus less costly 

employees. Anecdotal reports indicate that the industry’s 

starting salaries are lower than they were prior to 2001.39

From 2001 to 2005, real weekly earnings in the industry 

fell by 8.3 percent. (See chart 11.)40 

Brief signs of a recovery

By 2006, airline industry employment began to show 

signs of recovering after several negative years. (See chart 

12.) Passenger volumes stood at record levels, and the industry continued to make progress on structural reforms. 

Airlines were also successful in raising ticket prices for the 

fi rst time in several years. Consequently, fi nancial losses 

Chart 10. Air transportation, unit labor cost and labor productivity, output per hour, 1995–2005

140

130

120

110

100

90

80

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Index 

 (1997 = 100)

Index

 (1997 = 100)

SOURCE: BLS Industry Productivity and Employment Cost Program.

140

130

120

110

100

90

80

 Unit labor cost index

 Labor productivity, output per hour
Monthly Labor Review • October 2008 13

2001 2002 2003 2004 2005 2006 

Chart 11. Average weekly wage in air transportation, 2001–06

Constant 2001 dollars Constant 2001 dollars

Chart 12. Air transportation employment, seasonally adjusted, 2000–08

Employment 

 in thousands

Employment 

in thousands

700

650

600

550

500

450

2000 2001 2002 2003 2004 2005 2006 2007 2008

700

650

600

550

500

450

1,040

1,020

1,000

980

960

940

920

900

880

860

1,040

1,020

1,000

980

960

940

920

900

880

860

NOTE: Average weekly wages defl ated by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). 

SOURCE: Bureau of Labor Statistics Quarterly Census of Employment and Wages.
Airline Employment

14 Monthly Labor Review • October 2008

Notes

1

 Th e data on employment used in this article are from the Current Employment Statistics (CES) program, which surveys 150,000 

nonfarm businesses representing about 390,000 worksites monthly. 

For more information on the program’s concepts and methodology, see 

Current Employment Statistics Technical Notes, on the BLS Web site 

at http://www.bls.gov/ces/#technical (visited Oct. 6, 2008). CES data 

are available at www.bls.gov/ces (visited Oct. 7, 2008). Data used in 

this article are seasonally adjusted unless otherwise noted.

2

 As measured by revenue passenger miles, which is roughly the 

number of tickets sold times the average mile per ticket sold.

3

 Data in this article regarding airline employment refer to “air 

transportation” (NAICS 481), unless otherwise noted. Th e industry is 

composed of both “scheduled” and “nonscheduled” airline employment. However, scheduled air transportation accounts for the bulk of 

total air transportation employment.

4

 For complete projections on growth in air travel see “FAA Aerospace Forecasts Fiscal Years 2007–2020,” on the Internet at www.faa.

gov/data_statistics/aviation/aerospace_forecasts/2007-2020/media/FORECAST%20BOOK%20SM.pdf (visited Oct. 7, 2008).

5

 See “Outlook: Air Transport Market: Th e Demand Continues,” 

Avionics Magazine, January 1, 2001, on the Internet at www.aviationtoday.com/av/categories/commercial/12513.html (visited Oct. 7, 

2008).

6

 See C.K. Anderson and J.G. Wilson, “Wait or buy? Th e strategic 

another period of sustained employment declines because 

of a bleaker outlook for air travel resulting from rising fuel 

prices and a weakening economy. 

THE AIRLINE INDUSTRY HAS RECENTLY EXPERIENCED

its most volatile period in the past 20 years. Propelled by 

expectations of ever-increasing demand for air transportation, passenger airlines expanded rapidly throughout the 

late 1990s. Th e growth was led by discount carriers that 

possessed distinct competitive advantages over their more 

established rivals. When the economy faltered in 2001, it 

became apparent that air carriers had expanded beyond 

sustainable levels. Th e September 11th attacks contributed 

to a further decline in the industry. Over the course of the 

next 5 years, airlines continued to struggle as fuel prices 

rose to historic highs. Even after passenger volume recovered, the airlines continued to shed jobs in an attempt 

to restructure and return to profi tability. In early 2007 

employment in air transportation reached a trough, and 

airlines returned to profi tability, carrying record numbers 

of passengers. However, the recovery in airline employment would prove to be short lived. By 2008, the industry 

was once again losing jobs because of soaring fuel prices 

and a faltering national economy. 

subsided, and many airlines recorded their fi rst profi ts 

since 2000. Because of the gradually improving health of 

the airline industry, employment losses in the industry fi -

nally ended. After losing jobs for 5 of the 6 previous years, 

air transportation employment leveled off in early 2006. 

Airlines had completed most of their major layoff s yet 

remained hesitant to take on new personnel; accordingly, 

employment stagnated throughout the year. In February 

2007, air transportation employment offi cially reached 

an employment trough. Although the airline industry 

had shed nearly one in four workers during the previous 

6 years, the steady downward trend in air transportation 

employment had ended. 

