U.S. airlines plan further capacity cuts

By Karen Jacobs and Deepa Seetharaman

ATLANTA/NEW YORK (Reuters) - Two major U.S. airlines, Delta Air Lines Inc (DAL.N) and American Airlines (AMR.N), will slash capacity this year as the recession erodes travel demand, the carriers said on Thursday.

The cuts, which were broadly expected, are likely to be matched by rivals. US Airways Group (LCC.N) and Continental Airlines (CAL.N) also signaled plans to cut the number of seats available for sale.

The airline industry has barely digested last year's deep capacity cuts. But experts say more are needed to bolster fares and help compensate for rising oil prices and weak demand.

"We think fourth-quarter (capacity) will be down at least 12 percent over last year. Maybe even 15," said airline consultant Michael Boyd.

"Right now, capacity has not fallen to match decline in demand," he said.

Delta said it plans to trim system capacity by 10 percent this year, with reductions beginning in September. Previously, it said its system capacity would be down 6 percent to 8 percent.

Delta also said it plans to cut international capacity an additional 5 percent on top previously announced cuts, for a total reduction of 15 percent.

"If you can't recover the cost of oil, it's going to necessitate more dramatic capacity reductions as we get to the end of the year," Delta President Ed Bastian told a Bank of America-Merrill Lynch conference.