1990s AD - Decade

Monthly Labor Review, March, 2000 by William C. Goodman

Aviation employment and business activities increased massively for decades, but growth slowed in the '90s

Commercial air transportation has grown rapidly in the United States since 1938 or earlier.(1) The most significant reason for such growth is probably that air travel has become almost continuously more affordable. Ticket prices adjusted for inflation have been falling consistently since 1950 or earlier.(2)

Airfares have decreased over the years not because of any one consistent reason, but because of two distinct sets of circumstances: regulation and deregulation. From 1938 to 1978, Federal control of fares, routes, and even the existence of each airline prevailed. After the lifting of economic regulation, price competition was a major force. Before 1978, development of the commercial airplane itself contributed heavily to decreases in the costs of operations and consequently to lower fares (after adjustment for inflation). After 1978, when changes in routes and fares and the formation of new airlines became unrestricted, price competition and a variety of management responses to competition have reduced operators' costs. The resulting lower fares have multiplied demand and jobs in the industry.

According to estimates from the Bureau of Labor Statistics,(3) employment in commercial aviation increased by about 700,000 jobs, or more than 400 percent, from 1958 to 1996 as output, consisting mainly of passenger-miles and cargo ton-miles, increased by more than 1,800 percent.(4) Although the main purpose of this article is to explain the trend in numbers of jobs in the industry, the movement of aviation output is cited often. Some industries have been known to lack a close connection between production and employment; thoroughly automated processes in certain industries may explain the possibility of little connection between volume of production and number of employees. The aviation industry, despite its great technological advances, remains a service industry, and is labor-intensive. According to the Air Transport Association, "... there is no changing the fact that they [airlines] are in a service business where customers require, and often demand, a lot of personal attention. More than one-third of the revenue generated each day by the airlines goes to pay its workforce."(5) This article shows the extent to which employment and production are linked in the aviation industry.

Despite the massive cumulative increases of output and employment, the growth of both decelerated; recent increases have been at reduced rates. This article explains some of the many technological, legislative, and business changes that have caused the growth and the deceleration of the industry.

Economic performance

The amount of growth that has occurred in the industry's jobs and business, both in isolation and in relation to other transportation industries, the general economy, and U.S. international trade, is extraordinary. To give one of many possible perspectives, from 1971 to 1997, the proportion of U.S. adults who had ever traveled by an airliner increased from less than half (49 percent) to 81 percent. According to surveys from the Air Transport Association of America, the proportion of adults who had traveled on an airliner in the latest 12 months increased from 21 percent to 39 percent during the period.(6)

Between 1960 and 1996, the output of the air transport industry increased sixteen-fold. By comparison, the output of the entire business sector only increased by a factor of 3.6. Total passenger-miles of all major forms of transportation tripled, and domestic ton-miles of all major modes of freight transportation increased 1-1/2 times. (See chart 1.)(7)

[Chart 1 OMITTED]

Substitution? Most modes of transportation have grown during the last 40 years. But to a considerable extent, aviation has taken over the roles of other forms of travel in the typical American life; flight is now a more frequent experience, and most other major modes of passenger transportation have not kept up with the growth of the general economy. The only large category of U.S. transportation to show an actual reduction of business in recent decades is rail passenger transport, which lost 12 billion annual passenger miles from 1960 to 1996. Even if all those who previously traveled by train now travel by air, the loss in rail passenger transport would explain only 3 percent of the increase in domestic air passenger business. In 1960, air transport was 2 percent of all U.S. domestic passenger-miles (including the use of private automotive vehicles); air transport rose to 10 percent of the total by 1996. The following tabulation compares changes in the volumes of the major passenger modes from 1960 to 1996. (Over the same period, by comparison, gross domestic product in chained 1996 dollars increased by 231 percent.):(8)

                           Change in passenger- miles
         Mode
                           In billions     In percent

 Total, all modes             2,939            200
Air                             395          1,293
Highway, except bus           2,400            170
Intercity bus (1960-95)           9.7           50
Rail                            -12            -70