Airlines....Grounded

Some interesting data, courtesy of today's Dallas Morning News...
***American Airlines Inc. said Wednesday that it filled 83.5 percent of its seats on its August flights, down 1.5 percentage points compared with August 2007.While the Fort Worth-based carrier reduced capacity 1.1 percent, traffic declined at a faster rate, 2.9 percent.Regional partner American Eagle also reported that its passenger loads declined in August, down 7.3 points to 69.7 percent.Its traffic decreased 13.6 percent on a 4.5 percent reduction in capacity.

United Airlines Inc. said its August traffic dropped 5.1 percent, with a 3.1 percent cut in capacity. Its load factor dropped 1.8 points to 84.5 percent.The results were consistent with those of Continental Airlines Inc., which reported Tuesday that its August flights saw a decline in passenger loads. However, Continental's traffic increased 0.7 percent on a 2 percent increase in capacity.***

The macro picture: The Airlines' management's strategy to fly high?

• Cut capacity
• Cut pilots
• Cut Flight attendants
• Cut basic amenities
• Cut service/ Provide lousy service
• Raise fares
• Raise add-ons

As the airlines are finding out, this is leading to a decline in traffic that's more than the reduction in capacity- people are just sick of the high fares/lousy service, and as the traffic cuts back, the fares go up even more and capacity becomes even less- this is a death spiral.

Eventually, folks have to figure out that management, pilots, and other labor need to take big pay cuts (perhaps 50% or higher) to lower the operational expense to a level that will allow traffic to grow by keeping prices attractive yet profitable.