STEVE INSKEEP, Host:
Airlines in the United States may be struggling; airlines overseas are not. Germany's Lufthansa posted record profits last year. British Airways says its yearly profits more than doubled. And so to try to understand why this is kind of a tale of two industries, we've invited in David Field. He's U.S. editor of Airline Business magazine, a regular guest here.
David, good morning.
DAVID FIELD: Good morning.
INSKEEP: How could it be that American airlines are struggling, charging extra for baggage, complaining about fuel costs, and overseas airlines are making big profits?
FIELD: Overseas airlines, particularly European airlines, are not exposed at home to the low-cost competition. They don't face a Southwest at home. That's because they don't fly very much at home. Lufthansa is 75, 80 percent overseas, long distance. British Airways the same. And if you do see a British Airways flight on a local route, it's probably a franchise carrier rather than BA itself.
INSKEEP: Does this mean that when fuel costs go up, if you're British Airways it's much easier for you to just jack up fares to customers?
FIELD: In Europe in particular it's easier to impose fuel surcharges. It's not easier to raise fares, but you can do it. And also when fuel prices go up, they pay less than U.S. carriers pay. U.S. carriers pay in dollars, and dollars cost so little buy that you have to pay more per gallon of fuel.
INSKEEP: Oh, let's make sure we understand this. Oil is bought and sold in dollars.
INSKEEP: And so U.S. carriers get the full impact of this. But if British Airways is buying in pounds or the airlines are buying in euros, those are much stronger currencies right now.
FIELD: Exactly. Exactly.
INSKEEP: Now, let's talk about one consequence of this. U.S. carriers are not adding routes to China, which must be one of the hottest destinations right now, because they say can't afford it.
FIELD: In the last two or three years there was a very fiercely fought competition for new routes to be given out by the D.O.T. One of the airlines that won one of the routes, U.S. Airways, says it can't afford to start up next year. The $60 million in annual fuel costs that U.S. Airways had estimated, it's gone up to $90 million.
INSKEEP: Does that mean that U.S. Airlines can't compete on the international routes with their international competitors?
FIELD: In a lot of cases it does mean that, that they have to rely on home traffic simply as a matter of habit.
INSKEEP: And there seem to be more and more overseas carriers trying to make a name for themselves. I think of Emirates Airways out of Dubai or Qatar Airways out of Qatar.
FIELD: Or Ediat(ph), which is a relatively new five-year-old airline from the Gulf states doing incredibly well, having established the Gulf states as a transfer point for long distance international travelers.
INSKEEP: Are there East Asian airlines jumping ahead as well?
FIELD: Certainly there are East Asian airlines that are doing awfully well, such as Cathay Pacific, Singapore Airlines - probably the greatest airline in the world. And they're doing well because they have a homeland base that enjoys premium service and is willing to pay premium dollar.
INSKEEP: What do you mean premium service for the East Asian airlines?
FIELD: People who sit in first class and business class and who will pay $3,000, $4,000, $5,000, $6,000 and $8,000 for a lot of personal space, a lie-down flat bad, and incredibly high levels of people waiting on you. And you don't see that in U.S. airlines.
INSKEEP: Can I just ask, is it possible, given the regulatory situation, for someday there to be an Emirates Air flight that I would take from Washington to Houston, say?
FIELD: Wouldn't that be nice? But right now, no, that's pretty much impossible. Local traffic rights, or cabitage, are very strictly limited. You cannot fly locally and pick up and drop off passengers. And until you see foreign ownership of or foreign investment in U.S. airlines, I don't think you'll see anything like that.
INSKEEP: David Field of Airline Business magazine. Thanks for coming by.
FIELD: It's my pleasure.
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