More knowledgeable people (that is, Dirty Water, Tunefink, and others) will see this and chime in to help you.

From the photo, it is hard to see whether there is a gap between the leather and the spacers, or if it is a situation where the leather has shrunk to a smaller diameter than the spacers.

These are nice older knives! The more sophisticated collectors can advise whether to do anything that might affect the current appearance and maybe the value.

Larry