Many cities face flight cuts

At least 100 will see route cuts. Economic ripple effect may be broad.

By Alexandra Marks | Staff writer of The Christian Science Monitor

from the June 12, 2008 edition

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New York - From Butte, Mont., to Hagerstown, Pa., more than 100 small and medium-size cities across the US will see reductions in airline service by year's end. Some communities will lose commercial service altogether.

Surging oil prices, driving up the cost of jet fuel, are behind the cuts. For the first time in aviation history, airlines are forced to reduce the number of flights offered and eliminate some destinations even as demand for their services remains high.

The result: It will be harder for many Americans to get from where they are to where they want to go, planes will remain elbow-room-only packed, and ticket prices will soar higher.

The aviation reductions will also produce economic ripples that extend far beyond those airports with newly empty tarmacs, some aviation experts warn.

"This is not about Butte. This is about the national economy," says Roger Cohen, president of the Regional Airline Association. "Commercial air service is part of the backbone of the American economy.... All of the industries that have grown up with cheap, competitive airfares over the last decade will be affected."

The impact of the service cuts probably won't be felt until 2009, because most aren't slated to go into effect until fall. The summer schedule has been pretty much set and sold for months. But here's the rub: Most of the tickets for the peak summer season were sold before oil skyrocketed above $130 a barrel. That means that even as passengers are packed like sardines into planes and it would appear that the airlines should be raking in huge profits, the carriers are actually losing money.

"Probably 70 percent of the seats that will be flying in the next two months will be flying at rates that lose money because [airlines] sold them when oil prices were less," says aviation analyst Michael Boyd, president of The Boyd Group in Evergreen, Colo.

To make up the losses, airlines must ensure that in the future they fly only very profitable routes. As a result, some communities where airlines rely on regional jets that guzzle a lot of fuel will see service cuts, even though plenty of passengers may still want to fly from there. Mr. Boyd cites Delta's service to Lansing, Mich. While the airline can easily fill 85 percent of the seats on three regional jets a day, it doesn't make enough money on each seat to justify the cost of filling those fuel tanks three times a day.

"The local yield is less than the cost of flying it, and what you're feeding to the carrier to connect to the rest of the Delta flights brings in less than the cost of flying it," he says.

The solution is to cut flights and raise prices. Of course, airlines know that when prices go up, demand comes down. So airlines are cutting the number of flights not only to prevent losses, but they're also cutting flights in anticipation that fewer people will fly precisely because ticket prices will jump.

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