Boyd: Further Cuts In Capacity Inevitable

If you thought the capacity cuts announced by several major airlines for this quarter were deep, get ready for more. That's the opinion of aviation consultant Michael Boyd, who predicted Monday that US airline capacity on domestic routes decline further next year, and falling capacity could spur still more cuts.

The Dallas Morning News reports that at his annual Boyd Group aviation conference, Boyd said this is not like previous industry cycles, and customer demand could fall faster than the airlines plans to cut seats.

"This is not an aviation cycle. What this is, is a whole new environment," he told attendees. "We have grown up on oil prices being relatively low. They're going to be high. That means how you do business, where you do business is going to be different."

He notes that for the first time in 35 years, fuel prices have prompted airlines to park aircraft and cut service even before customer demand has dropped. "They don't want to carry low-fare people to Florida. They don't want to carry people to Vegas any more. The reason for that is real simple -- they can't make money on it anymore."

On the airline side, American Airlines VP of state and community affairs, Kevin Cox, finds himself a frequent bearer of bad news as flights and some entire routes are dropped.

"I've been in my job for a year and a half, and I've done nothing but deliver bad news to a lot of communities," Cox laments. "It's a very sobering message to say we're not coming back any time soon."

Cuts by American and its regional partner American Eagle total 12 percent of domestic capacity, compared to a year ago. Alaska Airlines plans to operate 16 percent fewer flights in the first quarter of 2009, year-to-year.

One of the few bright spots in the business, believe it or not, has been public acceptance of all the new ala carte fees for checked bags, changed flights and snacks. Brandon Pedersen, Alaska Airlines controller and VP of finance, observes passengers complain far more about a $25 fare increase than they do about a $25 charge for a second checked bag.

"I think those fees are here forevermore."

FMI: www.aviationplanning.com