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SEAT 2B | By Joe Brancatelli

The Incredible Shrinking Airlines

They're cutting back flights, routes, and services. How business travelers can be prepared for the upheaval.

Airline travelers walk past the departure update board in the United Airlines area of the terminal at Dulles International Airport.
Airline travelers walk past the departure update board in the United Airlines area of the terminal at Dulles International Airport. (Paul J. Richards - AFP/Getty Images)
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By Joe Brancatelli
Portfolio.com: Business Travel
Tuesday, June 17, 2008; 11:02 AM

Airlines are getting smaller -- fast -- and that is going to have a profound and immediate effect on how you travel.

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After guessing wrong on the direction of oil prices and generally reducing their hedging positions this year, the big airlines now face a world where jet fuel costs twice as much as it did a year ago. The major U.S. carriers have announced they will shrink by around 10 percent in 2008, and they will attempt to stem the red ink by slashing at their route networks and flight schedules. The longer oil stays above $100 a barrel -- doesn't that sound like a blast from a much happier energy past? -- the more the airlines will cut.

That could mean some nasty surprises for travelers. Here's what you need to know to help you understand the new airscape and plan for the coming weeks and months.

What You Don't Know ...

Some airlines have publicly trumpeted their cutbacks, all the better to underscore their parlous finances. But not everything is announced. Delta Air Lines, for example, is making sizable schedule reductions at its Atlanta, Salt Lake City, Los Angeles, and New York hubs. The carrier has been mum on details, however, because it wants to merge with Northwest Airlines and promised various government agencies that the combination wouldn't affect capacity. The lesson: Assume nothing. The flight you thought was there yesterday may not be on the schedule tomorrow.

Long and Short Are Most Vulnerable

You're at greatest risk of having a trip disrupted if it includes very long intercontinental flights or very short domestic commuter flights. The long hauls are going because they burn fuel simply to carry enough fuel to make the long runs. In fact, one European airline executive told me that his nonstop flights to the West Coast use about 30 percent more fuel per hour than his nonstops to the East Coast. So it's not surprising that Thai Airways is dropping its New York-Bangkok route (it stops at the end of the month) or Aer Lingus is cutting its Los Angeles-Dublin run (it ends in October). Meanwhile, the short commuter hops are going because the 37- and 50-seat regional jets aren't fuel-efficient either. It just doesn't make sense anymore to operate planes that carry so few passengers per flight.

Nonstops Are Being Stopped

Airlines are also eliminating routes that overfly their big hubs. One example: American Airlines has dropped most of its nonstop flights to Austin; most travelers now must connect through American's mega-complex in Dallas/Forth Worth. As airlines retreat, the larger hubs will fare better than the smaller ones. Last week, for example, Continental Airlines announced it would reduce flights at its Cleveland hub by 13 percent. The airline's much-larger connecting complex in Newark, New Jersey, however, is only losing 3 percent of its service. And the nation's most important hub, Chicago's O'Hare Airport, will see virtually no flight reductions. The federal government has capped the number of flights at O'Hare, and neither American nor United, the carriers that dominate the airport, want to risk losing any of their takeoff and landing slots.

Fewer Flights, Fewer Seats, Fewer Cities

Sharp-eyed travelers will notice three other startling trends: Fewer flights on once-popular routes, fewer seats on the remaining flights, and many cities disappearing from the route map. One example: US Airways announced last week that it would halve its operations at Las Vegas, from 141 daily departures to 74. As American Airlines contracts both its Miami and San Juan, Puerto Rico, hubs, the number of available seats between these Caribbean and Latin American flight centers is falling precipitously. This spring, American's seven daily flights offered a total of more than 1,700 seats. The fall schedule still shows seven flights, but smaller aircraft will be used, cutting the daily inventory to just 1,300 seats. Continental is dropping service to 15 cities entirely in September, dumping locales both mundane (Oakland, California, and Toledo, Ohio) and exotic (Bali, Indonesia, and Cali, Colombia).

Light Flights May Get Canned

As airlines obsess over oil -- fuel now accounts for about 40 percent of a carrier's costs -- a disreputable old practice called "flight consolidation" is returning. Despite what frequent flyers occasionally thought, network carriers in the past almost never canceled a scheduled flight because there were too few passengers; the airline needed the aircraft to get to its next destination to operate a subsequent flight. But with fuel costs what they are now, airlines may sometimes cancel a flight if too few passengers turn up at the gate. You'll probably be automatically re-booked on the airline's next flight. There's not much you can do if an airline abruptly cancels your flight; in fact, there's no way you can even be sure they "consolidated" your flight. All you can do is be prepared: Before you head off to the airport, get a list of other flights and connections that can get you where you need to go.

Panic Now, Book Later

If these cutbacks create a mild sensation of panic, it's understandable. But don't rush out to book flights now for trips six or eight months in the future. The airlines have raised published fares more than a dozen times this year and added a slew of new fees and restrictions. But many of the price increases are mitigated by the industry's reflexive, short-term discounting. You'd be better off waiting for the fuel-induced fare spikes to settle down. Besides, as it gets closer to departure, airlines will add discounts to help sell the remaining unsold seats. One more factor: Southwest Airlines, which is still profitable and still growing, hasn't even loaded its flight schedules and prices for travel beyond October 30. Southwest's competitors on its domestic routes will be forced to match whatever prices the new King of Skies eventually sets.

The Fine Print . . .

American Airlines began charging most coach customers for checked bags on Sunday, June 15. United Airlines and US Airways have matched American's move to charge $15 for the first bag and $25 for the second, but their fees go into effect later in the summer.

* * *

To contact Joe, visit his Contributor's page on Portfolio.com.


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