Even as analysts suggest low-cost carriers look abroad for their next expansion opportunities, U.S. carriers may be cutting what most see as an overcrowded market. Indeed, in what could be the leading edge of similar moves by U.S. airlines, US Airways is drastically cutting its international services to focus on its core network which include hubs in Charlotte (CLT), Philadelphia (PHL) and Phoenix (PHX), and a focus city at Washington’s National Airport (DCA).

Meanwhile, American, which its high unit costs, announced it was cutting 700 employees impacting maintenance bases at San Francisco, Kansas City, Minneapolis and St. Louis, where it has just closed its hub. The industry is coming off a bad third quarter despite the praise it received from analysts for its discipline and cost cutting, and is facing two quarters which are historically weak and expected to be even weaker this season. In addition, fuel prices are rising again putting further pressure on airlines to cut more than the 10% done in the last year.

The moves come as the average domestic fares dropped 13% in the second quarter, the lowest level since 1998 and the largest year-over-year decline on record, according to the US Bureau of Transportation Statistics (BTS). The dramatic decline to 1998 levels, said BTS, comes as overall prices (per the inflation rate) rose 32.3% during the period. In a measure of just how tough it is to raise fares, BTS said that since it began keeping track in 1995, fares rose only 1.5% versus a 41.4% inflation rate. It also reported that since 2001, the inflation rate has jumped 21.2% while fares have declined 8.3%.

US Airways
These four cities, as well as the airline’s popular hourly Shuttle service between New York’s LaGuardia Airport (LGA), Boston (BOS) and DCA, will serve as the cornerstone of the airline’s network, said the airline in yesterday’s announcement which means the loss of 1,000 jobs of its 33,400 system-wide jobs. By the end of 2010 they will represent 99 percent of the airline’s available seat miles (ASMs) versus roughly 93 percent today.

In a letter to employees US Airways Chair and CEO Doug Parker outlined the changes, “Today we are announcing a realignment intended to focus on our key network strengths … By concentrating on our strengths we will be better positioned to return US Airways to profitability, which will result in a more consistent experience for our customers, better returns for our shareholders and greater job stability and career opportunities for our employees.”

It will further cut back Las Vegas service nearly halving the 64 departures by February while closing both Colorado Springs and Wichita. The remaining 15 Embrear ERJ 190s will be deployed on its shuttle services, matching similar moves already made by Delta on its shuttle operations.

The airline is also suspecting five European routes from Philadelpha citing the weakness of trans-Atlantic revenue and including Birmingham, London/Gatwick, Milan, Sannon and Stockholm. However, it is making seasonal service to Brussels and Zurich year-round beginning in lat 2010. It is also returning its Philadelphia-Beijing authority to the Department of Transportation pending improvement in economic conditions while retaining the option to reapply for this authority in the future. It’s China service had already been delayed until 2010 from 2009.

Along with the layoffs of 1,000 employees, it is closing its Boston, LaGuardia and Las Vegas basis the latter two expected to close in January with BOS following in May. The layoffs will come in the first half of next year and include 600 airports passenger and ramp service positions, approximately 200 pilot positions and approximately 150 flight attendant positions. The total pilot corps numbers 4,200, while flight attendants number 6,300 flight attendants, and airport, baggage, gate, and grounds workers total 11,500.

“These are difficult decisions to make because of the impact to some of our fellow employees,” said Parker in a letter to employees. “They are, however, the right decisions. By focusing on our strengths and eliminating unprofitable flying we will increase the likelihood of returning US Airways to long-term profitability, which is in all of our best interests. As we work through these changes, we’ll do all we can to minimize the impact of these reductions on our current employees.”

American
Maintenance and engineering will take the brunt of AMR’s latest downsizing as it eliminates 700 of the 12,700 maintenance and engineering jobs. Citing its smaller operations, it is downgrading San Francisco’s maintenance operation to what is calls a Class II station which closing Class II stations at Kansas City, Detroit, Minneapolis and San Jose. At St. Louis line operations will decline, it said. Another factor is the age of the American fleet which has dropped significantly as older planes were withdrawn in favor of the less maintenance intensive newer aircraft. The cuts are effective in next September.

“We are making critical changes to the M&E (maintenance and engineering) footprint to take into account our reduced flying and a fleet that has shrunk from a high of more than 900 planes to approximately 600 today,” said Senior Vice President of Maintenance and Engineering Carmine Romano, who indicated the move was to “resize and reshape” operations. “In addition, we are responding to the changes resulting from the major network realignment we announced earlier this year.”