Annual Passenger Plane Load Factor, World and United States, 1950-2021

Annual Passenger Plane Load Factor World and United States 1950 2021

Source: Airlines for America & BTS. Both domestic and international flights. Load factor is the number of passenger miles as a proportion of available seat miles.

The elaboration and consolidation of hub-and-spoke systems combined with fiercer competition have been among the factors propelling load factors (the percentage of seats filled) higher, both in the United States and around the world. Up to the 1970s, the load factor was steadily declining as air routes and fares were regulated and could not be modified unless approved by the regulator. The Airline Deregulation Act of 1978 allowed airlines to enter and compete in any market within the United States. The trend reversed and load factors steadily improved, particularly in 1978 and 1979 at the onset of deregulation. Still, through the 1970s and 1980s, American airlines underperformed the global load factor average by around 5%.

By the 1990s, the national air market has become highly competitive, and American airlines were now comparatively overperforming the global average. While the average load factor was around 65% in the 1990s, better scheduling and yield management have enabled American airlines to substantially increase the load factor of their fleets above the 80% landmark by 2010. This threshold was reached at the global level in 2013. In light of increasing competition, airlines have been able to improve the utilization level of their assets. This has also involved reducing capacity on some segments of the network with the dual intent of increasing fares as well as asset utilization.

However, while high load factors imply higher profit levels for airlines, they also involve lower levels of flexibility to accommodate demand fluctuations and disruptions. For instance, if a flight is canceled, an airline may have difficulties rebooking passengers on alternative flights within a reasonable timeframe since with high load factors few extra seats are available. It may be difficult to have load factors above 85% since it could create a context where small disruptions (a few canceled flights) could have substantial system-wide impacts. This appears to follow the rule in transportation that once an asset (vehicle, terminal) has reached a utilization level of 80%, this level is close to optimal use of this asset.

The Covid-19 pandemic had a substantial impact on load factors as the number of passengers substantially declined in March 2020 and onward. Airlines were maintaining essential services, even if planes had a limited number of passengers. By 2021, domestic demand rebounded with load factors in the range of 75%, levels similar to the early 2000s.