WASHINGTON — A quarter of domestic flights failed to arrive on time in 2007 — the industry's second poorest performance on record — and analysts say it is likely to get worse.

More than 26 percent of commercial flights in the U.S. arrived late or were canceled last year as rising passenger demand and an industry preference for smaller planes intensified congestion in the skies and on runways. The air-travel logjam, reported yesterday by the Department of Transportation, comes as a growing number of air traffic controllers close in on retirement age — a trend the controllers' union says will magnify the problem.

The only time passengers had more difficulty getting to their destinations on time was in 2000, when more than 27 percent of flights were tardy or canceled. Back then, there were 31 percent fewer flights than in 2007, when carriers operated nearly 7.5 million one-way trips.

Excluding cancellations, however, 2007 was the worst on record for flight delays, with 24.2 percent arriving late, compared with 23.9 percent in 2000, according to government statistics that date back to 1995. The worst month of the year for the nation's 20 largest airlines was December, when more than a third of all flights were late or canceled, mostly because of the weather.

There is no sign of improvement on the horizon, analysts said, because airlines continue to replace larger aircraft with smaller ones. The practice is intended to maximize profit margins by flying with fewer empty seats, but it also means more flights and more congestion and delays.

The use of smaller planes also increases airlines' exposure to rising fuel prices, since it costs them more money per seat to operate, said Robert Mann, an airline consultant in Port Washington, N.Y. The industry has said that rising fuel prices are expected to again cut into profits this year, and some airlines have raised their fuel surcharges to compensate.

President Bush has demanded action to avoid another summer of record delays, but there is little consensus among airlines, airport operators, Congress and the administration on what should be done.

The Federal Aviation Administration has been locked in a contract dispute with the union representing air traffic controllers since 2006. While the agency insists staffing has no impact on flight delays, the union says congestion problems will worsen unless the government hires more air traffic controllers and pays them better.

"A smaller, less experienced workforce will have an adverse impact on system efficiency," said Paul Rinaldi, executive vice president of the National Air Traffic Controllers Association.

In an effort to address the airline delay problem, Transportation Secretary Mary Peters earlier this month said congested airports can charge landing fees based on the time flights land and traffic volume to encourage carriers to spread operations more evenly throughout the day.

But the Port Authority of New York and New Jersey, which runs John F. Kennedy International Airport, LaGuardia and Newark Liberty, said the new policy was a minor fix for a major problem. In 2007, those three airports had the lowest on-time arrival rates, and aviation officials say delays there cascade throughout the system and cause three-quarters of all flight delays.

The Air Transport Association, which represents the nation's largest airlines, also said a more comprehensive fix is needed.

The trade group and the Port Authority prefer flight-path changes and improvements aimed at increasing the flight capacity at airports.

Under another federal plan, New York City area airports will start flight caps in March, with JFK limited to about 80 flights per hour at peak times, down from about 100 that had been scheduled last summer. Similar caps, which already exist at LaGuardia, also will go into effect at Newark.

The airlines and the FAA, meanwhile, are pressing for a new $15 billion satellite-based air traffic control system, dubbed NextGen, that will take nearly 20 years to complete to improve operations.

Peters on Monday said the Bush administration's $68 billion fiscal 2009 budget proposal for the department would more than double the investment in NextGen technology to $688 million. But airport operators criticized the proposal for cutting the FAA's airport improvement program to $2.75 billion in funding, which is $765 million less than this year.

Atlantic Southeast Airlines, a subsidiary of SkyWest Inc., had the worst on-time arrival rate last year at 64.7 percent, while Hawaiian Airlines had the best at more than 93 percent. American Eagle Airlines, which operates regional flights for AMR Corp.'s American Airlines, had the worst December with more than 46 percent of its flights delayed by at least 15 minutes. Aloha Airlines had the best on-time arrival rate in December at 93 percent.