Maintaining capacity discipline


US airlines have been burned badly in the past by moving too aggressively to increase capacity.

Huge profits. Low fuel prices. Strong demand. In the past, those factors would likely have led major US airlines to ramp up capacity…but no longer. The US’s three global full-service airlines—Delta Air LinesUnited Airlines and American Airlines—have all vowed to maintain strict capacity discipline.

United and American both plan to stay below 3% capacity growth in 2015. Delta has not provided full-year capacity guidance (though president Ed Bastian has said domestic capacity will probably grow “somewhere in the 2% to 3% range”), but has said its March quarter capacity will rise just 3% schedule-over-schedule (factoring in all of last year’s winter storm-related cancelations, Delta’s first-quarter capacity could rise as much as 5%). That follows low growth in 2014, a year in which all three airlines stayed below 3% year-over-year capacity expansion (United 0.5%, American 2.4% and Delta 3%).

“We are not making any changes to our 2015 capacity plan in light of the lower fuel prices,” Delta CEO Richard Anderson told analysts and reporters last week when discussing the carrier’s 2014 earnings. “In fact, we continue to trim capacity on the margin to maintain yields and our RASM premium.”

Similarly, United chairman, president and CEO Jeff Smisek told analysts and reporters last week, “We’re going to run the airline for profit maximization and we’re very focused on capacity discipline … We will absolutely not lose our capacity discipline.” United plans to grow capacity no more than 2.5% this year.

American plans to increase 2015 capacity 3% year-over-year domestically and 1.5% internationally. CFO Derek Kerr said this week, “You won’t see any changes from us in the near future” on the capacity plan.

US airlines have been burned badly in the past by moving too aggressively to increase capacity. “We’ve seen this movie many times in the industry,” Anderson said. “You’ve got to run the company conservatively and we’re trimming capacity as we speak.”

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