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Air Transport Sector, 2007

U.S. Market Overview

The U.S. airline industry, which provides air transportation of passengers, cargo and mail, has undergone a large-scale transformation in recent years. U.S. airlines incurred overwhelming losses between 2001 and 2003, caused by both natural and unnatural events. Terrorist attacks, economic recession, and high jet fuel prices caused some major carriers to declare bankruptcy. Security costs also increased substantially post-9/11. Some forecasters have suggested a return to “business as usual” is unlikely. A soft market and stiff competition are keeping prices low, making it difficult for some airlines to turn cost-saving measures into profits.

Operating revenues for U.S. passenger and cargo airlines topped $150.8 billion in 2005. During this same time period, these airlines carried over 738 million passengers and flew more than 26.8 million revenue ton-miles of freight. The U.S. airline industry employed over 605,000 employees at the end of 2005; 114,000 of these are considered part-time workers. A recent state-by-state review of the broad economic impact of commercial aviation by the Air Transport Association of America attributes over $1.2 trillion in economic output and nearly 11.4 million U.S. jobs to commercial aviation. The leading aviation state by both employment and output is California, while in Hawaii commercial aviation has the greatest per capita impact.

The U.S. passenger airline industry has lost more than $40 billion since 2001, including about $10 billion in 2005. An industry forecast for 2006 estimates an industry-wide loss of $0.5 billion in 2006. However, if two major airlines had not incurred restructuring costs of $6 billion, the industry would have made a profit. Industry forecasts suggest net profits of $2.5 billion for 2007.