Two popular "legacy carriers" with networks capable of funneling international traffic to Las Vegas plan to merge, which could further erode capacity.

The number of flights coming into McCarran each day has fallen 2.2 percent over last year as tourism marketers are looking to broaden the market to offset the sluggish economy and gear up for a dramatic expansion in the next few years.

Most tourism experts agree that although the downward spiral of the airline industry has had a minimal effect on Las Vegas, the trend is disturbing, especially as the fortunes of the industry worsen because of the soaring cost of jet fuel.

And, although analysts disagree on how much the local tourism industry would be affected by the shakeout in aviation, most say change is ahead between local resorts and their airline partners. They also say tourists will spend more money to get here, but less on what they like to do once they arrive.

How bad is it?

One airline analyst said last week that if current fuel prices persist, the effect on industry profitability is expected to rival - if not exceed - that of the 9/11 terrorist attacks.

The Las Vegas Convention and Visitors Authority said 46 percent of the people who visited Southern Nevada in 2007 arrived by plane. Although that percentage has been fairly consistent for years, the importance of the airline industry to local resorts is bound to become even stronger in the future as Las Vegas attempts to attract high-end customers from greater distances to fill CityCenter, Echelon, Encore, Fontainebleau, the Plaza and other top-tier resorts that will charge the city's highest room rates.

Most of the city's visitors arrive on Southwest Airlines, which commands a 42 percent market share of the seats coming in. But Southwest doesn't dabble in international flying, one of the key tourism segments the convention authority is targeting to fill the new high-end rooms.

Most of the carriers that quit flying after filing for bankruptcy protection were minor players in Las Vegas.

A Southwest Airlines passenger jet takes off at McCarran International Airport. STEVE MARCUS / STAFF PHOTOGRAPHER

ATA, Aloha and MAXjet collectively had less than 1 percent of the local market. Minneapolis-based Champion Air, a charter carrier that announced it would discontinue service in May, also is a bit player at McCarran.

Denver-based Frontier Airlines is the largest of the bankrupt carriers at McCarran with 1.3 percent of the seats in the market, but it has vowed to continue to fly while it reorganizes its finances.

ATA, Aloha and MAXjet each cited the same reason for the decision to quit flying - the cost of fuel was too much for the airlines to bear. Earlier this week, the cost of a barrel of crude oil hit a record $117.

The three bankrupt companies weren't alone in pointing to fuel as the biggest problem the industry faces.

US Airways, the Phoenix-based carrier that is the second-busiest operator at McCarran, has 23.6 percent fewer flights today than it had a year ago. In February the company said it had dramatically scaled back its popular night schedule to Las Vegas because it made more sense for the airline to park its planes than to run them because of high fuel costs.

Southwest, consistently the most profitable airline in the industry, announced earlier this month that fuel would cost the company $500 million more this year than it did last year. That's about the total of what Southwest earned all last year.

Last week, the company reported first-quarter earnings of $34 million, a 63.4 percent decline from 2007's first quarter. Airline management said it would slow growth plans for the rest of the year, and it deferred delivery of some new planes on order. The plan to slow down is bound to affect Las Vegas since it is home to Southwest's biggest operation.

As fuel costs continue to drag airlines down, some are looking to industry consolidation as a means to hang on. Last week, Atlanta-based Delta Air Lines and Minneapolis-based Northwest Airlines formally announced merger plans that had been rumored and worked on for weeks.

Delta is No. 4 in market share in Las Vegas, thanks primarily to its dominant use of wide-body jumbo jets. Delta and Northwest say they won't close any of their respective hubs. Since those airlines' local presence is predominantly flying to their hubs, a reduction in flights doesn't appear to be on the horizon.

But that leaves Wall Street investors wondering where the savings would occur if the companies merge.

The answer could lie in another recent merger experience, between US Airways and America West Airlines in 2005. Former America West Chief Executive Douglas Parker, a crusader for industry consolidation, said the merged airlines would keep five hubs served by the two airlines at existing levels. Three years later, the US Airways hub in Pittsburgh has disappeared and capacity has fallen in Las Vegas.

Aviation consultant Mike Boyd of the Evergreen, Colo.-based Boyd Group, said Delta and Northwest are telling various players what they want to hear for now - but the reality of some of the merger plans could change over time.

The Delta-Northwest tie isn't the only merger under discussion. Various reports have had United Airlines talking with Continental and US Airways.

Parker told US Airways' employees in a memo that while he couldn't tell them about any prospective deals, he's willing to do what would be in the airline's best interests. The company was scheduled to report its first-quarter earnings April 24 after In Business Las Vegas' deadline.

Wall Street is a big fan of consolidation. Ray Neidl, an analyst for New York-based Calyon Securities, said in a note to investors that less capacity is essential for the survival of the industry.

