New Northwest, Virgin America, Air Canada capacity cuts


Three more airlines will be cutting capacity in the fourth quarter in an attempt to deal with high oil prices. Northwest will trim between 8.5 and 9.5 percent of its flights, Virgin America will eliminate 10 percent, and Air Canada will cut 7 percent. These capacity reductions follow similar moves from AirTran, Continental, American, Qantas, Horizon, United, and Spirit. Air Canada will also cut about 2,000 jobs while Northwest hinted cryptically at "employee impacts" and "headcount reductions" in its press release.

On the plus side, it doesn't appear that any of today's cuts will require discontinuing service to any destinations. Continental's capacity reductions, detailed last week, included the total elimination of service to a number of cities.

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As a result of all these flight cuts, the airline industry is on pace to be flying at 1997 capacity levels by 2009. As FareCompare.com CEO Rick Seaney explains, the cumulative loss of capacity cuts will essentially wipe out 10 years of industry growth (and a strong post-9/11 rebound). But as capacity has grown, load factors (the percentage of filled seats on an airplane) have been steady, meaning passenger numbers have kept up with the growing number of available seats. As our own Tim Winship points out, it's not as if planes are flying empty even now, despite rising fares and new fees.

So what will all this quick and significant loss of capacity mean for travelers? The answer is simple: higher fares, fewer options, and full planes.

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