Summary: Most major U.S. airlines began realizing net operating losses early in the 2001, and all of the major U.S. passenger carriers except Southwest Airlines reported losses for the year. Travelers throughout the nation shared in the difficulties. In October 2000, the typical or median small community that GAO analyzed had service from two airlines, with a total of nine daily departing flights. Forty-one percent of the communities were served by only one airline with size being the most obvious factor for service limitations. However, the level of service also varied by the level of local economic activity. The total number of daily departures from these small communities declined by 19 percent between October 2000 and October 2001. Although carriers had reduced total departure levels at small communities before September 11th, airlines made even more reductions after that date. Because profitability is so critical to airline decisions about what markets to serve and how to serve them, the changes in service levels in small communities can be traced to economic factors. Two such factors--the economic decline that began in early 2001 and the collapse of airline passenger traffic after September 11--are widely acknowledged as the main contributors to declining profitability in the industry.
