In 2015, American Airlines Inc. and Southwest Airlines Co. will end the year with about the same number of airplanes they had at the beginning of the year or fewer.
Even so, they’ll fly more capacity in 2015 than in 2014.
How? By putting more seats in their airplanes, replacing smaller airplanes with bigger airplanes or flying their airplanes more often or on longer trips — efficient ways for the carriers to boost productivity, even if coach passengers may feel even more squeezed.
“Almost all of our capacity growth domestically is about putting more seats on airplanes,” American Airlines president Scott Kirby said Tuesday at an investment conference sponsored by J.P. Morgan Chase.
Delta Air Lines Inc. president Ed Bastian, speaking at the same conference, said much of Delta’s increased productivity has come from “upgauging” — using larger airplanes or putting more seats on airplanes.
“While we’ve done a lot of upgauging in terms of getting cost efficiencies and productivity in our fleet, I still think we’re in the mid-innings of our upgauging effort,” Bastian said. “That will continue to drive increased cost productivity results over the next two to three years.”
Southwest Airlines chief financial officer Tammy Romo said the carrier’s fleet will remain around 700 airplanes at year’s end. But it expects to operate 2 percent more flights, with 2 percent more seats per flight, with longer flights on average.
That should increase Southwest’s capacity — measured in available seat miles flown — by 7 percent over 2014, even with about the same number of aircraft, she said.
The subject of capacity growth is a ticklish one for investors, who fear that the industry’s current boom in profit will prompt some airlines to lose “discipline” — a euphemism for adding more capacity than demand will support.
Passenger unit revenue, or revenue per mile per seat, has grown little or in some cases has shrunk in the first quarter, with increased capacity getting much of the blame.
However, American’s Kirby said the boost in 2015 capacity, estimated at 5 percent on domestic routes, is “a one-time event.”
“It’s distinct from capacity where we’re adding new airplanes, growth aircraft. We really aren’t. We expect to end 2015 with fewer aircraft at the end of the year than we started the year, but we’ll still have capacity growth because we have more seats on each of the aircraft,” Kirby said.
“All airlines for the most part are putting more seats on airplanes. We’re doing it. United’s doing it. Delta’s doing it. Even Southwest is continuing to put more seats on their existing aircraft. Once you’ve done that, you’re done.”
The capacity boost at American is largely coming in two fleets, the Boeing 737-800s that are now the mainstay of its single-aisle fleet and the Boeing 777-200s that anchor its international fleet.
American is putting another 10 seats on the 737-800s, taking that aircraft to 160 seats. As part of an overall redo of the 777-200 interiors, American is going from 247 seats to 289.
The arrival of more Boeing 737-800s and the phase-out of the 140-seat McDonnell Douglas MD-80 on domestic routes will also boost the average number of seats per flight, although American will fly some of the MD-80 routes with 128-seat Airbus A319s.
Delta is also adding aircraft that replace smaller airplanes, and five daily flights between Dallas Love Field and Atlanta illustrate the result.
A year ago, Delta used a regional partner to operate the flights with 50-seat jets, giving it 250 seats to sell each day in each direction. But with the Oct. 13 end of a federal law restricting Love Field flights, Delta began flying 110-seat Boeing 717s on the route, giving it 550 seats each direction — more than doubling the capacity without adding any flights.
Delta also has added the 180-seat Boeing 737-900, the largest single-aisle jet that Boeing sells. Delta now has 31 of the 737-900 and firm orders for 69 more. It also has firm orders for 45 Airbus A321s, the Airbus counterpart to the 737-900.
Southwest has used two methods to boost its capacity — putting more seats on airplanes and going to a larger airplane type.
At the end of 2011, Southwest’s fleet of 698 airplanes (including AirTran Airways Inc. aircraft) had an average of 134 seats.
Since then, Southwest has decided to begin buying 175-seat Boeing 737-800s and is adding an extra row of six seats to the 137-seat Boeing 737-700s.
Sending AirTran’s Boeing 717s to Delta also helped Southwest boost its capacity. Southwest has replaced those 117-seat airplanes with larger Boeing 737-700s.
As a result of the changes, the average aircraft size at Southwest went up to 146 seats as of Dec. 31, a 9 percent increase over 2011. The total number of seats is more than 97,000, compared with about 93,500 three years earlier, even though the airline had 665 aircraft operating at the end of 2014 compared with 698 in 2011.
At the investment conference, executives said they are concerned about too much capacity in international markets.
“If you look around the world, I would describe demand as pretty good everywhere except for the fact that capacity is growing faster than demand in some of the regions,” Kirby told attendees.
Capacity to Europe is up significantly, he said. American has reduced flying across the Atlantic, “but the rest of the industry hasn’t,” Kirby said.
Bastian said the stronger dollar will hurt Delta on foreign exchange weakness, and that is likely to cause it to cut international flying in September and October.
“Summer is looking strong. It should do quite well. But post-summer, in the September-October period, you can expect to see some reductions on the international front,” he said.
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