In the face of fierce domestic competition, US carriers are looking to international markets where profitable operations are more likely
US mainline carriers are still haemorrhaging money and are facing continuing pressure on fares and yields on domestic routes. In response they are focusing new attention and substantial capacity increases on expanding international services.
The carriers began upping their transatlantic, transpacific and Latin American services last year and are going full-tilt internationally this year as well – beginning new routes, adding frequencies to existing markets and substituting larger aircraft for smaller ones where demand permits.
Continental Airlines is especially aggressive. The carrier is opening five transatlantic routes from Newark, all with Boeing 757-200s; beefing up frequencies on two other Atlantic routes, and will begin newly approved Newark-Beijing service on 15 June using a 283-seat Boeing 777-200ER.
The new Beijing flights will make Continental the only US airline linking China with the New York area. The airline also plans to fly to Lagos, Nigeria, later this year, becoming the only US carrier to offer a scheduled service to Africa. Furthermore, Continental is adding points to its extensive network in Mexico, bringing to 30 the number of destinations served by the carrier and its regional partner.
In recent years, Continental has been steadily increasing its international reach and now serves more foreign destinations than any other US airline. Last year, its international capacity rose 15.6% with traffic on international routes jumping 21.2%. "The ratio encourages us to do more," says Continental. "It tells us the extra capacity we're putting in is being readily absorbed with new traffic."
American Airlines also has been eager to move capacity to the international sector. Last year, while its domestic capacity was up a negligible 1.1%, international available seat kilometres rose 16%, with international traffic outpacing the increase, advancing by 17.8%. "We've been pretty clear about shifting some of our capacity to international markets," says American. "On domestic routes, especially the large- and medium-sized markets, there are a number of carriers competing for the same passengers, so we're seeing historically low fares and low revenues. We're finding markets internationally that aren't in the same situation, where customers are underserved." Last year, about 25% of American's capacity was in international markets. "This year, we'll be closer to 30%," says the airline.
American expansion
American is starting two new transatlantic routes – Boston-Shannon and Chicago-Dublin – and adding a second daily flight to São Paulo, Brazil, from Dallas Fort Worth (DFW). Even more capacity will be added to Asia-Pacific, which last year saw a 37.6% increase in traffic on a 27.7% rise in capacity. The carrier is beginning a new service Chicago-Nagoya, resuming DFW-Osaka flights and next year will begin long-sought service to Shanghai from Chicago.
Delta Air Lines next month starts flights from New York to Chennai, India, with a stop in Paris. Besides new nonstops this year to Berlin, Delta also, pending final approvals, will begin nonstops from Atlanta to Moscow in June and to Rio de Janeiro in October.
Northwest Airlines expects capacity on its Asia-Pacific routes to be up 10-11% in the first quarter but a less ambitious 3-4% for the year as a whole, as it added substantially to services in 2004. It nearly doubled its Detroit-Tokyo service and began new Portland-Tokyo and Tokyo-Guangzhou flights. The airline expects capacity on the Atlantic to rise 11-12% this year, in large part because it is steadily replacing ageing 273-seat McDonnell Douglas DC-10s with new 298-seat Airbus A330-300s.
More capacity
United Airlines, which boosted international capacity by 14.9% last year, plans an even greater increase this year, particularly to the Asia-Pacific, with new routes, added flights and increased aircraft sizes.
Among European mainline carriers, British Airways has just a slight increase in capacity on the North Atlantic this year to accommodate the peak summer travel season. Air France, though, expects a 12% increase in transatlantic capacity through additional frequencies, the relaunch of its Cincinnati service and the opening of its 13th US gateway at Detroit.
Craig Jenks, president of Airline/Aircraft Projects, told the Network 2005 gathering of airline and airport route planners in Orlando in March that preliminary data indicate the addition of 22 daily frequencies on the transatlantic – 13 from the USA and nine from European airlines – this July over last year. Overall transatlantic capacity, including new and expanded services and changes in aircraft sizes, will be up 4-5% this summer over 2004, which Jenks called "relatively controlled" growth. "That's actually quite modest given the traffic recovery and even the yield recovery in the market," he says.
Low-fare long-haul
Despite talk of new US low-fare start-up service on the Atlantic, those new services, at least as of now, will be offered by European carriers. Using 282-seat A330s, the Italian airline Eurofly will offer three-weekly flights to Naples, three to Bologna, and one to Palermo from New York JFK this summer. Also from JFK, the German carrier LTU will fly A330s to Düsseldorf six times a week.
There is still a possibility that a new US-based low-fares carrier could ply the transatlantic skies this year. SkyLink Airways, based outside Washington, has won preliminary approval from the US Department of Transportation (DoT) to begin international low-cost, low-fare service. The carrier has sought authority for flights between the USA and 15 international destinations, including London and six other European cities, using Boeing 767-200ERs.
SkyLink offered as "an illustrative service proposal" a route between Baltimore/Washington International and London Stansted. However, its website has been offering employment opportunities, including general manager and sales manager positions, in New York, leading to expectations that its initial US operations may well focus on JFK.
The start-up also told the DoT it would explore opportunities to partner with other carriers to serve as feeders into its transatlantic services. This would allow low-cost, low-fare carriers on both sides of the Atlantic to feed passengers to SkyLink, probably without formal codeshare or interline deals. Both SkyLink and Riviera Jet, another potential US low-cost start-up, are still looking for funding, Jenks notes.
Janice Holden, director of marketing and business development for JFK's Terminal 4, which will be home to Eurofly and LTU, says it is seeing interest from companies seeking to provide new high-end services across the Atlantic. They would be similar to the 48-seat all business-class flights offered by Lufthansa on three USA-Germany routes operated for it by PrivatAir. Low-fares Eurofly expects to begin such a service between New York and Milan in the fourth quarter of this year using a 48-seat Airbus A319, according to Holden.
High-volume markets
The new companies want to provide more exclusivity on high-volume, point-to-point markets like New York-London on business class-equipped Boeing 737s or A319s. Service would include limousines to the airport and expedited check-in and services. "Terminals have to figure out ways to accommodate this demand," Holden says.
The $1.3 billion Terminal 4, opened four years ago, also will be used this summer for two new long-haul services. Thai International Airways, using Airbus A340-500s, will inaugurate 17-hour nonstop flights between New York and Bangkok six times a week next month, moving to a daily service in October. Air Tahiti Nui also will begin nonstop service three times a week between New York and Papeete, Tahiti, on 4 July. The service, using A340-300s, will be the first time the South Pacific will be linked nonstop to New York.
CAROLE SHIFRIN WASHINGTON
Source: Airline Business
