If you are planning a long trip somewhere, you could drive your car, ride a train or take a boat, but the odds are you'll be flying. Airplanes give us the ability to travel long distances in only a fraction of the time it would take by other forms of transportation. If you are travelling by air, you will almost certainly have to fly on one of the commercial airlines that has flights to your chosen destination.
Americans love to travel, as is witnessed by the hordes of travelers at the airport nowadays. In the United States, 665-million people traveled on at least one U.S. airline in 2000. Twenty-five-thousand (25,000) flights depart every day from American airports, and Americans are expected to travel even more in 2001.
An airline's basic function is to transport passengers and their luggage from one point to another. Just like any other service industry, the airline industry provides a service for a set price. In this edition of HowStuffWorks, you will learn about the different types of airlines, how they're structured and how they determine ticket prices.
Types of Airlines
Not all airlines are created equal. As in most businesses, there is a sort of stratification of airlines, at least within the United States. U.S. airlines are either publicly or privately owned -- however, in many countries, the government owns the airlines. A U.S. airline's rank is determined by the amount of revenue it generates. It is then classified by the U.S. federal government and placed in one of three categories: major, national or regional.
If you've flown before, it may be easy for you to tell the difference between the three categories. Each of the three types of airlines has distinguishable routes. Typically, the larger airlines offer more destinations and longer routes. Let's take a closer look at these airline categories.
- Major airlines - These are the heavyweights of the airline industry, and you will often hear about them in the news. A major airline is defined as an airline that generates more than $1-billion in revenue annually. There were 12 major airlines as of 2000: Alaska, America West, American, American Eagle, American Trans Air, Continental, Delta, Northwest, Southwest, Trans World, United and US Airways. Typically, these are also the largest employers among airlines. For instance, United Airlines employed more than 97,000 people in 2000. American employed 93,000, and Delta employed more than 77,000. However, there are also some major airlines that don't employ large numbers, such as Alaska, which employs only 9,600 people.
- National airlines - Just one step down from the major airlines, these are scheduled airlines with annual operating revenues between $100-million and $1-billion. These airlines might serve certain regions of the country, but may also provide long-distance routes and some international destinations. They operate medium- and large-sized jets. Examples of national airlines include Aloha, Atlas Air, Airtran, Emery Worldwide, Evergreen, Hawaiian and Midwest Express. Because these are smaller airlines, you can expect them to have a smaller number of employees. For example, Airtran employs just more than 3,700 people, and Midwest Express employs about 2,500.
- Regional airlines - As the name suggests, these airlines service particular regions of the United States, filling the niche markets that the major and national airlines may overlook. This is the fastest growing segment of the airline industry, according to the Air Transport Association of America (ATA). Regionals are divided into three subgroups: Large regionals - These are scheduled carriers with $20-million to $100-million in annual revenue. They operate aircraft that can accommodate more than 60 passengers. Medium regionals - These airlines operate on a smaller scale, with operating revenues of under $20-million, and often use only small aircraft. Small regionals - These airlines don't have a set revenue definition, but are usually referred to as "commuter airlines." They use small aircraft with less than 61 seats.
The airline industry is just like any other business, meaning that there are numerous types of airlines because their customers have different needs. If you are going overseas, you're likely to use a major airline because it has more destinations overseas. A business person travelling between two small cities is likely to fly on a regional airline, because he doesn't want to have to stop at a major-airline hub for a layover. You'll learn more about hubs later.
Anatomy of an Airline
While the operations of each specific airline may differ, there is a certain amount of similarity among each airline's structure. An airline's most important assets are its airplanes and its people. An airline can have the best planes in the world, but without the employees, an airline can't do anything.
Airlines are most often represented in public by those employees who have the most contact with travelers, such as pilots and flight attendants, but there are many more airline employees working behind the scenes. Larger airlines may employ more people, but the employee categories are generally the same no matter what the size of the airline.
Here are the various types of employees in an airline:
- Line personnel - This is the group of people you most often see during a flight, and they form 85 percent of an airline's labor force. Line personnel include pilots and flight attendants, reservation clerks, airport check-in and gate personnel and security guards.
- Operations - If line personnel form the heart of an airline, operations keeps it's blood pumping. These people are responsible for scheduling aircraft and flight crews to man the aircraft. Operations personnel maintain guidelines to meet FAA standards, and they train the flight crews. Included in operations are the dispatchers, who track all of the airline's flights.
- Maintenance - Airplanes are multi-million-dollar vehicles that must be maintained in order to prevent the airline from losing money. Aircraft only make money for the airline when they are transporting passengers. About 10 percent of an airline's work force is dedicated to aircraft maintenance.
- Sales and marketing - If you wonder who sets your prices, you can usually find them in the sales and marketing divisions of an airline. These people are also tasked with advertising, cargo sales, reservations, customer service and food service.
In addition to the personnel listed above, who make up the majority of airline's payroll, the airline also employs specialists and subcontractors to perform particular duties. This specialized staff includes people like lawyers, accountants, and employee- and public-relations specialists. It is their role to support the work of line personnel. Typically, these people work at the airline's headquarters. Subcontractors are people whom airlines farm work out to, and may perform the such tasks as cleaning, fueling, security, food services and sometimes maintenance. To learn more about airline employees, see How Airline Crews Work.
