Impact of Airlines' Capacity Cuts Debated

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.


"If these various carriers shrink or continue to shrink, clearly that's a scenario that provides opportunities for us to expand," Gary Kelly, Southwest's chief executive, told analysts in New York last week.

Other discount carriers such as JetBlue, Spirit Airlines and Frontier Airlines are also likely to take advantage of cuts in competitors' flights.

That likely means more pressure for the so-called legacy carriers such as American, those with lengthy histories, Klaskin said.

"The legacy carrier tide is going out, and the low-fare tide is coming in," he said. "This could be the beginning of the tidal wave."

International competition

Most of the large carriers are finding some relief in international flights, for which there is little competition from discount rivals and for which ticket prices remain high. Part of Delta's plan includes a 25 percent increase in international flights even as it cuts its domestic schedule.

But that shift in capacity from domestic to overseas flights also heightens competition on those routes.

Baker said Delta's plan to boost international service "will negatively impact American, Continental, Northwest and United."

To cope, the big airlines will have to continue to cut costs and find other ways to boost revenues. American and Continental are ahead of the pack, both reporting operating profits this summer despite high fuel costs.

It's impossible to predict, however, which airlines will ultimately survive and thrive. Even the low-fare airlines are threatened as they continue to grow and increasingly compete with each other.

"The low-fare carriers will be forced to learn how to manage their growth, and if they don't they won't survive," Klaskin said.

In the short term, however, there will be one group that benefits the most.

"It's going to be great for the consumer, because we'll see more penetration of low fares," he said.

IN THE KNOW

American cuts

American Airlines said Friday it will cut 15 daily flights from Dallas/Fort Worth Airport and Chicago O'Hare Airport due to high fuel costs. Affected flights from D/FW include:

City Flights cut Remaining flights
Atlanta 1 10
Austin 2 15
Chicago (O'Hare) 1 18
Denver 1 10
El Paso 1 7
Houston (Bush) 1 9
Kansas City, Mo. 1 11
Minneapolis-St. Paul 1 8
Newark, N.J. 1 6
Toronto 1 3
Tulsa 1 3
Washington (Dulles) 1 5

SOURCE: American Airlines

IN THE KNOW

Airline growth

After several years of growth, airline capacity is likely to diminish with the bankruptcies of Delta Air Lines and Northwest Airlines.

Year Capacity*
1994 784
1995 807
1996 835
1997 857
1998 874
1999 918
2000 957
2001 931
2002 892
2003 893
2004 968

* Available seat miles, in billions

SOURCE: Air Transport Association

Fort Worth Star Telegram


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