U.S. airlines target foreign routes for profit
NEW YORK (Reuters) - When the going gets tough, the tough find new markets.
U.S. airlines, suffering under record fuel prices, low-cost competition and a weakening domestic economy, are increasingly turning to more profitable international routes.
Year-to-date statistics show that almost half of Continental Airlines Inc's mainline operations are now international, up 9 percent on last year, and roughly 43 percent of United Airlines' operations are now outside of North America, helped by a 15 percent jump in trans-Atlantic business.
At American Airlines and Delta Air Lines Inc, growing international traffic now comprises roughly one third of their operations, and at Northwest Airlines Corp, international has grown to make up roughly 40 percent of its traffic.
"They are all making pretty good money on the international routes," said Ray Neidl, analyst at Calyon Securities. "So far, it has been a life-saver for a lot of airlines -- it has been keeping the losses from being much bigger."
International routes are often more profitable due partly to less competition and the fact that better fuel efficiency can often be achieved on long-haul flights.
And with the "open skies" agreement between the European Union and the United States now in place, the trend of U.S. carriers increasing their lucrative international routes is likely to gather pace.
The first phase of "open skies" -- allowing EU and U.S. airlines to serve any route between the EU and the United States for the first time -- took effect March 30 and replaced restrictive treaties dating back to World War Two.
"U.S. carriers have been shifting many of their resources
to international," said Patrick Murphy, principal of aviation consulting firm Gerchick Murphy Associates in Washington.
"I see this (open skies) agreement as allowing them to accelerate something that was already under way."
OPPORTUNITIES
The opening up of London's Heathrow airport should further boost the international operations of U.S. carriers.
For decades, U.S. access to Heathrow was limited to two U.S. and two British airlines -- AMR Corp's American Airlines and UAL Corp's United Airlines, along with British Airways and Virgin Atlantic Airways.
With "open skies" now in operation, other airlines have announced plans to cash in at Heathrow. Continued...
