The latest schedules uploaded to the Official Airline Guide (OAG) forced the company to revised its report on airlines cuts and reveals that continuing problems within the U.S. economy are impacting airline operations with worse than expected declines in airline capacity this winter, as the number of domestic flights is set to fall by almost 11 percent and capacity by 9 percent in the 4th quarter of 2008 compared to a year ago.
The report comes as the International Air Transport Association revealed that global traffic was down to the lowest points in five years in August. “The slowdown has been so sudden that airlines can’t adjust capacity quickly enough,” said IATA CEO Giovanni Bisignani.
Some 28 airlines have ceased operations around the world with another 20 at risk, he said, adding the 1.3 percent August growth matched that of September 2003 and was down from the 1.9 percent posted in July. "The three-month decline, led by weakness in Asia-Pacific markets, is a clear indication that global trade is slowing down," Bisignani said. "This shows that the impact of the financial crisis is broad geographically and will worsen before it gets better. The slowdown in global traffic last month was led by the Asia-Pacific region, where carriers reported a 3.1 percent reduction in passenger demand. Economic distortions surrounding the Olympics in China and a weakening Japanese economic outlook contributed to the decline.”
In the meantime, the industry could cut another 9.5 percent in 2009, according to Boyd Group President Mike Boyd, speaking before his aviation conference in Aspen. He indicated the cuts could increase if passenger demand falls faster than capacity. So far, he said, capacity is dropping faster than demand. However, with the continually unfolding hammer blows from the Wall Street crises could change that, leaving seats empty and fare wars looming in markets where low-fare carriers do not compete. He said the downturn was unlike previous business cycles, adding oil prices make it a new environment which will force changes in how and where airlines do business.
He said mainline carriers were largely abandoning low-fare travelers. However, recent signs indicate that demand is dropping in the front cabin. He called the recent drop in oil insignificant since the system was not designed for $90 per barrel, despite the relief industry might feel on the decline.

OAG Outlines Winter Cuts
The U.S. domestic market will account for 21.4 million of the cutback in available seats, or 46 percent of the global decline, and a staggering 59 percent of the global drop in frequencies with 265,000 fewer flights. Some 219 of the world's airports are losing scheduled air service altogether, compared to the August figure of 275. Of these, 33 are in the U.S. which is 15 percent of the global total.
"The scale of the decline in the U.S. market is worse than the previous schedule analysis showed, with airlines taking 265,000 flights out of operation this quarter," said Steve Casley, chief operating officer of OAG. “When you consider that the combined cuts from all the world's airlines totals 451,000 flights, then it really puts America's domestic capacity decline into perspective.
"Our revised analysis of scheduled airline activity reveals a number of significant changes from two months ago, reflecting the dynamic nature of the airline industry compounded by significant economic turmoil in the global financial markets,” Casley continued. “While the global picture still shows a 5 percent drop in global capacity and a 6 percent drop in flights, this is somewhat less dramatic than the 7 percent fall our database showed previously. However, with economic problems now impacting both Europe and Asia this picture could change quickly as airlines are extremely vulnerable and quick to react to economic downturns and subsequent shifts in market demand.
"We are seeing an interesting regional balance emerging, with European travelers facing double the number of capacity cuts identified in the August analysis, and Asian travelers with half as many now that all carriers have filed their winter schedules," continued Casley. "We shouldn't let this apparent improvement in Asia undermine the fact that 15.3 million fewer seats will be available within Asia compared to this time last year; a staggering figure by any measure. Asia has been the center of growth for many years, and this decline is a stark reminder that the global economic crisis is taking its toll on aviation and air travel."
Other notable findings from the OAG analysis show:
• Global capacity analysis shows slight improvement with 5.2 percent decline
• Europe capacity cuts double to 5.6 percent
• 6.5 percent capacity reduction within Asia not as bad as earlier analysis
• Transatlantic and transpacific routes switch from growth to 3 percent drop