Several international airlines have throttled down long-haul operations by cutting frequencies and temporarily or indefinitely discontinuing routes. Including some services between major cities, many international city pairs previously seen as highly lucrative now are cost-prohibitive given fuel prices and other challenging market conditions.
U.S. carriers until last year had been directing lots of new growth to long-haul routes. As airline management teams carefully examine corporate demand, decisions to cut back mean that many transnational travel programs will be forced to revise airline preferences or consider less convenient routings.
At Delta, "we are paring down some of our international growth and taking laggards out of the network in the fall, anticipating that the robust growth we have seen for the past two years in international traffic and revenues will start to level out as we move into the fourth quarter," according to executive vice president Glen Hauenstein.
Delta cuts include New York JFK-London Gatwick (effective 30 August), JFK-Bucharest, Romania (2 October) and Atlanta-Vienna (4 October).
United Airlines has been one of the more aggressive U.S. carriers in cutting international flights. "We recognize the developing oversupply situation in the international marketplace," said COO John Tague. "Eliminating 8 percent of international capacity in 2009 will result in a substantial reduction in our current international losses."
United's discontinued routes include Chicago-Mexico City; Denver-London Heathrow; Los Angeles-Frankfurt; Los Angeles-Hong Kong; San Francisco-Nagoya, Japan; and San Francisco-Taipei. It also delayed nonstop service launches to Guangzhou, China and Moscow. Nevertheless, Tague said, "Our comparable value proposition for corporates is still quite robust from a network perspective."
Continental Airlines in the coming months will discontinue certain international routes, including Newark-Cologne, Germany, and some services to Latin America. "The softness we began to see in the transatlantic sector last quarter continued throughout the second quarter, which we believe is mainly attributable to the weak dollar," said Continental president Jeff Smisek. "We expect to continue to see this pressure on our year-over-year transatlantic yield throughout the third quarter, although we'll be dialing down our year-over-year capacity growth in that region."
Smisek noted that "our market intelligence shows that most companies are not significantly reducing their air travel budgets ... And while it's good news that we aren't hearing of travel budget decreases, for the most part, we also aren't hearing of many companies increasing their travel budgets to compensate for higher fares. So the number of trips taken will have to decrease if companies are to stay within their travel budgets." He said the situation varies by sector, with financial institutions particularly pressured to reduce travel costs by booking economy rather than premium tickets and taking other measures. Some oil and gas companies, however, "are living large and flying all around the world up front and spending money like drunken sailors."
At American Airlines, "we're hearing that companies are being more cautious and more closely scrutinizing their travel, and we've actually seen that business traffic has been down a bit year over year, but pretty modest reductions thus far," said CFO Thomas Horton.
AA's cuts include discontinued service between New York JFK and London Stansted, and between Chicago and Buenos Aires.
Like United, US Airways received approval from the U.S. Department of Transportation to delay new nonstop service to China. Philadelphia-Beijing flights now are scheduled to begin in March 2010. Elsewhere in the US Airways network, "we still have a long-term growth plan that includes more international service from Charlotte, but with high oil prices, it is more speculative than it was before," said US Airways president Scott Kirby. "It is still in our plan but it's 2011, 2012."
Other U.S. airline service cuts include Northwest Airlines routes; Amsterdam-Hartford, Conn., and Detroit-Dusseldorf, Germany, will be discontinued, while Minneapolis-Paris will be suspended for six months from October.
Advito vice president of consulting Bob Brindley said international network decisions by U.S. carriers are "not surprising as they focus on the least profitable, especially with fuel price increases. Clearly, clients are very concerned, both from a domestic perspective and an international perspective. As those services are ratcheted down, how does that impact their program and what steps do they need to take to potentially add a new carrier to their program or make other changes to their preferred carrier strategy?"
Meanwhile, more routes could have been eliminated if not for a decision by the U.S. Department of Transportation to deny a request by several airlines that would have allowed them to cut services without losing rights to serve the affected routes.
Non-U.S. airlines suspending or discontinuing overseas routes include Aer Lingus (Dublin-Los Angeles), Air Canada (Toronto-Rome and Vancouver-Osaka), El Al (Tel Aviv-Miami) and Thai Airways (Bangkok-New York).
"The days of airlines flying half full are fast disappearing," according to a statement by FCm Travel Solutions global executive general manager Anthony Grigson. "They are now firmly focused on the return on investment for every seat and every takeoff ... In some markets, bookings made up to a week in advance are no longer guaranteeing well-priced seats, and we're seeing more of our clients being forced to travel economy on relatively high fares."
Amid all the retrenchment, some global carriers are adding to their international portfolios through new long-haul services and/or new partnerships. The announcement that Southwest Airlines and Canada's WestJetare forming a marketing alliance, for example, is not surprising given Southwest's stated intention to expand its network beyond the continental United States.
Meanwhile, profitable and fast-growing Emirates Airlines is preparing to serve additional U.S. gateways this year with daily nonstop service between Dubai, and both Los Angeles (effective 1 October) and San Francisco (20 November). Ever-expanding easyJet will launch service from Manchester, U.K., to both Sofia, Bulgaria, (11 December) and Geneva (12 December). And while they will cut in some areas, U.S. carriers are sticking with plans to start certain new overseas routes. For example, Delta began nonstop JFK-Lyon, France, flights this month, offering connections to 40 European cities via joint venture partner Air France, and United in October will launch nonstop service between Washington Dulles and Dubai.