Editorials The pie and excess capacity Editorial May 05, 2008 Share 1 -- Pundits are fond of saying that the airline industry is plagued by excess capacity. Nonpundits are fond of asking, "What excess capacity? The airplanes are full!" We checked with a pundit and a nonpundit, and it turns out that both sides are right.When the pundits speak of overcapacity, they mean that supply and demand are out of kilter. The nonpundits are correct that the producers are moving a lot of product, but it's because they're underpricing it. According to the pundits, there is insufficient demand to consume the available capacity at a price that would return a profit for a reasonably well-managed airline.It's another way of saying that prices are too low and that supply has to come down so that prices can rise.This is not what consumers and nonpundits want to hear, especially with oil at $120, the euro at $1.60 and consumer confidence at minus something-or-other.But the sad fact remains that if the airlines are to make any money at all, fares and fees have to rise. They have been rising, and they will likely continue to rise. And this poses an interesting challenge to everybody else in travel.If corporate spending and discretionary travel budgets are static or shrinking and airlines are demanding a larger slice of that shrinking pie, then, as nonpundits might phrase it, "something's gotta give." That "something" is the nonair component of America's travel budget.Leaving aside highway travel, most mainstream inter-city and international travel these days begins with an airline trip. It may also include lodging, gaming, food, entertainment, a spa treatment, a tour, a cruise or a car rental, but it begins most often with air. The airlines, in a sense, get the first bite of the pie.For a long time, that bite has been relatively modest. There are exceptions, but airline fares, adjusted for inflation, have been mostly tolerable in recent years. But as the air bite gets bigger, other suppliers, such as hotels, spas, cruise lines and tour operators, will feel the pressure.It would be unfortunate if, in a weakening market, travel became a zero-sum game and hotels began to feel that every dollar they don't grab will be wasted on an airline, and airlines began to feel that every dollar they don't grab will be squandered at a spa.In short, now is a good time for travel marketers to recalculate their value equations and to remember that intelligent packaging can work for suppliers and consumers alike.Good news from D.C.Our nation's capital has recently produced some good news for travelers for a change.As we had hoped, the Transportation Department came to its senses last week and decided to make more federal funds available for extending Washington's Metro subway to Dulles Airport, which is still no closer to downtown Washington than it was when it opened 46 years ago.This decision reverses an earlier, and lamentable, finding that the rail extension, which would mostly run on the surface, wasn't worthy. d Within the city, meanwhile, a local court has upheld Mayor Adrian Fenty's edict to throw out the voodoo-based zone system for taxi fares and have the city's hackers install meters. Cabbies have until June 1 to comply.