However, the respite did not last long. Despite modest 

employment growth in 2007, the industry once again experienced turbulence caused primarily by fuel prices that 

began to accelerate during the second half of 2007. By 

2008, the industry’s troubles were compounded by a slowing national economy. Th e anemic recovery in employment that had begun in early 2007 gave way to further job 

losses. In February 2008, the industry offi cially reached 

another employment peak after having recovered only a 

little over one-seventh of the jobs lost during the previous 

decline. By the middle of 2008, the industry had entered 

consumer: Pricing and profi t implications,” Journal of the Operational 

Research Society, Mar. 1, 2003, pp. 299–306. It has been assumed that 

the Internet has allowed consumers and travel agents access to greater 

information on pricing than previously available. Th is study of consumer behavior found that prospective passengers were able to use “this 

information to make strategic purchasing decisions.” Th is can result in 

“signifi cantly reduced revenues [for fi rms] when buyers are using an 

informed strategic approach to purchasing.”

7

 Data on profi ts and revenues are available from the Air Transport 

Association. Th e data are derived from the Bureau of Transportation 

Statistics’ Schedule P–12 fi nancial fi ling. Profi t fi gures exclude accounting charges associated with bankruptcy restructuring. Operating 

expenses equal revenues minus operating profi ts. Operating income 

excludes expenditures on taxes, interest payments, and various onetime charges; as a result, operating profi ts diff er from net income. Net 

income fi gures were used to determine profi ts and losses in this article. 

See www.airlines.org/economics (visited Oct. 7, 2008).

8

 For a complete overview of airline employment trends in the 

1990s, see William C. Goodman, “Transportation by air: job growth 

moderates,” Monthly Labor Review, March 2000, pp. 34–47.

9

 Data on revenue passenger miles are provided by the Air Transport Association; the fi gures are based upon data produced by the 

U.S. Bureau of Transportation Statistics (BTS). According to the BTS, 

“[r]evenue passenger miles are computed by the summation of the 

products of the revenue aircraft miles fl own on each inter-airport hop 

multiplied by the number of revenue passengers carried on that hop.” 
Monthly Labor Review • October 2008 15

See www.airlines.org/economics or http://www.bts.gov/dictionary/

list.xml?letter=R (visited Oct. 7, 2008).

10 Data on profi ts and revenues are available from the Air Transport Association. Th e data are derived from the Bureau of Transportation Statistics’ Schedule P–12 fi nancial fi ling. Profi t fi gures exclude accounting charges associated with bankruptcy restructuring. See www.

airlines.org/economic.

11 See Lisa DiCarlo, “Jet Blue IPO Will Fly Right For Investors,” 

Forbes.com, Feb. 12, 2002, on the Internet at www.forbes.com/2002/

02/12/0212jetblue.html (visited Oct. 7, 2008).

12 Tom Hansson, Jürgen Ringbeck, and Markus Franke, “Flight for 

Survival: A New Operating Model for Airlines,” strategy+business, Dec. 

6, 2002, on the Internet at www.strategy-business.com/press/enewsarticle/22462 (visited Oct. 21, 2008).

13 Barry T. Hirsch, “Wage Determination in the U.S. Airline Industry: Union Power under Product Market Constraints,” Institute for the 

Study of Labor (IZA), October 2006.

14 Real airfares are derived by dividing the nonseasonally adjusted 

CPI for All Urban Consumers U.S. city average for airline fares by the 

nonseasonally adjusted U.S. city average All items CPI for All Urban 

Consumers. Th e resulting data are smoothed with a 12-month moving average to remove short-term volatility. For additional information, 

please see: www.bls.gov/cpi (visited Oct. 7, 2008).

15 Steven A. Morrison, “Actual, Adjacent, and Potential Competition: Estimating the Full Eff ects of Southwest Airlines,” Journal of 

Transport Economics and Policy, May 2001, pp. 239–56.

16 Th e defi nition of employment peak is based on offi cial BLS employment peak and trough criteria. Employment in air transportation 

reached its highest point in March 2001. 

17 Data on available seat-miles are provided by the Air Transport 

Association; the fi gures are based upon data produced by the U.S. Bureau of Transportation Statistics. BTS defi nes available seat-miles as the 

miles fl own in each inter-airport hop multiplied by the number of seats 

available on each respective hop for revenue passenger use. See www.

airlines.org/economics or www.bts.gov.

18 U.S. Airline Cost Index 3rd Quarter 2005, Air Transport Association, on the Internet at www.airlines.org/economics/fi nance/

Cost+Index.htm (visited Oct. 21, 2008). Th e ATA defi nes “load factor” 

as: “the percentage of available seats that are fi lled with paying passengers, or of freight capacity that is utilized. Average load factor is 

computed as the ratio of RPMs to ASMs, or, in the case of cargo services, 

the ratio of RTMs to ATMs.” (RTMs are revenue ton-miles, and ATMs are 

available ton-miles.) See www.airlines.org/economics.

