Airline Flight Cuts End Up Hurting Airports and Hotels, Too

— -- In a sign of hard times for the travel industry, Stewart International Airport north of New York City has put itself on sale.

As the fall travel season begins, U.S. airlines are sharply reducing domestic flights and routes nationwide to cut their losses from high jet fuel prices. In one of the most dramatic examples, Stewart by November will lose 63% of the passenger air service it had last November, current airline schedules show. So for the next six months, Stewart's owner, the Port Authority of New York and New Jersey, is waiving all fees it charges airlines to use that airport in hopes of keeping airlines it still has and luring new ones.

The drastic action by Stewart, and by other airports nationwide, is only one example of the widespread fallout of the airlines' service cutbacks. The carriers' misery is spreading, or is expected to spread, to virtually every industry they touch in the travel economy: hotels, rental cars, convention centers, websites that book travel, airports and others.

Labor Day drop-off

The Air Transport Association trade group forecast that travel over Labor Day weekend would be down about 6%, the first year-over-year drop in Labor Day passengers since 2002, following the 2001 terrorist attacks the previous fall.

"It's a sharp reversal," says ATA chief economist John Heimlich. "I think it's an indication of what looms the rest of the year."

This month, domestic airline capacity measured by the number of seats on flights will shrink 7% from last September, according to OAG-Official Airline Guide. As airlines continue to shrink, domestic capacity by November will be down 10% nationwide — forcing up airfares. In many markets, service cuts will be much deeper.

Travelocity.com reports that the average domestic round-trip airfare booked so far on its site for flights from Nov. 1 through Feb. 28, 2009, is up nearly 16% year-over-year. Travelocity says the average booked fare this winter is up 27% to New York's three major airports, up 25% to Dallas/Fort Worth, up 22% to Atlanta, up 21% to Chicago and up 30% to Boston.