Airlines' international growth hits headwinds

Runaway fuel prices and a weakening economy are forcing airlines to taper international expansion this fall, reducing the growth of new flight options from the USA to the slowest rate since 2003.

For October, airlines increased seats on non-stop flights from the lower 48 states to foreign destinations by just 1% compared with last October, a USA TODAY analysis of flight schedules shows.

Last year, they'd boosted seats by 5%, adding non-stop routes and frequencies to business destinations throughout Asia, the Middle East and elsewhere.

Yet, as oil prices continue to rise and pressure airlines to scrutinize their non-stop flight offerings, global business travelers are expected to suffer from fewer schedule reductions than jet-setting leisure travelers and U.S. domestic travelers.

"International business travelers really are the creme de la creme for airlines," says Chris Spidle, research director at Sabre Airline Solutions. "They typically are some of an airlines' highest-revenue travelers."

International airfares are also rising at a faster pace in October than domestic fares, which is helping the international market to outperform the domestic market so far this year, Spidle says.

According to a Sabre Airline Solutions analysis of fares bought through Sabre's computer reservations systems by June 30 for October travel, the average round-trip fare for an international ticket ($969) jumped 11.3% over a year ago. In contrast, the average round-trip ticket for a domestic flight ($309) cost 8.8% more than a year ago.

People who fly frequently outside the USA for business will also likely see fewer schedule reductions than other types of travelers for other reasons.

Airlines are generally reluctant to give up international routes that require more rigorous government approvals than domestic routes, Spidle says.

And airlines operate most international flights with larger jets, which provide better fuel efficiency per seat than smaller jets that fly within the USA, he says.

"You don't want to give up years of investment because of a temporary problem," Spidle says.

Business travel also continues to hold up for now in Europe, the USA's largest overseas market, says Brian Pearce, chief economist for the International Air Transport Association. He credits the weak dollar, which encourages European tourists to buy tickets on U.S. airlines and spurs export-related travel.

But not every flight is safe from reduction, elimination or postponement. And whether business travelers see their most common airline flights affected will depend on their preferred airline.

In October, United will reduce its international service slightly, with some cuts coming as it grounds older, less efficient aircraft. It's axing non-stop service between Los Angeles and Hong Kong, for instance, while launching new non-stop service to regions such as the Middle East.

Paul Mayo of Port St. Lucie, Fla., the Middle East sales manager for his company, says he's been able to shave hours off long journeys to Kuwait as United increased its non-stop service. And in October, United is going to start flying non-stop to Dubai, which will save him even more time when visiting customers.

"That's good news," Mayo says. "Usually, I fly through Frankfurt or Zurich on Lufthansa or Swiss Air. But with this (the Kuwait and Dubai service), you're saving connection time and gaining convenience, and there's less chance of your luggage getting lost."

Among the six U.S. airlines that provide half the service leaving the USA, half the carriers will reduce service. Besides United, American and Continental are also trimming international capacity in October by 2% and 3%, respectively. In contrast, Northwest, Delta and US Airways are scheduling more international capacity in October vs. a year ago. Northwest is adding 10% more seats, Delta is adding 6%, and US Airways is adding 3%.

Delta's additions for this fall will include newly launched service to Stockholm, Paris, Cairo and Georgetown, Guyana.

"The diversity of Delta's network has provided the financial balance we need to counteract the soft U.S. economy and tough fuel environment," Edward Bastian, Delta's president, said last month at an investor's conference. "International routes continue to be a boon for us."

Some of the service changes are coming in the form of postponements of flights that hadn't yet been introduced. Service between the USA and high-growth China, for instance, will take off more slowly than U.S. airlines had originally planned when they'd first applied for sought-after rights to fly there.

Citing higher fuel costs, US Airways received permission from the Department of Transportation to postpone the launch of Philadelphia-Beijing service for a year until March 2010. And United received permission to delay for 15 months the launch of its service between San Francisco and Guangzhou, China.

The foreign airlines, as a group, in October scheduled 3% more capacity than last year, with individual carriers taking different approaches. Like the U.S. airlines, they, too, are taking a varied approach to adjusting flight schedules.

Korean Air and KLM Royal Dutch Airlines, for instance, both scheduled 9% more capacity from foreign airports to the lower 48 states in October vs. a year ago, while Air Canada scheduled 5% less capacity. British Airways scheduled about 1% less capacity than last year.

Examples of flight cuts by foreign airlines this October include Aer Lingus' elimination of Los Angeles-Dublin service, and Mexicana's elimination of Portland, Ore.-Guadalajara, Mexico, service.