US airlines are now trimming their international capacity, cutting back on flights that had been the last reliable source of premium revenue in a downturn that seemingly has no bottom.
As the cost of fuel became a real crisis, US majors expanded their flying overseas, with some carriers such as Delta transforming themselves from largely domestic airlines to predominantly international carriers.But, says Michael Derchin, airline securities analyst at FTN Midwest Research, international "has gone from the bread-and-butter to the weakest part of the business".
The volume of international transactions fell 12% in February, while its dollar-value plummeted 29.9%, says Airlines Reporting Corp, the US clearinghouse. "They're cutting to keep fares from completely collapsing."
Delta is the latest to trim international flying, pulling back on its transatlantic and transpacific systems this autumn. Ed Bastian, Delta's president, says it will cut Atlantic capacity by up to 13% and Pacific flying by up to 14% in the September timeframe. At about the time it took over Northwest, Delta announced 15 new international routes for this summer to Europe, Africa and Asia.
But the newest cuts come on top of Delta's already announced plans to reduce overall capacity this year by 6% to 8%. Bastian joined Delta chief executive Richard Anderson in telling the airline's employees that revenues "have weakened, particularly in international markets".
Other US network carriers are also trimming their international exposure, with United planning a 14.5% cut in the first quarter and a 5.5% cut for the full year, its chief financial officer, Kathryn Mikells, told an investor event. United will have grounded six of its Boeing 747s by year-end, and has reconfigured its international cabins so they have 20% fewer seats in premium sections.
Continental,meanwhile, is reworking its overseas network, cutting capacity between New York Newark and Amsterdam by 15%, says president, Jeff Smisek. "The transatlantic is weak from a business-travel perspective," he told the same event, the JP Morgan investors conference.
Source: Airline Business
