Must-know: Trends in key economic indicators that impact airlines

The industry is an important contributor to the U.S. economy’s growth

The airline industry is an important contributor to the U.S. economy’s growth. According to Airlines for America (or A4A), the industry drives $1.5 trillion in U.S. economic activity and more than 11 million in U.S. jobs. Major U.S. airlines that contribute towards both are Delta Air Lines (DAL), United Continental Holdings (UAL), American Airlines (AAL), Southwest Airlines (LUV), and JetBlue Airways (JBLU).

Below is a summary of trends and forecasts for important economic indicators that impact the airline as per the Energy Information Administration (or EIA).

Trends and forecasts

• Real GDP growth: Economic growth picked up in the second quarter after slowing down in the first quarter of the year. Real GDP (or gross domestic product) increased at an annualized rate of 4% in the second quarter of 2014 (or 2Q14) from 1Q14 when it decreased by 2.1%. The unemployment rate has decreased to 6.1% in August 2014 compared to 7.2% in August 2013.
• Disposable income: Real disposable income is estimated to grow at 1.9% in 2014 and 2.8% in 2015. During economic prosperity, people have higher disposable income to spend more on leisure trips, and businesses make higher revenues and profits to be able to support higher travel expenses.
• Consumer price index (or CPI): The seasonally adjusted CPI for all urban consumers increased by 0.1% in July after rising 0.3% in June. Part 8 will discuss in more detail about airfare index and fuel index that form part of the CPI and impact the airline industry.
• Air travel expenditure: According to IATA (or the International Air Transport Association), there’s been a 4.6% growth in spending on air transport, which increased to $710 billion in 2013 and was driven by a 2.4% growth in world GDP. In 2014, the spending on air transport is expected to increase by 5% to $746 billion, or 1% of GDP.