19 Gross domestic product (GDP) is produced by the Bureau of 

Economic Analysis. GDP fi gures are defl ated by the BEA to account for 

infl ation. See www.bea.gov (visited Oct. 7, 2008). 

20 Passenger volume is the sum of revenue passenger miles from 

all scheduled passenger carriers. Th e fi gures are provided by the Air 

Transport Association and are based upon data produced by the U.S. 

Bureau of Transportation Statistics. See www.airlines.org/economics 

or www.bts.gov.

21 “Public Confi dent in Security of Airline Travel,” Feb. 15, 2002, 

on the Internet at www.gallup.com/poll/5335/Public-Confi dentSecurity-Airline-Travel.aspx (visited Oct. 21, 2008).

22 Th e American Customer Satisfaction Index is produced by the 

National Quality Research Center at the University of Michigan’s Ross 

School of Business. See www.theacsi.org (visited Oct. 7, 2008)

23 A mass layoff event is defi ned as a layoff of 50 or more workers at 

a particular establishment. See BLS Mass Layoff Statistics at www.bls.

gov/mls (visited Oct. 7, 2008). 

24 Data on profi ts and revenues are available from the Air Transport Association. Th e data are derived from the Bureau of Transportation Statistics’ Schedule P–12 fi nancial fi ling. Profi t fi gures exclude accounting charges associated with bankruptcy restructuring. See www.

airlines.org/economics.

25 Kate Snow, Dana Bash, and Ted Barret, “Congress approves $15 

billion airline bailout,” Sept. 24, 2001, on the Internet at http://archives.cnn.com/2001/US/09/21/rec.congress.airline.deal/ (visited

Oct. 7, 2008). 

26 Air travel, as measured by revenue passenger miles, also declined 

in 2 consecutive years: 1980 and 1981.

27 Th e decline in employment is based on nonseasonally adjusted 

annual averages.

28 Th e expected employment fi gure was derived from a linear regression model examining the relationship between annual revenue 

passenger mile data and the annual averages of nonseasonally-adjusted 

air transportation employment.

29 Data on profi ts are from the Air Transport Association. Profi ts 

are equivalent to net income and are listed in current dollars. For more 

information, see www.airlines.org/economics. 

30 Steven Morrison and Cliff ord Winston, “What’s Wrong with 

the Airline Industry?: Diagnosis and Possible Cures” (Washington, 

Th e Brookings Institution, 2005), Testimony before the U.S. House 

Subcommittee on Aviation, Sept. 28, 2005, on the Internet at www.

brookings.edu/~/media/Files/rc/testimonies/2005/0928business_

morrison/20050928winston.pdf (visited Oct. 21, 2008).

31 “Commercial Aviation: Bankruptcy and Pension Problems Are 

Symptoms of Underlying Structural Issues,” Government Accountability Offi ce, Sept. 30, 2005, on the Internet at www.gao.gov/new.

items/d05945.pdf (visited Oct. 21, 2008). 

32 Th e defi nition of overcapacity is provided by the BNET Business 

Dictionary. See http://dictionary.bnet.com/ (visited Oct. 21, 2008).

33 Morrison and Winston, “What’s Wrong with the Airline Industry?” 

34 Data on total real fi xed investment and gross output in air transportation are produced by the Bureau of Economic Analysis. Fixed 

investment in air transportation measures the purchases of equipment 

and software by fi rms in the air transportation industry. Gross output 

consists of sales, or receipts, and other operating income, plus commodity taxes and changes in inventories. Both measures are adjusted to 

refl ect the impact of infl ation. See www.bea.gov.

35 Data on fuel prices are from the BLS Producer Prices Program. 

PPI commodity index WPU057203, a seasonally adjusted jet fuel index, 

is from the Producer Price Index’s commodity data. Please see www.

bls.gov/ppi (visited Oct. 7, 2008).

36 U.S. Airline Cost Index 3rd Quarter 2005, Air Transport Asso-
Airline Employment

16 Monthly Labor Review • October 2008

ciation, on the Internet at www.airlines.org/economics/fi nance/

Cost+Index.htm (visited Oct. 21, 2008).

37 Data on load factors and breakeven points are from the Air 

Transport Association’s Quarterly Cost Index. Th is cost index is composed primarily “of data from quarterly fi nancial and operational information collected by DOT (principally Form 41 reports.)” See www.

airlines.org (visited Oct. 7, 2008).

38 Data on productivity are produced by the BLS Industry Productivity and Cost program. See www.bls.gov/Ipc (visited Oct. 7, 2008).

39 Melanie Trottman and Susan Carey, “As Pay Falls, Airlines 

Struggle to Fill Jobs,” Th e Wall Street Journal, May 16, 2007.

40 Based on earnings data from the Quarterly Census of Employment and Wages, on the Internet at www.bls.gov/qcew (visited Oct. 7, 

2008). Earnings are defl ated with the Consumer Price Index for Urban 

Wage Earners and Clerical Workers to adjust for infl ation. See www.

bls.gov/cpi (visited Oct. 7, 2008).