The capacity decline is beginning now in the airlines....and it is not going to come back. In all probability it will become to expensive for average people to fly within the next 20 years or so.
Krew,
Unfortunately, I believe that you are spot-on here.
As part of an M&A course I recently completed, a "senior executive" of a merging major air carrier came in to chat with our class. Your words reflect his, and nearly verbatim. He stated flatly, "Airline seats will no longer be a commodity."
He went on to note that industry-wide capacity reduction will occur through both business combinations - he predicted three major carriers as surviving entities - and dissolutions.
Best to all,
Felix