airports facing Flight Cuts

Routes Vanish in Low-Fare Cities; Grounding 737s

Oakland International Airport has ridden the wave of rapidly growing discount airlines to a 58% increase in passengers over the past 10 years. And now Oakland is in the vanguard of the next giant trend in aviation.

Grounded flights.

In November, Oakland will have 28% fewer departing seats than it had a year earlier, the largest decline among the nation's 50 biggest airports, according to OAG Analytical Services, which tracks airline schedules. AMR Corp.'s American Airlines and Continental Airlines Inc. have both decided to pull out completely from Oakland; other carriers are trimming flight schedules.

Cheap fares stimulated tons of travel over the past 20 years, but now airlines are slashing schedules in markets where cheap fares dominate. Communities that have enjoyed fierce airline competition now are paying a price in higher fares and fewer flights, while cities where one airline has a fortress hub are seeing far smaller schedule cuts.

Oakland now sometimes finds itself with higher ticket prices than its two Bay-area competing airports, San Francisco and San Jose. For a Nov. 20 departure to New York returning before Thanksgiving, for example, the cheapest flights from Oakland were $420 round-trip, according to Farecompare.com, while San Francisco had tickets starting at $320.

U.S. airlines will ground 512 airplanes by the end of the year, according to JP Morgan. That's a fleet about the size of Northwest Airlines Corp. In essence, airlines are taking an entire major carrier out of the skies.

The large capacity reduction has broad implications for travelers, from higher fares and less-convenient schedules, to the loss of service completely at some airports. But there are also a few benefits: less-crowded terminals, shorter lines and fewer flight delays.

It also may help discount carriers, such as Southwest Airlines, increase their market share at many of the nation's airports. Discounters have already gone from having 13% of domestic passenger traffic in 1993 to having nearly 30% in 2007, according to the Bureau of Transportation Statistics, and now will likely carry an even higher percentage of domestic travel.

Southwest says it estimates competitors will cut about 14% to 15% of their capacity in markets where Southwest flies, compared with 10% to 11% for the overall domestic market. Southwest expects Las Vegas, Chicago-Midway and Phoenix, for example, to get hit with cuts of 15% to 20%, while the airline says other cities like Houston and Baltimore will see reductions of 5% to 6%.

UAL Corp.'s United Airlines closed up in Fort Lauderdale, Fla., and West Palm Beach, Fla., on Sept. 2. Its flights from Chicago, Denver and Washington, D.C., to Fort Lauderdale all competed with non-stops from Southwest or JetBlue Airways Corp. United also cut flights between San Jose, Calif., and Chicago, another non-stop Southwest route.

Continental is scaling back flights in Cleveland, and the cuts fall largely on destinations also served from Cleveland by Southwest.

Fewer Flights in L.A.

Even a giant airport like Los Angeles International Airport is being hit hard because it does have lots of discount-airline competition. LAX will see a 13% reduction in seats in November airline flight schedules, according to OAG. That's 411,048 fewer seats to sell on flights leaving Los Angeles, or 13,702 sets per day.

"We probably have been hit somewhat disproportionately," said Gina Marie Lindsey, executive director of Los Angeles World Airports. "We do have a great deal of competition, so airlines don't have as much pricing power."

With fuel costs high, airlines have slashed schedules in two kinds of domestic markets: Long routes with lots of low-fare passengers and shorter-distance markets flown with regional jets (50 passengers or so) and older Boeing 737-type jets with fewer than 140 seats.

Discount airlines often are major players in both those kinds of markets. In low-fare markets, high fuel costs make flights unprofitable very quickly.

Vacation destinations such as San Juan, Honolulu, Las Vegas and Orlando are all scheduled for big cuts in flights this fall. So are smaller cities dependent on small jets, like Savannah, Ga.; Pensacola, Fla.; Tucson, Ariz.; and small hub cities like Cincinnati, Cleveland and Pittsburgh.

Small Cities Hit Hard

Tiny cities dependent on turboprop planes, many of which are being taken out of service, also will suffer. Thirty-six airports that had commercial airline service last year won't have it this fall, according to OAG. The largest in terms of air service is Bullhead City, Ariz., which averaged 329 seats a day last November. Another 29 small airports will lose more than half their service.

Many large cities hit with capacity cuts of 15% or more are Southwest-heavy airports: Ontario, Calif.; Kansas City, Mo.; Oklahoma City, Okla.; Orange County, Calif.; Spokane, Wash.; Reno, Nev.; Tulsa, Okla.; Hartford, Conn.; Raleigh-Durham, N.C.; Las Vegas; and San Jose, Calif. Chicago's Midway Airport, where Southwest dominates, will lose 17% of its seats in November, while Chicago's O'Hare International Airport, where fares are generally higher, will see an 11% loss in service.

Big airlines say they simply have been eliminating their least profitable routes, not running away from discount airlines. Cuts were made based on the aircraft they wanted to ground -- United and Continental are both aggressively grounding 737s, their smallest mainline jets, for example.

"The schedule reduction started with decisions about eliminating certain less-efficient aircraft from the fleet," said a Continental spokesman. "Then we looked at the profitability of routes, ending service where we did not see the prospect of making money in today's environment."

American ranks flights regularly based on profitability, and when cuts are made computer models predict how changes in the frequency of flights in a market and the size of airplanes will affect connecting passengers and profitability across the airline's system.

A spokesman for American notes that markets with lots of competitors, particularly low-cost competitors, often have excess capacity as airlines battle for market share, and so are ripe for cuts. "We are seeking to diminish capacity and make it more in line with demand and get a better price for our product," he said.

Southwest says it is taking some flights out of its schedule in the slow winter months, and is studying where it might make sense to add flights after pullbacks by competitors.

"We're being pretty conservative," says Bob Jordan, Southwest's executive vice president for strategy and planning. Even without growing, the airline will gain market share, he said. "It's a different kind of growth than in the past for us."

What isn't known is how much demand for travel will disappear this fall if fares are higher and the economy weakens further. When discounters enter markets and force all airlines to cut prices, traffic increases exponentially -- the Department of Transportation once labeled that stimulation "The Southwest Effect."

Yet now the reverse may be true -- higher prices and less competition may reduce passengers by percentages even bigger than the capacity cuts. That may be a trend Oakland faces.

"We are seeing the reverse of what people call the Southwest Effect," said Steve Grossman, aviation director for the Port of Oakland. Oakland has put a $1 billion project to build a third terminal on hold because of the downturn, aiming to keep costs low for airlines, but will be ready to handle any surge in traffic when things rebound.

"However, it looks like we're headed back to the future. The 1970s are here again," he said.