I think it was UBS Warburg who came out with a report saying that US industry capacity in summer 2004 will match capacity of summer 2000, but US majors capacity will be down 15%, meaning low cost carriers make up the difference.
It's interesting to note, that 11 out of the 18 fare increases (by majors) have been rolled back within 24 hours, most were in the $5 range. So that's going to put a huge burden on the revenue side - airlines will still have to make up for the variance from the cost side, which will be tough for the majors because they've cut a lot of fat out of their cost structure.
The capacity problem is a double-edged sword for the majors; on the one hand traffic will rebound but at what cost? Capacity increases are a short-term solution to a long-term fundamental problem. If the airlines don't address some of the other fundamentals, capacity will only solve their problem for a few years. Alternatively, the capacity issue will probably squeeze the middle low-cost carriers, like Frontier and Spirit. Look at what AA
has done in FLL
already (Spirit), not to mention JetBlue, Song and Southwest's large presence there.