Delta Grounds Planes. Will Others Follow?

Last Updated Mar 20, 2008 1:21 PM EDT

delta grounds planesRemember how I said that Delta was going to tweak its business plan this week? Well, it's happened. And you may not be surprised to hear that it sounds a lot like the plan other airlines are putting out there. It's shrinking time.

Delta said today that it would cut an additional 5 percent of domestic capacity and ground a handful of planes. As you might expect, that means the company doesn't have much need for all those employees, either. Thirty thousand employees are eligible for a buyout package, and the airline expects to get 2,000 to take Delta up on the offer.

United said basically the same thing -- minus the buyout. That airline will ground 15 to 20 narrow-body planes this year to reduce capacity and save money on fuel. Northwest and Continental have hinted the same thing might be in store for them.

So with flights so full, why does it make sense to ground these planes? Think back to your freshman Econ class; it's all about supply and demand. If they can cut the number of seats, they can raise fares to a level that can hopefully cover the cost of fuel. Yeah, that means that the planes will be packed, but more people may end up driving or not traveling at all because they can't afford a plane ticket. And those who do fly will be paying a lot more.

(Pink plane image courtesy Delta Airlines)