The incredible shrinking North American aircraft market

American Airlines 757-200 N7667A

A forecast of summer air travel released Monday by the Air Transport Association (ATA) reveals some fascinating figures about US carriers an aircraft market that been steadily shrinking over the past decade – driven down by consolidation, recession, the threat of terrorism and other exogenous shocks. 
ATA expects 2.24 million passengers will fly daily aboard US airlines this summer, up 34,000 passengers per day from 2010, transporting 206.2 million fliers from June through August. That figure is about 1.5% higher than last year 203.1 million passengers flew on US carriers during the same period a year prior.
While the figures show modest year over year growth, there are importantly underlying facts that tell us a lot about the state of the fleet in the US. According to Boeing and ATA, on an absolute basis the North American fleet has shrunk by nearly 1,000 aircraft since the end of 2001, a 12% drop from 8,056 aircraft to 7,096 at the close of 2010. 
During that same period the fuel consumption dropped 15% from 20.5 billion gallons in 2001 to fuel to around 17.5 billion gallons at the start of this year, a drop of 3 percentage points higher than the decline of the US fleet over the same period, indicating the increasing fuel efficiency of the the fleet.
Though staggeringly the fuel bill for US carriers has climbed from $15 billion to $50 billion annually and now accounts for $0.33 on every dollar spent by airlines today. By comparison in 2010, the International Air Transport Association says $0.26 on every dollar spent worldwide was for fuel. Engine and airframe maintenance accounted for just $0.13 of every dollar spent.

Amazingly even with this massive increase in fuel the average domestic fare in the last ten years has only risen $1.81 since 2000 to $316.27 (adjusted for inflation), illustrating the dearth of pricing power airlines have when it comes to managing their ticketing revenue stream. This fact should illustrate why ancillary revenue has become such a core component to achieving the thinnest of margins. 

Looking two decades into the future, Boeing’s own current market outlook spread across the past half-decade tell the story as well. The 2006 20-year outlook for North America forecast 9,450 new aircraft being delivered with an annual traffic growth rate of 3.6%. Four years later, Boeing’s own numbers are 24% lower, anticipating 7,200 deliveries from 2010 to 2029 and an annual growth rate of 2.4%. 
Yet, even with this steady decade-long reduction in size, North America remains the single largest market for narrowbody aircraft, with Boeing estimating that 78% of total deliveries to the US and Canada over the next twenty years will be to replace aircraft in service today.
When it comes to developing new and updating existing aircraft, these figures paint an interesting picture of what airlines will need from airframers in the coming decade. Fuel, once a relatively small fractional share of operating cost, has become the largest and most flexible cost lever to pull; whether it’s with winglets, precision navigation, weight and drag reduction, engine improvements or new aircraft. The question becomes how to pull that lever and how much do you spend as an aircraft maker pulling it to the benefit of airlines.

7 Responses to The incredible shrinking North American aircraft market

  1. FH May 17, 2011 at 2:15 am #

    I believe the importance of fuel cost is true also in europe. however, here it is more comme il faut to talk about the reducing the environmental impact and the co2 footprint.

  2. Guru Josh May 17, 2011 at 2:16 am #

    If traffic is forecast to double every 10-12 years, how can 78% of all deliveries over the next two decades be to replace existing aircraft?
    Either aircraft grow significantly in average seat capacity or the average aircraft lifetime is significntly below 20 years.
    What do I miss here?

  3. Aero Ninja May 17, 2011 at 3:32 am #

    When one considers all the factors, the situation is not all that surprising, is it? I think the point is slowly being reached, where anybody that can afford to fly in the US is, or soon will be, doing so.
    This accounts for the smaller increments in passenger number increases per year.

    These passenger numbers that have been increasing for some time now, are a direct result of deregulation, which has also accounted for the large increase in airlines, aircraft, flights and destinations. It has also brought about a very volatile market, where only the strong, tough, quick, ruthless and/or lucky have survived.

    This levelling off of passengers, accompanied with the increased cost of fuel, which I frankly don’t see as ever permanently decreasing in the future, has forced the consolidation of airlines along with a more efficient use of capacity (i.e. make sure you are flying a nearly full aircraft, not a nearly empty one).

    With the large distances and relatively large population with moderate income, it is not a surpruse that North America has the largest narrow body market in the world. I would assume that Europe would have the second largest market.

    I am a bit confused/uncertain about the 78% figure from Boeing. Does it mean that 78% of total deliveries to North America or to the world? One would assume the world but the focus in the previous sentence on North America brings me to doubt this assumption.

    The question concerning the 78% of deliveries being replacement aircraft is, to where is the 22% portion that are new aircraft being delivered (assuming the whole situation is not referring to North America)?

  4. MtlRG May 17, 2011 at 9:04 am #


    Does the average domestic fare you listed take into account business class fares as well or is it strictly an average of those in Y-class?

    I think we can agree that there has been a significant erosion in the ability of airlines to profit from their business/domestic first products during this same time period, which has to have a negative impact on average fares. At the same time, the emergence of national low-cost carriers, such as Southwest, Jet Blue, etc. most likely also had a significant impact on this average figure.

  5. iamlucky13 May 17, 2011 at 4:21 pm #

    Jon – this is a very interesting article, especially since it tends to at least partially counter the peculiar popular notion that airlines are raising fares wantonly. However, I think a few simple considerations could add a lot more clarity:

    First of all, you used the non-inflation-adjusted fuel price at one point, but compared it to the inflation-adjusted fare price. Your point on the efficiency increases is legitimate, but exaggerated due to this. If you wanted to get really detailed, you could also consider the affect of new bag fees.

    Also, you were comparing fuel consumption versus industry size, but I think looking at the number of planes is superficial. Comparing the fuel usage to the number of revenue passenger miles would be more insightful, and I think show a more dramatic but still real improvement in efficiency. Actually, it looks like at least one person has already done so, and while I can’t vouch for his number crunching, he seems to show a 20% improvement in revenue seat miles per gallon of fuel in 11 years:

    I would also keep in mind that in addition to the technical factors you listed that have dropped fuel consumption per passenger, increasing load factors have been a major contributor.

    While we’re all interested in the engineering work that improves engine efficiency, reduces drag and weight, etc, I’m hoping the manufacturers and airlines will also keep looking for ways to improve comfort and speed boarding as the planes become more and more crowded. The increasing number of premium economy products are one option, but I’d hate see no changes beyond the opportunity to pay 50-100% more for 5″ more leg room and a complimentary snack box.

  6. alloycowboy May 17, 2011 at 6:33 pm #

    Hey Jon,

    I think you need to look at the G20′s birth rate. All the G20 countries have birth rates below replacement levels of 2.1 children per couple. It’s unfortunate but too many people have their eyes closed to the demographic storm that is on the horizion.

    Here is a reference article with links to the Canadain Parliment’s demogrpahic report.

  7. Frequent Traveller May 18, 2011 at 10:47 am #

    What you’re asking for iamlucky13, is on its way, cf “H2XQR Series.pdf” downloadable from