Rising costs reshaping air travel across the USA

Record-high oil prices are threatening to ground millions of travelers who have grown accustomed to flying for fun and business during the past 30 years.

Air travel in the USA has grown at a rate five times faster than the population since 1978, when deregulation first allowed airlines to compete by setting their own prices and routes without government approval. Last year, 769 million passengers boarded U.S. airline flights.

But with today's unprecedented jet fuel prices, airline executives and aviation analysts are warning that only extreme fare increases and dramatic cutbacks in flights will enable the industry to cover a 2008 jet fuel bill the airlines' trade group projects will be 44% higher than last year's.

By this time next year, there could be as many as 20% fewer seats available if carriers respond to oil prices well above $100 a barrel by cutting as many flights as securities analysts such as JPMorgan's Jamie Baker are suggesting.

That would be like shutting down a carrier the size of American Airlines, amr the world's largest, which, with its regional carriers, operates 4,000 flights daily. That alone would sharply increase demand and prices for plane tickets.

Such huge cutbacks in airline capacity would transform the industry that Americans have come to know — and reshape the way they travel.

There would be fewer daily flights in cities of all sizes, fuller planes throughout the day and much more inconvenience. There would be fewer non-stop flights and longer layovers between connecting flights. And travelers who have long avoided flights at 6 a.m. or 10 p.m. might well have no other choices.

Those kinds of changes in Americans' traveling habits could be inevitable: Extraordinary jumps in fuel prices are being driven by surging demand in the fast-growing economies of China and India, instability in oil-rich Venezuela, Nigeria, Iraq and Iran, investor speculation and other factors.

"You can't underestimate the spike in fuel prices and how it is fundamentally changing the industry," says Delta Air Lines dal CEO Richard Anderson, who estimates ticket prices would have to rise 15% to 20% just to cover fuel costs.

Consumers already are getting a glimpse of travel's costlier future.

The website Travelocity reports that fares this summer to eight popular destinations — including Boston, New York, Chicago, South Florida, Denver and Los Angeles — are up by at least 18% since last summer.

A family of four would pay Delta Air Lines about $2,500 to fly from Cincinnati to Los Angeles this summer if they bought tickets now. If ticket prices rise another 20%, as Anderson suggests is needed, that family would pay about $3,000.

"Some leisure travelers are going to be priced out" of flights, says Tom Parsons, CEO of the travel website BestFares.com.

For many families, vacations by plane that have been within their financial reach could become an unaffordable luxury, Parsons and other travel specialists say.

For entrepreneurs and small businesses, the increasing cost of travel could prohibit them from making faraway sales calls to grow their business.

Smaller markets threatened

Small and midsize cities now served mainly or entirely by 50-seat regional jets could end up with far fewer flights each day, because at today's fuel prices, even fully loaded small jets don't bring in enough money to justify the same number of flights.

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