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Focus: The New Drivers of Airline Profitability Influence Service Decisions

Airline service decisions are increasingly influenced by the new drivers of profitability. These new drivers include charging passengers baggage and other fees, limiting capacity to reduce costs and drive airfares higher, discontinuing the operation of uneconomical aircraft types, and eliminating “unprofitable flying” from their route networks. A better understanding of the factors that influence airline servicedecisions will allow airport operators to consider overall industry trends and airline specific strategies, and communicate the rationale for changes in airline service at their airports.

U.S. airlines collected more than $20 billion in ancillary revenues, including baggage, reservation cancellation, priority seating, and frequent flyer fees.

A second strategy implemented by the airlines in response to increasing fuel prices was the retirement of fuel-inefficient aircraft and the discontinuation of “unprofitable flying” in citypair markets where fuel costs made the routes uneconomical. Between 2007 and 2010, the airlines decreased seating capacity at U.S. airports by approximately 10%.


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