The Trend of Future Air Travel:

Frequencies and Nonstops Continue To Grow

It is well known that Boeing and Airbus have differing views of how the airplane market will evolve. While both Boeing and Airbus see a vibrant commercial airplane market, the two companies disagree markedly on the future mix of airplane sizes.

Boeing sees the most growth in the mid-size airplane market. Yet Airbus anticipates a dramatic upswing in the very large airplane market. Consequently, the two companies focus their research and development on different segments of their product lines.

The Boeing market projection is based on the long view of commercial aviation history. Since the beginning of deregulation and liberalization in the mid 1980s, competition among airlines has driven a steady increase in flight frequencies, including new nonstop point-to-point service. Boeing sees no reason to expect this trend to change.

The Airbus projection, on the other hand, foresees a dramatic reversal in the historical trends. According to this scenario, sometime during the next 20 years, airlines will come to rely almost exclusively on very large airplanes to meet growing demand, raising average airplane size by a startling 20%. The Airbus scenario depends on three developments: (1) Airport congestion will constrain frequency growth; (2) Airline networks will consolidate toward heavily traveled trunk lines, forcing passengers to make one or more connections; (3) Airlines will use larger airplanes to reduce seat-mile costs.

Boeing considers this scenario-clearly undesirable for passengers-to be unlikely on all counts. Data show that frequencies, including new nonstop point-to-point service, have grown continuously for the last 15 years, even as passenger traffic doubled. In fact, since 1990, all passenger traffic growth has been accommodated by increased frequencies and new nonstop service. Average airplane size has actually declined during the same period, despite the availability of larger airplanes, such as the 747-400.

Congestion Is Not Driving Large Airplane Use Up

A closer look at London Heathrow is instructive. About 87% of Heathrow departures are airplanes with fewer than 300 seats. About 70% of those departures are airplanes with 200 seats or fewer. Increasing the size of the largest airplanes at the airport, which account for only 13% of the departures, could improve traffic by no more than 5%. Paradoxically, such an increase could make congestion even worse. About 40% of passengers who board large airplanes arrive on smaller airplanes. Therefore, increased use of larger airplanes could require an increase in small airplane traffic to funnel connecting passengers to the hub. Going to even larger airplanes could make the situation even worse.

The Number of Nonstop City Pairs Keeps Growing

The reason is simple: Competition. Passengers prefer to have a choice of departure times and to fly nonstop. Therefore, offering more frequent flights and nonstop service gives airlines a competitive advantage over those offering fewer flights or requiring intermediate stops in the same market.

In the past, long-range routes were not subject to this type of competition because only large aircraft had sufficient range to fly long-distance routes nonstop. The latest generation of highly efficient, long-range twinjets, however, enables airlines to offer higher frequencies in existing long-distance markets and to create new long-distance nonstop city pairs. The availability of twinjets for long-distance nonstop service makes it extremely unlikely that the historical trend toward higher frequencies and point-to-point service will diverge radically toward consolidation.

It Costs Less To Carry Passengers Nonstop

When the total cost of carrying passengers from their point of origin, all the way to their point of destination is considered, it becomes clear that it actually costs an airline less to carry passengers nonstop than to require passengers to make intermediate stops at hubs.

A hub-and-spoke structure requiring two flights for every destination incurs 2% higher airplane handling and landing fees than nonstop service to the same destinations. Passenger connection costs for a two-flight routing are around 8%-$30 to $40 per passenger-higher than direct routing. More difficult to quantify are the costs of schedule disruptions and lost passenger loyalty that accrue to delays, cancellations, and missed connections for which hubs have become notorious. An airline can therefore afford to offer lower fares (or earn higher profit) on a nonstop route than on a route that forces passengers to make airplane changes at a hub.

A recent article from Aviation Week & Space Technology concurs: "A new analysis by the Aviation Week Group's Aviation Daily and partner Eclat Consulting shows that the cost to handle passengers in a hub-and-spoke-dominated system is as much as 45% higher than in a point-to-point system, a disparity that costs airlines billions of dollars annually."

The success of low-cost carriers-which specialize in flying point-to-point-bears this out. Gary Kelly, CEO of Southwest Airlines, has gone on record saying, "We focus on nonstop traffic…. We'd prefer fewer connections. It's what customers want least. It raises the bar. It is extra work for no more money. On a fully-allocated basis, it's a lot cheaper for us to fly you nonstop."

While a requirement for large aircraft will remain, this requirement constitutes a relatively small portion of the airplane market. Larger airplanes may be required to accommodate incremental growth in some very busy markets and in those few, very dense markets where use of larger airplanes does not constrain frequencies or nonstop service.

All evidence and experience point toward a continuation of established market trends. Economics and passenger preference will continue to favor point-to-point travel. As a result, increased frequencies and nonstops-not airplane seat count-will be the dominant means to accommodate growing air transport demand.