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American Airlines to reduce flights, cheap seats

A new $15 checked-bag fee by American Airlines grabbed headlines last week. But for travelers, and Florida's tourism industry, the biggest impact hit a little deeper into the story.

American, the world's largest airline and the fifth-largest carrier at Tampa International Airport, is shrinking in a desperate effort to raise fares before being swallowed up by runaway fuel prices. In the last quarter of the year, the airline will cut its domestic flying as much as 12 percent. Other traditional carriers will likely accelerate their own plans to get smaller.

The strategy comes straight out of Economics 101. Cut the supply of widgets — or in this case airplane seats — and the price should go up. Unless, of course, people refuse to buy or a competitor comes along and sells them for less.

Faced with crude oil at $130 a barrel, American CEO Gerard Arpey decided the airline had no choice but to eliminate unprofitable flights and sell fewer cheap coach seats. It was the deepest seat reduction at American since the airline cut supply 13.6 percent in the wake of the Sept. 11 terrorist attacks in 2001.

This shakeout could prove even worse because no one knows when oil prices will return to Earth, says Louis Miller, executive director at Tampa International Airport. "With 9/11, there was an end in sight," he says. He won't know before next month how much the planned cuts will hit Tampa International, where American has just over 8 percent of the market.

Shrinking airlines put the squeeze on passengers, sometimes literally.

Travelers will pay higher ticket prices and get jammed even tighter into planes. Load factors, or the average percentage of full seats, will rise from the current "very high levels of 85 percent," said James May, president of the industry's trade group, the Air Transport Association.

That means more passengers jostling for space in overhead bins. The longer it takes to store overflow bags below and get travelers seated, the later planes reach their destinations.

Businesses that cater to tourists are feeling the jitters over shrinking airlines. Just over half of the 82.4-million visitors to Florida traveled by air last year. In Pinellas County, 70 percent of the 5.3-million overnight visitors in 2007 flew to get here.

"It's worrisome not only because they're removing seats from the market, but they're doing it in hopes of driving prices up," said D.T. Minich, the county's tourism director. That could mean fewer U.S. tourists, business travelers and conventioneers.

Traditional carriers such as American and Delta are largely sparing international routes, where they reap higher fares and don't face competition from the likes of Southwest, AirTran and JetBlue.

But most overseas tourists to the area connect through hub airports in New York, Atlanta and Miami. Fewer domestic flights to Tampa could make it harder to connect, said Minich. "Where you might have had an hour-and-a-half layover, it could be three or four hours," he suggested.

Tampa International's Miller already sees signs of ebbing demand as ticket prices rise and the economy sputters. Passenger traffic this year is flat through April. More telling, perhaps, he said for the first time since it opened in November 2005, the popular economy parking garage didn't fill up over Memorial Day weekend.

Steve Huettel can be reached at huettel@sptimes.com or (813) 226-3384.

American Airlines to reduce flights, cheap seats 05/27/08 [Last modified: Wednesday, May 28, 2008 3:21pm]
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