Hubs and Spokes
Most of the 12 major U.S. passenger airlines in operation as of 2001 use a hub-and-spoke network to route their plane traffic. The words "hub" and "spoke" create a pretty vivid image of how this system works. A hub is a central airport that flights are routed through, and spokes are the routes that planes take out of the hub airport. Most major airlines have multiple hubs. They claim that hubs allow them to offer more flights for passengers.
The hub-and-spoke system became the norm for most major airlines after the U.S. federal government deregulated the airlines in 1978. Under the direct-route, or point-to-point, system used prior to deregulation, airlines were forced by the federal government to fly directly between two small markets. This resulted in many flights that were routinely half empty, which resulted in airlines losing money. Today, most airlines have at least one central airport that their flights have to go through. From that hub, the spoke flights take passengers to select destinations.
A good example of a hub-and-spoke system is that of Delta Airlines, which has its hub at Hartsfield Atlanta International Airport. Let's say you are in Charleston, SC, and want to go to Memphis, TN. There's probably not a lot of demand for a Charleston-to-Memphis flight, so the airline flies you from Charleston to Atlanta, and then from Atlanta to Memphis via a connecting flight.
The purpose of the hub-and-spoke system is to save airlines money and give passengers better routes to destinations. Airplanes are an airline's most valuable commodity, and every flight has certain set costs. Each seat on the plane represents a portion of the total flight cost. For each seat that is filled by a passenger, an airline lowers its break-even price, which is the seat price at which an airline stops losing money and begins to show a profit on the flight.
Not all airlines use the hub-and-spoke approach. For example, Southwest Airlines is one of the exceptions to the hub-and-spoke network system. It uses the old-fashioned point-to-point system, hauling people short distances with few connecting flights. However, Southwest offers very few non-stop flights on longer routes. At the end of 2000, Southwest served approximately 306 one-way, non-stop city pairs. It's point-to-point system provides a more direct route than a hub-and-spoke airline can offer.
That's the Ticket
Once you determine your destination, your next step is to call the airline and make a reservation on a flight. Airlines employ many people who process these reservations and your tickets. There are personnel who take care of travellers at the reservation desk and the check-in counter at the airport. There are two types of tickets:
- Paper tickets - This is the conventional ticket that passengers have been using for decades.
- Electronic tickets - Many travelers are starting to use electronic tickets, or e-tickets, instead of paper tickets, according to Delta Airlines's document "The Plane Truth." Electronic tickets are typically purchased over the Internet. At the airport, passengers with e-tickets need only obtain their boarding pass by providing the gate agent with a confirmation number and proof of payment (sometimes, they only need to show a photo I.D.).
For most people, ticket pricing can be the most confusing part of air travel. Fares are constantly changing. What your friend paid yesterday for a flight from New York to Chicago is probably not what you are going to pay today for the exact same flight. Even the people sitting in the same section of a flight likely paid very different prices for their tickets. Believe it or not, fares are cheaper today than in 1978, which is why more people are flying than ever before. Fares are tracked according to what a passenger pays (in cents) per mile. In 1978, passengers paid approximately 19 cents per mile. In 1997, passengers paid about 14 cents per mile.
There are several factors that contribute to the cost of a fare:
- Purchase date - The earlier you buy a ticket, the cheaper it will be (most likely). For instance, Delta loads a flight into its reservation system about 332 days from the actual flight date. Someone who buys a ticket on the day the flight is entered is going to get a cheaper fare than someone who buys a seat on the day of the flight.
- Class - Put simply, first class is more expensive than coach.
- Destination - There are certain destinations that cost more, either because of the distance to the destination or the popularity of the destination. This is simple supply-and-demand economics.
- Flight date and time - Flights that depart earlier in the day tend to have lower fares because fewer people are flying then. Also, fares go up in the summer vacation season.
- Fuel costs - Fuel is an airline's second largest expense. Only labor costs more than fuel. In 2000, airlines paid about $5.4-billion in fuel costs, according to the Air Transport Association (ATA). Any increase in fuel costs is usually passed onto passengers in the ticket price.
- Competitors' fares - An airline has to be careful not to price their fares too much higher than their competitors. Sophisticated computer software is used to track the fares of competing airlines.
- Special factors - There are certain specialty fares given to senior citizens, government and military employees and corporate customers.
Another factor that can affect ticket pricing is the hub system itself. If a large airline controls a lot of the gates at a particular airport, it may charge higher ticket prices. That large airline has the most flights coming into that airport, so consumers have to pay the higher fares if they want to fly into or out of that airport.
Airlines often overbook flights, according to the ATA. Overbooking is the practice of selling more tickets for a flight than there are seats available. Airlines justify this practice by using historical analysis of traveller behavior. Often, travelers don't show up for a flight that they have a reservation for, or they don't make it to the gate in time. There are also travelers who reserve seats on multiple airlines and flights to ensure their travel plans. The ATA reports that airlines take great care in selecting which flights to overbook. They look at a flight's history of no-shows and try to match the overbook number to that.
Obviously, overbooking can sometimes cause problems, such as when more people show up for a flight than there are seats available. When that happens, airlines give special incentives to travelers who are willing to give up their seats. Usually, these volunteers are given free fare on another flight. If an airline is forced to bump a passenger involuntarily, the airline must compensate that person.
When you board an airplane, you might not be aware of all of the gears that are turning behind the scenes. There are many people performing many functions to get you to your destination.
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