Date of Defense

4-17-2025

Date of Graduation

4-2025

Department

Aviation

First Advisor

Selim Ozyurek

Second Advisor

Steve Sparks

Abstract

The commercial aviation industry, despite its transformative impact on global connection and economy, has historically struggled with consistent profitability. This thesis investigates the drivers of financial success within the airline industry, with a particular focus on the relationship between passenger load factors and profitability. Passenger load factors, defined as the percentage of available seats occupied by paying customers, have emerged as a key performance indicator, offering important insights into operational efficiency and revenue generation.

The study utilizes comprehensive data from the Bureau of Transportation Statistics, encompassing quarterly metrics on revenue, load factors, operating costs, and fuel prices from 2002 to 2024. Analytical methods include regression analyses to evaluate the strength of relationships between load factors and profitability, as well as multivariate regression models to account for additional factors such as fuel costs, seasonality, and cargo revenue. Inflation-adjusted values are used for financial variables to ensure consistency and accuracy across time.

Initial findings from simple regression analyses reveal a moderate correlation between load factors and net income percentages. Further exploration through multivariate regression shows that the combination of high load factors and low inflation-adjusted fuel costs explains even more of the variation in airline profitability. This underscores the dual significance of maximizing seat occupancy while controlling volatile fuel expenses.

Contrary to my expectations, other factors such as seasonality and cargo operations exhibit limited influence on profitability. Additionally, seasonal travel trends, while responsible for influencing trends in demand, do not significantly contribute to overall industry profitability. Similarly, cargo revenue fails to demonstrate a statistically significant impact, likely due to its smaller contribution relative to passenger revenue.

The findings suggest actionable strategies for airline operators aiming to enhance profitability. Prioritizing operational efficiencies that drive higher load factors, such as optimizing flight schedules and pricing strategies, combined with leveraging fuel-efficient technologies and hedging against fuel price volatility, can significantly improve financial outcomes.

This research contributes to a deeper understanding of the economic factors within the commercial aviation sector, offering a framework for industry insiders to navigate challenges and pursue sustainable growth within commercial aviation. Future studies may build upon this analysis to explore impacts on profitability.

Access Setting

Honors Thesis-Open Access

Additional Files
ThesisPresentation.pdf (1266 kB)
Defense Presentation
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