When the going gets tough, the tough find new markets. US airlines, suffering under record fuel prices, low-cost competition and a weakening domestic economy, are increasingly turning to more profitable international routes.
Year-to-date statistics show that almost half of Continental Airlines Inc's mainline operations are now international, up 9 percent on last year, and roughly 43 percent of United Airlines' operations are now outside of North America, helped by a 15 percent jump in trans-Atlantic business.
At American Airlines and Delta Air Lines Inc, growing international traffic now comprises roughly one third of their operations, and at Northwest Airlines Corp, international has grown to make up roughly 40 percent of its traffic.
"They are all making pretty good money on the international routes," said Ray Neidl, analyst at Calyon Securities. "So far, it has been a life-saver for a lot of airlines - it has been keeping the losses from being much bigger."
International routes are often more profitable due partly to less competition and the fact that better fuel efficiency can often be achieved on long-haul flights.
And with the "open skies" agreement between the European Union and the United States now in place, the trend of US carriers increasing their lucrative international routes is likely to gather pace. The first phase of "open skies" - allowing EU and US airlines to serve any route between the EU and the United States for the first time - took effect March 30 and replaced restrictive treaties dating back to World War Two.
"US carriers have been shifting many of their resources to international," said Patrick Murphy, principal of aviation consulting firm Gerchick Murphy Associates in Washington. "I see this (open skies) agreement as allowing them to accelerate something that was already under way."
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The opening up of London's Heathrow airport should further boost the international operations of US carriers. For decades, US access to Heathrow was limited to two US and two British airlines - AMR Corp's American Airlines and UAL Corp's United Airlines, along with British Airways and Virgin Atlantic Airways.
With "open skies" now in operation, other airlines have announced plans to cash in at Heathrow. Delta and Air France have a new joint venture to team up on routes linking major US cities and Heathrow in a direct challenge to British Airways. Delta will use Air France slots at Heathrow.
And Continental recently launched new flights to Heathrow from Newark and Houston. "Broadly speaking, greater access to more international markets provide carriers with new opportunities," said David Castelveter, a spokesman for the chief trade group of major US airlines, the Air Transport Association.
"For years, the international routes have been the most profitable of their routes." US carriers are also adding other international services. American Airlines will begin flying to Milan and Barcelona from New York's John F. Kennedy International Airport on May 1 and start a service between Chicago and Moscow on June 2.
"The network carriers are focusing on the international sector and using their domestic system more and more to feed the international," said Murphy of Gerchick Murphy Associates. "So it boosts their domestic system and allows them to add to international.
TSE eyes Indian firms to perk up Japanese market
TOKYO: The Tokyo Stock Exchange, facing a slide in listings by overseas firms, is eyeing yen-based depository receipts issued by Indian firms to help turn the tide.
The exchange last year allowed foreign companies to list Japanese depository receipts, and Japanese media report Indian car maker Tata Motors Ltd will be the first to seek cash in this way from Japanese investors, after its purchase of Landrover and Jaguar from Ford. A depository receipt is a security backed by a company's stock. Trading securities in yen cuts trading fees for Japanese investors, encouraging them to buy foreign stocks locally rather than shop offshore, said Yasuyuki Konuma, a director at TSE's listing department.
"India is our target because its economy is growing at an outstanding pace," Konuma told Reuters in an interview.
The number of foreign companies traded on the Tokyo exchange, the world's second-largest market, fell to 25 in December last year from a record 127 in 1991, exchange figures show, with trading value in foreign stocks collapsing by more than 90 percent in the past 16 years. Companies that dropped TSE listings during that period include Westpac Banking Corp, Deutsche Bank AG and IBM.
With investors increasingly looking globally for good places to put their cash, the Tokyo exchange's business faces risks if it only focuses on Japanese companies, Konuma said.
"The exchange will be left alone if we remain domestic," he said. Besides helping investors target India's growth, the TSE's focus is on Indian companies because they are not allowed to list their shares directly on foreign exchanges, said Konuma. Depository receipts get around that restriction.
Tata Motors, a low-cost rival to Japanese car makers that is zooming upmarket by buying Jaguar and Landrover from Ford plans to become the first company to trade depository receipts in yen on the Tokyo Stock Exchange, the Nikkei business daily said this month.
Tata may raise more than 100 billion yen ($986 million) to help fund the luxury brands purchase, the paper said. Asked about Tata's plans, Konuma said: "We can't comment on any company's attempt to list their shares until we approve the listing."
In other attempts to make foreign securities available to Japanese investors, the TSE last week listed an exchange-traded fund that tracks a stock index in China, the second such foreign-based ETF after the launch of one in November last year that tracks a South Korean stock index.
Trading value of foreign companies' shares peaked in 1987, during the Japanese bubble economy years, at 3.5 trillion yen ($34.5 billion) a year, the exchange says on its Web site.
That collapsed to a low of 24 billion yen in 2003 before rebounding a little to some 153 billion yen last year - a 10-year record but still only around 4 percent of the peak. Individual offshore stocks still only do a fraction of their trading through their TSE listings.
South Korean steel firm Posco listed its American depository receipts on the TSE in 2005. Some 50 million yen ($493,200) worth of its shares were traded in the week of April 7, TSE records show, compared with $916.4 million worth of shares traded in Seoul the same week.
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