Have you ever realized that when you get on a plane and look around, there are little to zero empty seats? Or, have you ever heard an airline try to sell credit to passengers because they overbooked their flight? According to the Bureau of Transportation Statistics (BTS), the odds of seeing an empty seat next to you on your next flight are even slimmer than they were before. The load factor, which is the ratio of the average amount of some quantity and the maximum possible, has been increasing significantly since January of 2000. An empty flight would have a load factor of 0 and a full flight would have a load factor of 100.
The graph above illustrates the load factor of US domestic flights between the years of 2000 and 2017. The red line represents before seasonal adjustment and the blue line represents after seasonal adjustment. Each peak on the red line can be represented by a summer month when travel is most popular, and each low-point on the red line is represented by a winter month when travel is least popular. You can tell that the gap between these points has become smaller over time suggesting that airline's are becoming more efficient in improving their airplane capacity. If you look at the blue line, airlines are adjusting their business model seasonally, mostly in winter months, to entice consumers to want to fly. As the load factor increases from 70 percent to roughly 85 percent, flights become more crowded. As flights become more crowded, the price per ticket goes down because the airline is making more money by selling more tickets. The Graph below shows how air fare increased steadily from 1989 to 2013 ( without considering the 2008 financial crisis). However, since 2013 air fare has decreased steadily. If you consider the above graph, this makes perfect sense because as load factor increases, price per ticket decreases. Obviously these graphs only have to do with US domestic flights, but is there anyway that load factor increasing could have any kind of effect on international flights? What do you think happens when airlines reach an average of 100 percent load factor? Will air fare lock at a certain price, or will it begin to increase?
Written by Chris Randall and Danny Mitchell