Big Airlines in a Rush to Go Small

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In the three decades since deregulation, the nation’s major airlines have operated with a simple strategy that bigger was better, and that the way to win the industry dogfight was to fly more planes on more routes to attract the most passengers.

Now, with fuel prices almost double the level of a year ago, many big airlines have decided that less is more, and they are shrinking in a hurry.

Continental was the latest carrier to announce cuts, saying on Thursday that it would ground 67 planes. In all, airlines in the United States have announced plans since March to park more than 200 aircraft, from regional jets to big Boeing 747s, representing more than 10 percent of the major airlines’ fleet.

As they cut costs, they are also raising ticket prices and imposing new surcharges and fees to help offset soaring fuel costs. Air fares over all are up 16 percent this year, for coach tickets bought in advance, according to Harrell Associates, an industry consulting firm.

For passengers, it all means a system that made flights cheap and plentiful is slipping away. “Air travel will be less democratic from here on out,” said Tim Winship, an editor of SmarterTravel.com, a Web site offering travel advice.

Already, fewer Americans are flying. The soft economy is a factor, of course, but so are higher fares and the inconveniences of flying.

The Air Transport Association, the industry’s lobbying group, predicts 2.7 million fewer people will fly this summer than in 2007.

Industry executives say they can no longer provide the cheaper fares that made air travel an attractive substitute for car trips.

Even Southwest Airlines — which has long used the marketing slogan “You are now free to move about the country” — has eliminated its self-imposed cap of charging no more than $299 for any one-way flight. Now it charges close to $400 each way on some routes.

And this year, half a dozen smaller carriers, some of which offered low fares, have gone out of business or filed for bankruptcy.

“Higher fuel prices at the end of the day need to be reflected in our ticket prices,” said Edward H. Bastian, president and chief financial officer at Delta Air Lines.

Mr. Bastian said he was sympathetic to passengers’ complaints about higher fares, fuel surcharges and fees, like the new $25 charges imposed last month by Delta and many airlines to check a second bag. (American plans to add a $15 fee for the first bag for many passengers on June 15.)

“Our goal is not to take it out on the customers,” Mr. Bastian said. “Our goal is to be able to provide a more stable and better product, albeit at a somewhat higher price.”

Even some union leaders agree that prices need to rise, but say industry officials should have foreseen the impact of higher fuel costs.

“It’s management’s failure to prepare for the future,” said Robert Roach Jr., general vice president of transportation for the International Association of Machinists and Aerospace Workers, which represents workers at several airlines.

Mr. Roach has long been an advocate for government intervention to set ticket prices that would allow airlines to make money and avoid cutting more jobs. Since March, airlines have said they would eliminate nearly 5,000 jobs on top of more than 100,000 they have already cut this decade.

Airlines for the most part have tried to preserve their flying schedules for the summer, the busiest and most profitable time of the year.

American, though, is dropping its daily flight from Kennedy Airport to Stansted Airport outside London as of July 2, and will eliminate flights from Chicago to Buenos Aires and Honolulu. Cuts are expected to spread after Labor Day, as airlines speed up retirement of inefficient planes, cut flights and eliminate service to some cities altogether.

Continental is cutting 3,000 jobs, although officials said they hoped most of those cuts would involve voluntary departures by employees.

Brian Bagenski, a spokesman for the Air Line Pilots Association, which represents pilots at Continental, said the union was “pretty darned disappointed in the news.” He added, “Our concern is to protect jobs and find out how to mitigate effects on pilots and families.”

The impact on passengers, however, will be clear. They can expect to pay more for fewer choices — the industry’s new norm.

“The picture going forward for travelers is pretty grim,” said Mr. Winship of SmarterTravel.com. “There are going to be fewer flights since ticket prices will be significantly higher. From a service and comfort standpoint, consumers won’t be getting more for their money. If anything, less.”

Even with these steps, however, industry analysts say fuel prices are racing ahead of airlines’ ability to cut costs and raise fares. Jamie Baker, an analyst with JPMorgan, said airlines could lose a collective $7.2 billion this year if fuel prices stay at current levels or rise further.

That is raising fears of another round of bankruptcy filings.

To be sure, nobody in the industry expects any of the major carriers to go away, although the outlook for smaller airlines is less certain.

For its part, Delta, which announced a merger with Northwest in April, is looking for more places to save. The two airlines, which originally expected to cost cuts of about $1 billion, now expect to cut “significantly in excess” of that amount, Mr. Bastian said. An announcement is due next month.

But airlines cannot cut everything and expect passengers to endure the result, said Mr. Roach, the union official.

“The flying public will be inconvenienced, and the employees will suffer because the public doesn’t like what they’re finding,” he said. “This just doesn’t do well for the image of the industry.”

Mary M. Chapman contributed reporting.