Looks like Fodorites who predicted that airlines would cut back on the number of flights instead of airfares were correct:
http://www.boston.com/travel/article...rseas_flights/

i think the US airlines in particular continue to suffer, fares to the London, Paris & NYC from Bombay have dropped significantly over the past few months and only now have settled down in a range.

Perhaps airlines are cutting back on flights, but ALSO on prices! In late October, I purchased my USAir nonstop R-T to Greece for May, because it finally went down $100 .. it cost me $1198. Yesterday I looked at the new price for that exact flight -- and quickly called USAir. The current price is $728!! a 39% drop! Even after a $150 change fee, I saved $300.

I didn't mean to imply that airlines haven't cut fares - I bought tickets a week or two ago for a lot less than it would have cost a few months ago and much less than most flights were costing last summer. But if I hadn't already bought tickets, I probably wouldn't hold out any longer in the hope that I'd get a better deal later.

Airfares have gone down in spite of flight cutbacks. The airlines can only cut so much before they start having problems with their host airports and gate rights. So, there could be lower prices in the offing--note that fares from the east coast of the USA to Japan in April/May fell dramatically over the past week or so. From the $1,100 range to around $830--unfortunately I bought last month at just under $1,100. Same could happen in other months and for flights to Europe. Will it happen? Noone knows. But we will know soon.