Airlines Continue to Slash Capacity

The massive tsunami that swept parts of Japan has grown in its level of devastation with each passing week. The Internet is ablaze with images of the havoc it caused, including a CCTV recording of the tsunami engulfing the airside of Sendai Airport. And through amateur video recorded inside the airport at the time, cars parked nearby are washed away as easily as if they were toy models.

Yet, the greater threat from radiation from the nation’s damaged nuclear reactors has left the country in a state of fear and uncertainty.

This, of course, has had an effect on the airline industry. No stranger to natural disasters, the airlines are monitoring the situation closely and making adjustments to routes as needed. As reported by AP, United/Continental has suspended some flights from U.S. locations to Japan, citing a lack of demand for the routes. Delta announced it will cut flights from Japan by 15 to 20 percent through May.

The cuts are not likely to stop there. Reported by CNN, Lufthansa and Alitalia, which have rerouted some flights in Japan, have been watching radiation levels of its flights to determine further action.

And, of course, this is coupled with the threat of rising fuel costs. As reported by the AP, Qantas recently announced it would cut growth in domestic capacity by 6 percent in the second quarter of this year and cut international growth in capacity by 3 percent. That followed an earlier announcement by Air Canada that it would eliminate six routes due to fuel costs.

And this is on the backdrop of larger capacity cuts announced by the airlines in the past few weeks, including US Airways, which, according to the Philadelphia Inquirer, plans to reduce capacity by 2 percent in the fourth quarter.

The cuts in capacity come amid reports of stronger traffic and earnings for most airlines in 2010 and the first couple months of the year. In its latest statistics for February 2011, the Air Transport Association reports that U.S. carriers saw an increase in passenger revenue by about 13 percent compared to the previous year. And in 2010, the US DOT Bureau of Transportation reported that airlines in service in the U.S. carried 2.1 percent more passengers in 2010 than in 2009.

This sets up an interesting situation leading into the summer travel season, traditionally a peak money-making time for the airlines. Will the public continue to travel in light of fewer flights, higher fares and more fees? Stay tuned.

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