As U.S. Airlines Struggle, Foreign Carriers Innovate

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.

United, too, plans to upgrade its premium international service. The Elk Grove Village, Ill., carrier, which came out of Chapter 11 bankruptcy protection Feb. 1, plans to spend $165 million to retool its business and first class next year, and will install redesigned seats.

Sophisticated planes

Still, those efforts are falling short of the money foreign carriers are spending on new aircraft and amenities.

All Nippon Airways and Singapore Airlines, to name just two moneymakers, are snapping up the Boeing 787 Dreamliner, which will go into service in 2008. Of the major U.S. carriers, only Northwest, which last year ordered 18, and Continental, which last week ordered 10, are buying the sophisticated new plane in significant numbers.

Made from light composite materials -- chiefly advanced plastics -- the 787, according to Boeing, will burn 20 percent less fuel than other planes of similar size -- a big deal for airlines in an era when the price of crude oil is hovering near $70 a barrel.

Indeed, the world's airlines would have been profitable last year had it not been for the sky-high price of fuel, according to the international association. The trade group's prediction of $3 billion in worldwide losses this year is predicated on an average price of $66 per barrel for 2006.

Leading foreign airlines, including Singapore, Emirates and Virgin Atlantic, are also placing orders for Airbus' next-generation A380 super jumbo for long-haul routes. Although planned deliveries of the 555-seater have been slowed because of Airbus' vexing problems with electrical wiring and the rough wake churned up behind the huge aircraft, the A380 will start flying by the end of this year and could transform long-distance travel over time.

For United, busy righting itself after its long flight through Chapter 11, buying new planes is an unaffordable luxury. "We have to earn the right to be able to do that,'' said spokeswoman Jean Medina, who said United's planes average a relatively young 11 years old.

Most American carriers reduced their fleets after the Sept. 11, 2001, terrorist attacks and during the economic downturn. Some, such as JetBlue Airways, the stylish low-cost carrier that has had two successive losing quarters after several years of profit, are still doing so. Last week, JetBlue said it will sell five of its Airbus A320s, but expects to turn a profit for 2006.

Last year, more than half of the 93 orders by American carriers from Boeing came from low-cost and regional carriers. Alaska Airlines ordered 35 Boeing 737s last year, according to Boeing, and Southwest ordered 10. This year, Southwest will expand its fleet to 480 aircraft from 445 -- all are Boeing 737s, said Southwest spokeswoman Whitney Eichinger. The largest version of the 737 in Southwest's fleet, the 737-700, is used chiefly on domestic routes.

Used in normal conditions and well maintained, the Boeing 737 can be used for 15 to 20 years as a passenger aircraft, according to a Boeing spokesman. The wide-body 747 has a lifecycle of 20 to 25 years, while the 787 could be safely used to carry passengers for 40 or more years, thanks to its composite structure, which is more flexible and durable than aluminum. Converted to carry only freight, these aircraft can gain a few more years in the sky, the manufacturer says.

With few if any new aircraft on the tarmac, major U.S. carriers will have to be content with tweaking planes they already have, flying new routes -- such as United's daily flight between SFO and Toronto starting in September --

and rethinking in-flight service.

Battle for London

But even after upgrading their first and business classes, United, American and others may still struggle to match innovative foreign competitors such as Virgin Atlantic, which flew far ahead of U.S. airlines during the last five years.

Both United and Virgin fly between SFO and London's Heathrow airport -- but some United fliers have to change planes in the United States before continuing on, while both Virgin and its larger rival British Airways fly nonstop and direct.

And there's service and price to consider -- not only in business and first class, but also at the back of the plane.

"Our family flew to (the United Kingdom) on Virgin airlines,'' said Geoff Caldwell of San Francisco. "They had advertised more legroom, and that they had. Leather seats and televisions (at every seat) were little bits of luxury that that were not found on other airlines. But most of all, the airfare was much less than the domestic airlines. The service was great in coach, and you did not feel that you were disturbing the flight attendants from their conversations with each other.''

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