Will the Airlines Cut Seat Capacity?

Fewer Empty Airline Seats?

It doesn’t take a rocket scientist to tell you that the current economic picture is beyond gloomy but does that mean airlines will resume their capacity-cutting ways with a vengeance and start yanking more seats or even flights?
Maybe. And that could happen despite what could be considered a relatively good aspect of an economy in the doldrums: lower oil prices which I talked about on Good Morning America recently. As Delta’s CEO pointed out in a recent Bloomberg article, “The economy has many challenges, and we have no reason to think low fuel prices will stick.” He has a point; sure, oil prices are down for the moment but the “crack spread” (the profit margin for refining crude oil into jet fuel) has yo-yoed up and down throughout the past year.

As far as cutting capacity, one analyst claims it’s not a matter of if but when.

Passengers Continue to Fly, for Now

What will ultimately happen depends on you, the flyer, but so far many of you have been boarding planes in solid numbers. One indication of this: an attempted airfare hike just last week (since rolled back). The fact that an airline thought it worthwhile to pursue a hike as we head into the soft fall season, is telling; it says airlines are reasonably confident that they will have the traffic they hope for. At least, they feel that way at this moment.

On the other hand, there was a proposal to slash the U.S. government’s $15 billion travel budget by 75% that I tweeted about, so there is certainly contradictory evidence out there.

If airlines do cut capacity, it will mean even fewer empty seats and more packed planes which is directly proportionate to the pain of flying. On the other hand, airlines are businesses, and if they can’t make a profit on a flight, there’s no point in taking off. We shall see.


Published: August 15, 2011