The U.S. airline industry is shrinking to a size not seen since the months after the 2001 terror attacks.
The airlines have been trimming flights for the past two years, matching the falling demand for air travel. Additional capacity cuts are under way at American, the nation's second-largest carrier, and at No. 3 United.
And it could get worse.
Most big airlines depend heavily on a relatively small chunk of passengers who pay the highest fares, "and that's generally business travelers," said Robert Mann, an aviation consultant in Port Washington, N.Y.
"If business travel doesn't rebound, we're going to see further (capacity) cuts."
Less capacity means consumers will be left with fewer flights to choose from and planes will be crowded. Fewer seats normally mean higher fares but that might not happen this time unless the economy begins a true recovery and passenger traffic picks up.
Airlines measure capacity in "seat miles," the number of miles flown multiplied by the number of seats on the planes. Capacity is crucial in the airline industry in the same way that inventories matter to car dealers and retailers. Too much capacity, and airlines have to cut prices, just as a department store stuck with too many suits and dresses will hold a fire sale. Airlines cut capacity by reducing the number of flights or using smaller planes that carry fewer passengers.
The Air Transport Association, the trade group for big U.S. airlines, estimates that carriers will offer fewer than 12.5 billion seat miles in the U.S. in the fourth quarter.
That is not much more than the low of 12.1 billion late in 2001, when airlines were reeling from the Sept. 11 terror attacks, and it's down 13 percent from the fourth quarter of 2000.
After such a steep decline in demand, airline executives and analysts are looking eagerly for any signs of improvement. About the best they can say is that things are not getting much worse. Airline executives say that business traffic is a bit better than it was in the spring but still far behind last year's pace.
This summer the airlines were busy, but weak fall bookings led them to offer deeply discounted fares to fill seats normally taken by business travelers. Southwest ran a sale with some seats as cheap as $30 each way on some routes.
Rick Seaney, the CEO of FareCompare.com, thinks the best of the fall sales are over. With airlines cutting capacity, and having sold many fall seats during the recent promotions, planes will be crowded.
"I can't imagine we'll see anything but firm pricing," Seaney said.
"There are still some $99 coast-to-coast deals occasionally, but it's much more random."
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