As U.S. Airlines Struggle, Foreign Carriers Innovate

Foreign carriers have been buying new planes and updating luzury offerings while U.S. carriers fall behind.

After five years of losing billions of dollars, going in and out of bankruptcy and ordering money-saving service cutbacks, U.S. carriers are falling behind rival foreign airlines in the care and feeding of travelers, especially the long-haul passenger who flies in the front of the plane in business or first class.

Carriers such as British Airways, Cathay Pacific Airways, Virgin Atlantic Airlines, Singapore Airlines and Lufthansa AG have been buying new planes, installing elaborate entertainment systems, firing up in-flight e-mail and Web-surfing options, designing plush seats and recruiting celebrity chefs to create haute cuisine menus.

Continuing losses at big U.S. carriers, however, have not allowed them to buy state-of-the-art airplanes. At best, they have had to make do with upgrading business and first-class services.

"I almost always take foreign carriers overseas,'' says East Bay resident Rebecca Dixon. "In 2004, I flew Cathay Pacific to Bali and enjoyed that 20-hour journey more than I would have thought possible. I had my choice of seven continuous movies on my personal screen, frequent meals (choice of Asian or Western food), and efficient, friendly service, plus a bargain price in October. A year later, price led me to Korean Airlines, where the service and food was better than any U.S. airline I've ever flown.''

Travelers and travel industry experts alike say the U.S. airlines have a long way to go to catch leading European and Asian carriers -- especially at the front of the cabin, where high-paying passengers shell out thousands of dollars for long international flights. And that means U.S. airlines, which have lost $40 billion since 2000, may well continue to struggle, notwithstanding predictions of a busy summer with full flights and higher fares.

Foreign carriers profitable

Indeed, if it weren't for ailing U.S. carriers, the world's aviation industry would make money this year, according to the International Air Transport Association, an industry group whose 275 member airlines carry 94 percent of the world's air travelers.

At its annual meeting two weeks ago in Paris, the association predicted a worldwide industry loss of $3 billion in 2006, down slightly from 2005's $3.2 billion loss. The association's director-general and CEO, Giovanni Besignani, pinned the red ink directly on U.S. airlines, which lost $6.9 billion last year. They are expected to lose $5.2 billion this year.

To be sure, American carriers have their strengths. With passenger demand recovering and half a dozen small fare increases since the beginning of 2006, many carriers are at least losing less money than before -- though only low-fare pioneer Southwest Airlines is a consistent moneymaker.

Moreover, seasoned international travelers often like the global networks of the big carriers. Major airlines like American Airlines and United Airlines have held on to some customers because of their frequent-flier programs and premium services such as United's p.s. (for premium service), which flies business travelers in premium economy, business and first class between SFO and New York, and Los Angeles and New York.

Walt Stannard, a frequent flier from Berkeley, said, "My paid United miles are more than 500,000. I've flown about the same number using (United) MileagePlus miles. Though I now feel I'm taken for granted, memories of United flights long past and of once being romanced in the friendly skies keep me loyal. United is still my No. 1. It's sorta like we're married.''

With the revenue outlook starting to improve, American Airlines has decided to upgrade its business class on international flights. Beginning next year, American will install a flatbed seat -- a refinement that Cathay Pacific, British Airways and other leading foreign carriers have had for four or five years.

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