The Plane Truth: American Airlines to Cut Capacity

More bad news is taking flight in and around the airline industry. 

At an airline conference sponsored by J.P. Morgan in New York, American executives reiterated Monday they will continue their plans to cut  capacity by nine percent this year. 

The cuts come as the airline is trying to find ways to eliminate 400 flight attendant positions through retirement and attrition.

Southwest CEO Gary Kelly told investors on Monday that revenue at his airline is off seven percent in the first week of March. 

Southwest will also cut capacity this year by about four percent.  It's the first time in the company's 38-year history that it is shrinking. 

Kelly even could not rule out the possibility of job cuts if the economy continues to worsen.

Industry-wide air travel is down 12 percent this year, leaving executives fearing the worst is yet to come. 

Even travelers see the airline industry's decline first-hand.  

"I think people are hesitant to travel and they are using the phone, fax and Internet more which could be problematic long-term for the airlines," said frequent flyer Sam Cortez. 

Some of the cutbacks worry travelers.

"I worry about people who work for the airlines -- that they will get frustrated and standards will become relaxed," said traveler Margaret Swisher.

The only upside to a decrease in air travelers is that fares could fall as airlines find ways to drive traffic, analysts said.