The horrific events of Sept. 11, 2001, changed the world and dramatically altered the course of the aviation industry—and in many ways prepared it for the future, experts say.
Experts and industry insiders said the attacks on Sept. 11 exposed the shaky economics of an aviation system with a lot of capacity and, in some cases, unsustainably high costs.
“What 9-11 did was ensure that the industry had to change the way it does business,” said Bill Swelbar, chief industry analyst at Swelbar-Zhong Consultancy. “All of a sudden, yes, we accelerated to have lots of bankruptcy and consolidation, but it became a business.”
Indeed, the changes forced by the terrorist attacks put the industry on stronger financial footing and helped it survive the Great Recession of 2008 and the calamitous shutdown caused by COVID-19.
Twenty years ago, the airlines had unsteady balance sheets and little ability to borrow, Swelbar said.
“It’s just a very different day today. If we had gone into COVID with the balance sheets in place on Sept. 10, 2001, there might be one or two airlines alive.”
Piling up losses
Directly following 2001, net income from U.S. domestic carriers plummeted by an estimated $9.1 billion from the previous year, according to the Bureau of Transportation Statistics.
Losses totaled about $40 billion between 2001 and 2005, and profitability wasn’t restored until 2006 and 2007. High oil prices in 2008, on the eve of the Great Recession, led to losses of $18.2 billion.
The industry’s financial collapse resulted in numerous bankruptcies; most significantly, those of Pittsburgh’s US Airways in 2002 and 2004; United Airlines in 2002; Delta Air Lines, Northwest Airlines and Comair in 2005; and American Airlines in 2011. Three major airlines, including America West, filed for bankruptcy less than 10 days after 9-11, according to The Hill.
The consolidation that followed shaped today’s industry. Prior to 9-11, nine airlines held 80 percent of the market. Today, just four carriers—Delta, United, American and Southwest—control nearly 80 percent. The 15 mergers and acquisitions that occurred from 2005-16 included US Airways, Continental and Northwest, which all re-emerged under their legacy successors today known as American Airlines, United and Delta, according to The Hill.
Swelbar said the industry was already facing severe financial challenges before 9-11. The internet became the distribution vehicle for airline tickets, and consumers could shop around because of price transparency, he said.
And then came the low-cost carriers.
“At the time, it was primarily Southwest being very aggressive,” he said. “It was crossing the Mississippi into the eastern U.S. and lower fares followed. The network carriers particularly did not have cost structures that could sustain the new revenue environment.”
The impact of 9-11 on US Airways and Pittsburgh was severe. Former Spirit Airlines CEO Ben Baldanza, who was the senior vice president of marketing and planning at US Airways from 1999-2005, said 9-11 pushed US Airways into bankruptcy and ultimately forced the airline to drop Pittsburgh as a hub.
Three big changes hit the airline industry almost immediately after 9-11. First, U.S. financial markets shut off the airline industry, forcing the federal government to step in with financial assistance, he said.
Second, air traffic dropped immediately and enormously, and it took many years for the industry to carry as many people as it did prior to 9-11. And third, short-haul flights dried up almost overnight, as people found it more convenient to drive rather than spend extra time at security in a post-9-11 world, he said.
“I honestly think you could say 9-11 caused all of that: the lack of capital, the massive need to restructure, the change in network structures, the closure of initially Pittsburgh and then other hubs, and the need for consolidation, which closed more hubs,” Baldanza said. “The industry today looks like it does largely because that chain of events that were all driven by 9-11.
“If 9-11 had not happened, maybe some of those things would have still happened,” he added. “But they certainly wouldn’t have happened when they did or maybe not as completely as they did.”
Return to growth
The loss of the US Airways hub in 2004 had a huge impact on the Pittsburgh market.
“Everyone in Pittsburgh can tell you about the loss of the US Airways hub,” said Christina Cassotis, CEO of Pittsburgh International Airport, who was hired in 2015. “But there’s another story being written here, and it’s about the rebirth of a region and the airport that serves it.
“Pittsburgh is in the midst of a renaissance, and not even the devastation caused by COVID-19 is going to hold it back,” she said.
Before the pandemic, PIT saw six straight years of passenger gains, and the number of carriers jumped from eight to 17, including the entrance of ultra low-cost carriers like Spirit, Allegiant and Frontier. In addition, Southwest has continued to grow, carrying the most passengers with about 30 percent of the traffic.
Breeze Airways selected Pittsburgh as one of its launch markets this summer, and British Airways started flying nonstop from London to Pittsburgh in 2019 after a 20-year hiatus. The airport also doubled its number of nonstop destinations to 65 in the past six years.
When the larger carriers pulled back from small- and mid-sized cities in the decade after Sept. 11, it opened the door for low-cost carriers to begin service in underserved and unserved markets, said Bijan Vasigh, professor of economics and finance at Embry-Riddle Aeronautical University in Daytona Beach, Fla.
Before airline consolidation, passenger load factors were often typically 65 to 67 percent. They increased dramatically afterward.
“(Pre-pandemic) it was 90 percent in the U.S.,” Vasigh said. “Consolidation allowed airlines to cut costs significantly and the lack of competition allowed them to increase ticket prices.”
Aviation doesn’t look the same as it did before 9-11. Increased security is the most obvious change, including the creation of the Transportation Security Administration to screen passengers at the nation’s airports.
Increased security brought additional restrictions, limiting checkpoint access to passengers only. That had a big impact on airports like Pittsburgh, which was the first in the U.S. to introduce the airport-mall concept.
Those restrictions stayed in place until 2017, when Pittsburgh International became the first in the U.S. to partner with TSA to allow non-passengers beyond the security checkpoint.
“Change is constant in this industry,” Cassotis said. “Pittsburgh and its airport have a history of innovation to meet the needs of the market and the industry.
“As we look ahead to the future, we will continue to build our air service portfolio, both passenger and cargo, by sharing the amazing renaissance story of Pittsburgh.”