For the first time in recent aviation history, the financially troubled U.S. airline industry is shrinking domestic flying capacity in the face of strongly growing public demand for its service.
If the capacity reduction is the beginning of a long-term trend toward less domestic flying -- and it's not certain that it is -- the implications could be profound. For consumers, diminished capacity could mean higher average fares, fewer choices, fuller flights and fruitless searches for mileage upgrades and award travel. For communities, it could mean deteriorating or disappearing air service. For the airlines themselves, it could mean a fighting chance to regain profitability.
Meanwhile, the number of air travelers has been growing strongly since the collapse of the travel industry after the Sept. 11 attacks. The Federal Aviation Administration projects 19% more domestic air passengers in 2006 than traveled in 2002.
Frequent-flier Kevin Kruke of Park City, Utah, says he's been feeling the pinch of more travelers chasing fewer seats. He believes airline capacity cutbacks are rippling back into airports. "Fewer flights are putting more people in terminals at the same time. Lines are longer for Starbucks, food, shoeshines," he says.
For some carriers, the cutbacks are "a matter of survival," says John Heimlich, economist for the Air Transport Association, the airlines' main trade association. Capacity reduction cuts expenses and improves airlines' pricing power by constricting the supply of airline seats.
Heavy losses weigh
U.S. airlines have lost $32.3 billion in the last four years and are expected to lose $10 billion more this year. Top executives such as American CEO Gerard Arpey have long argued that excess flying capacity needs to be trimmed if the industry is to regain its financial health. Airline executives often make such arguments when talking about the demise of the weakest players within the industry.
Different dynamics explain the capacity reduction measured by the USA TODAY analysis of OAG (formerly Official Airline Guides) flight schedule data from Back Aviation Solutions. What's behind the reduction:
*Strategy. In the last year, some big traditional airlines such as United and Delta have been shifting more of their capacity to international flying. Those routes command higher fares and help the beleaguered carriers escape fierce domestic competition from low-cost competitors.
*Bankruptcies. To cut costs in bankruptcy reorganization, airlines such as Delta and Northwest have trimmed their fleets. Discounters Independence Air and ATA, also in bankruptcy reorganization, have also jettisoned planes.
*Fuel costs. The run-up in jet fuel prices after Hurricane Katrina accelerated the capacity reduction by forcing airline executives to examine the cost effectiveness of many of their routes. Costly fuel erased profit on many routes, prompting cuts.
Even profitable discounter JetBlue made fuel-related cuts. It eliminated two round trips a week between its New York John F. Kennedy base and Buffalo, Tampa, Fort Lauderdale and Fort Myers, Fla.
According to the USA TODAY analysis, Delta, which has been in bankruptcy reorganization since September, has cut the deepest among U.S. airlines. The Atlanta-based carrier and its regional partners are flying 19% fewer domestic seats this month than in December 2004.
Delta eliminated seats mainly by cutting the number of daily flights on many of its routes, and by shifting to smaller planes.
Delta significantly shrank a major hub, Cincinnati. As a result, Cincinnati lost non-stop service to 12 U.S. airports.
With airlines slashing flights in response to high fuel costs and bankruptcy filings, the beginning of a long-anticipated reduction in airline capacity may have finally arrived.
For the first time in memory, airlines are cutting flights into Salt Lake City Int'l Airport even as demand for seats is growing.
Delta and Northwest airlines are offering jobs to hundreds of furloughed pilots and flight attendants.