We've dedicated a lot of blog space here at Wired.com to outlining all the ways the airline industry is screwed and predicting that things will only get tougher. U.S. airlines are paying record prices for fuel and burning it in some of the world's oldest planes. They're also slashing services and alienating passengers. It's no wonder the domestic air travel industry faces a bleak future.
Foreign carriers, on the other hand, are livin' large despite the challenges. Germany's Lufthansa reported record profits last year, and British Airways saw its profits double. Over at Air France, company brass are saying fuel prices are hitting the bottom line hard and the airline must reduce its profit projections to $1 billion Euros. U.S. airlines wish they had that problem.
So why are international carriers doing well while domestic carriers circle the drain? Let us count the reasons.
Fuel costs are the biggest issue these days. Oil is denominated in dollars and the dollar is weak, which means European carriers can buy more fuel for fewer Euros. Yes, record oil prices are hitting the entire commercial aviation industry hard, but it's the U.S. carriers that are being knocked out.
The Europeans also don't have to deal with discount carriers like Southwest and JetBlue undercutting their fares. Oh sure, budget carriers like Ryanair and EasyJet crisscross the Continent, but they tend to fly leisure routes. The big boys have responded by simply redeploying planes to more lucrative business and international routes. Major airlines in America don't have this option because they compete head to head with the discount carriers in key business markets like New York, Los Angeles, and San Francisco.
The Europeans also have a solid presence in fast-growing international markets like China, India and Africa. Domestic carriers are expanding into these areas as fast as they can, but they're way behind the Europeans and losing business to them. What's more, even in those areas where domestic carriers have gained a foothold, they can't afford to fly the routes.
Only time will tell if things will improve in the long haul, but it doesn't look good for the short-term. European carriers are sinking a lot of their profits into new routes, new planes and improved customer service (We recently enjoyed a delicious roast beef sandwich on a 70 minute Lufthansa flight between Frankfurt and Toulouse.) and leaving U.S. airlines in the dust.
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Photo by Flickr user caribb*.