"We believe that the fragmented airline industry needs to consolidate, and this merger will set off the necessary trend," Neidl said in his note on the Delta-Northwest deal. "Although projections sometimes can be overblown and problems underestimated in transactions of this type, we believe that in the long term the move is necessary. However, we also believe that ultimately more drastic cost cuts, like closing marginal hubs or simplifying the fleet, will be needed if fuel prices continue to climb."

Any merger has the potential of further consolidating operations and reducing the number of flights to and from Las Vegas.

Will the airline industry's troubles and potential solutions create problems for local tourism? It depends who you ask.

Clark County Aviation Director Randy Walker said for now, things aren't too bad. The county operates McCarran.

"From a long-term perspective, it's important to have a healthy airline industry," Walker said. "Something has to happen. If they (the airlines) all sink at the same time, we'd obviously have some real trouble."

But for now, the shakeout in the aviation industry is almost helping McCarran.

"Let me be clear that we would like as many people to come to town as we can accommodate," Walker said. "The slight reduction that we've had and that we're seeing now is not something that creates a huge concern at this level."

Walker was one of the first to sound a warning a couple of years ago that capacity was growing so rapidly at McCarran that it was going to overwhelm the airport. McCarran was on target to hit its theoretical annual capacity of about 53 million passengers before it could open Terminal 3 or Clark County could build a reliever airport south of Las Vegas in Ivanpah Valley.

The slowdown in growth could give McCarran the breathing room it needs to be able to accommodate more passengers comfortably.

So far, the capacity cuts that have occurred haven't hurt airport concession revenue, and customer satisfaction numbers are up.

"We've seen a little flattening in news and gifts, but food revenues did not go down," Walker said of current concession operations.

He explained that with the airport being less crowded, lines at the food vendors are shorter.

"People who fly get a little anxious when they see a line for the food vendor. They'd rather walk away than risk the chance of being away from the gate when their plane boards," Walker said.

The improved customer satisfaction numbers he attributed to the airport being less chaotic with the fewer people.

Although overall operations remain profitable and user satisfaction is high, Walker said some use patterns have to be modified and airport officials will begin looking at some operational changes in the future. For example, more people use the C and D gates than the A and B gates with the capacity reduction of US Airways. Walker said his staff would look at shifting some of the airlines with small operations at the D gates to A and B to balance things out and make the overall operation smoother.

Although fuel costs are hurting the airlines, Walker said they haven't helped themselves with their marketing techniques.

"Airlines have been their own worst enemy," Walker said. "The flying public never sees the value they get when they fly because they see all the additional costs that are added on."

Robert Mann, an airline analyst with R.W. Mann & Co. of Port Washington, N.Y., said airlines recently have "pressed the auto-gouge button" for their customers by adding fuel surcharges to ticket prices, charging passengers a fee for a second suitcase or adding a $5 charge for an aisle or window seat when they check in.

"The impact on leisure markets like Las Vegas is that it's going to cost more for a vacation," he said.

Airlines will have no choice but to charge more for tickets because of rising fuel costs. An aspect of the cost of a vacation that galls the airline industry is that room rates have climbed substantially since 9/11 but the airline industry has a difficult time getting increases in ticket prices to stick because of the hypercompetitive nature of the industry.

Mann predicts that airlines will attempt to negotiate better vacation packages with their resort partners so that they can still offer attractive deals to customers but not bear the entire brunt of the fuel bill.

Boyd agrees that airline capacity reductions are in play, but he doesn't think they will affect Las Vegas as much as other markets.

"You're not going to see the throng in front of the Bellagio thin out anytime soon," Boyd predicted. "Vegas is very important for moving traffic through the system. If they (airlines) cut capacity, it'll be in places like Omaha, not Las Vegas."

Boyd said a 2.2 percent drop in capacity isn't a big worry, but if it climbs to 5 percent or 10 percent, it's a different story.

Walker said he expects tourists will simply spend more money to get here, but less on recreation, entertainment, shopping, dining and gambling once they arrive.

There's some evidence suggesting that is already happening.

The convention authority's 2007 Las Vegas Visitor Profile Study published earlier this month says tourists on average spent more for tour packages, but less for food and drink, shopping, shows, sightseeing and gambling than they did in 2006.

Based on surveys conducted by GLS Research for the authority, the average cost per person for a tour package was $709.90 compared with $662.78 a year earlier.

But tourists on average paid $254.49 for food and drink (compared with $260.68 in 2006), $114.50 for shopping (compared with $140.86), $47.87 for show (compared with $50.81) and $8.31 for sightseeing (compared with $8.49).

Among those who gambled, tourists budgeted an average $555.64 for casino play in 2007 compared with $651.94 - a five-year high - in 2006. The 14.8 percent decline in the gambling budget came despite tourists spending more time playing - 3.4 hours a day compared with 3.3 hours a day in 2006.

But resort operators have to be encouraged with a response visitors gave related to their love for the Las Vegas market. Asked whether they would be "more likely" to visit Las Vegas even with more places to gamble outside Las Vegas, 48 percent answered favorably in 2007, the highest percentage in five years.