Analysis: Airlines charging more to fly on cramped planes

Frontier Airlines flight attendant Cheryl Jacquot checks seats for safety cards before a trip to Washington, DC at the Denver airport August 27, 2009.

CHICAGO (Reuters) - Pay more. Get less. Get used to it.

This is the message U.S. airlines have for their customers this year -- although they tend to use different phrasing.

Years of financial hardship, have finally taught the embattled industry that the key to survival is fewer seats and higher fares.

And if travelers feel overcharged and uncomfortable on crowded planes this summer, maybe they should take a bus.

"It's a double whammy. It's lower capacity. It's higher fares. And those two are coming together," said Terry Trippler, a travel expert at rulestoknow.com.

Monthly data from U.S. airlines for May show load factors, which measure how full an airplane is, are above 80 percent for most carriers.

Delta Air Lines (DAL.N), for example, had a load factor of 83.9 percent, up 1.6 percentage points from a year ago. UAL Corp's UAUA.O United Airlines had a load factor of 84 percent, up 3.8 percentage points. AMR Corp's AMR.N American Airlines said its May load factor was 82.8 percent, up 3.6 percentage points from a year earlier.

For years, the airline industry has been hit with one crisis after another. A 2008 spike in fuel prices to record highs was followed by a global economic recession that drained travel demand. Airlines survived these back-to-back assaults by slashing capacity in a bid to cut operational costs and charge more for seats.

Now, as demand returns, flight are fuller than ever, and airlines expect to show profits this year.

"Capacity discipline is clearly key to improving the economics of our business," Kathryn Mikells, UAL's chief financial officer, said at an investor conference this week.

UAL and other carriers are proud of their capacity cuts and they say they intend to remain disciplined on that front.

"We've shown a good track record here of capacity discipline and capacity management, especially over the last number of years," said Zane Rowe, chief financial officer at Continental Airlines CAL.N at the conference. Continental plans to merge with UAL later this year.

"Over the last two years on both the mainline and consolidated basis we're actually down about 5 percent," in capacity, Rowe said. "And as we look to this year we continue the trend on the mainline domestic portion of the network where we've come to expect our capacity to be down to 0.5 percent to 1.5 percentage points."

Scott Kirby, president of US Airways Group (LCC.N), said he, too, believes airlines have learned a valuable lesson about over-aggressive expansion.

"The industry by and large is led by CEOs who have a different view of the industry than the CEO's of yesterday," said Kirby.

"Today's crop of CEOs are former CFOs or general counsel." Kirby said. "I don't think that rapid capacity growth is going to become the problem for the industry, at least for the foreseeable future."

Meanwhile, airlines are ratcheting up the fees they charge for items and services that once were included in the price of a ticket. Fees for bags checks and priority seating are generating new airline revenue but leave passengers feeling fleeced.

Trippler said good business strategy for airlines may not win many fans among the traveling public who are used to last summer's domestic fares. Since then, fares have risen roughly 15-20 percent.

"A lot of people were traveling on a fairly low fare and had their entire row (of airplane seats)," he said. "Now that's probably not going to be it. You're going to be paying a little bit more. And you're not going to have your whole row."

(Reporting by Kyle Peterson; Editing by Tim Dobbyn)