U.S. carriers add transatlantic flights for travel-hungry consumers

By Rajesh Kumar Singh

CHICAGO (Reuters) – U.S. carriers including Delta Air Lines and United Airlines are betting big on American consumers’ unquenchable thirst for transatlantic travel by adding more flights to Europe.

U.S. airlines are responding to consumers buoyed by a stronger U.S. dollar and more flexible work arrangements that allow them to work from wherever they want, extending the travel season into the fall, industry officials said.

“For Americans going to Europe, it’s a currency bargain,” Ed Bastian, Delta’s chief executive, told Reuters. “Europe is probably our strongest region, even stronger than our domestic demand.”

Transatlantic is the most profitable travel market in the world. In 2019, before the COVID-19 pandemic, it accounted for between 11% and 17% of passenger revenue at the three largest US carriers – United, Delta and American Airlines.

United and Delta are best positioned to generate more revenue from increased demand for international travel because of their stronger global footprint, said Guido Petrelli, CEO of Merlin Investor, which tracks the airline sector.

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Starting this month, Delta plans to operate more transatlantic flights than it did before the pandemic.

The Atlanta-based carrier typically curtails its transatlantic schedule in September after the Labor Day holiday, which marks the unofficial end of the US summer season. But this year it is instead adding an undisclosed number of flights to its October and November schedule. Delta’s move comes after United grew its transatlantic capacity by 22% in the September quarter compared to the same period in 2019, becoming the largest US airline in the transatlantic market.

THE NEW AMERICAN DOLLAR

For Ohio tech professional Jenna Charlton, the strong dollar made extending a business trip to Germany by up to three days next month a no-brainer. She noted that her spending power is at least 30% higher than her last trip to Europe in 2017.

“Last time I went I was much, much lower against the pound,” Charlton said. “This time, it will be significantly less expensive.”

The strong dollar, which hit a 20-year high this year, is a boost. With an 18 percent gain against a basket of major currencies including the euro, the Japanese yen and the pound, the greenback has boosted Americans’ spending power and made foreign travel much more affordable.

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Travel website KAYAK said searches for international travel, including Europe, from the United States were up nearly 40 percent from last year.

For United, higher capacity led to a 40% increase in European passenger revenue in the third quarter, accounting for 21% of total passenger revenue. United said demand for transatlantic travel remained “incredible” through the fall. It plans to increase this capacity by 30% from pre-pandemic levels.

JetBlue said last month that its flights to London from the United States are fully booked. The New York-based carrier is adding more flights across the North Atlantic, increasing from one daily flight last summer to five by this fall.

Foreign airlines face rising costs for everything from fuel to aircraft due to the dollar’s rise against their local currencies. Conversely, a stronger dollar reduces non-dollar costs for US airlines.

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US carriers also have less exposure to exchange rate risks because most of their revenue tends to be denominated in dollars.

Bastian said the international outlet currently accounts for less than 10 percent of Delta’s revenue.

Airlines say hybrid working arrangements also help with bookings.

United CEO Scott Kirby said hybrid work made every weekend “a holiday weekend”.

Stronger demand, however, has increased ticket prices. Average economy fares for a round-trip flight from the United States to Europe rose 17 percent year-over-year this month, TripActions says.

Analysts have warned of a slowdown in travel spending, citing rising airfares, high inflation and rising interest rates. But consumer demand, so far, has been resilient.

Ryanair CEO Michael O’Leary issued a note of caution. In an interview last week, he said the rising cost of living as well as rising interest rates would affect customers’ disposable income.

(Reporting by Rajesh Kumar Singh; Editing by Josie Kao)

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