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The recession brought deep capacity cuts to the skies, with airlines shedding up to 15 percent of their flights in some cases. Now, after nearly a year of positive trends, and with an optimistic outlook for the months ahead, airlines are cautiously adding back some of the capacity that was lost.
Chief among these is JetBlue, which is taking on nine new planes and adding 10 percent capacity this quarter alone. For the low-cost carrier, there is a clear opportunity to get the jump on larger rivals and siphon off some of the returning passengers that might otherwise choose, say, American or Delta.
Alaska is also adding significant capacity, with a 9 percent boost.
Other airlines are focusing on international capacity. Delta raised international capacity 13 percent in November, and American increased international flights by almost 11 percent.
But all of this new capacity comes with risk. Airlines have profited in recent quarters primarily because travel demand skyrocketed, outpacing airline supply, which had remained low since those initial recession-era cuts. Soaring demand plus limited supply equals higher prices, and airlines raked in huge revenues as a result. So what happens when airlines start adding seats back?
The airlines' hunch is that demand is on a steady upward climb, and they are adding capacity slowly to avoid tipping the balance. If that hunch is correct, they will be able to continually increase capacity over the next 12 to 18 months while keeping fares stable.
If they're wrong—for example, if the economy remains flat and consumer confidence wanes—we'll either see capacity stabilize or shrink, and fares will likely come down a bit as well.
Readers, are you planning on traveling more in 2011, or are you waiting for the economy to improve?