As a result, passengers reported fewer complaints even while cash-strapped airlines reduced flight schedules and charged for everything from bags and pillows to prime spots in boarding lines.

Airline performance has improved over the past two years. U.S. air travel surged to 770 million passengers in 2007, when airline performance suffered a near meltdown. Last year, with nearly 70 million fewer passengers boarding planes, airlines did a much better job as measured by such basics as on-time performance, mishandled bags, bumpings due to overbooking and consumer complaints.

“We kind of turned a little bit of a corner in 08 and were glad to say theyre continuing that generally positive (trend) for the consumer,” said Dean Headley, a Wichita State University professor and co-author of an annual analysis of airline quality. “Every airline that we looked at in 08 and 09 got better.”

One cloud in the otherwise friendly skies was a slight increase in denied boardings, mostly due to overbooking.

The reports findings are based on government statistics. An overall ranking of the 18 airlines was to be released Monday.

The top rated airline in 2008 was Hawaiian, which flies to ten U.S. mainland cities along with the Hawaiian Islands and to the Philippines, Australia, Samoa and Tahiti. At the bottom was Atlantic Southeast, which operates Delta Connection regional flights.

For 2009, American Eagle, which operates regional flights for American Airlines, had the highest rate of involuntary denied boardings at 3.76 per 100,000 passengers. Low-cost carrier JetBlue had so few denied boardings that its rate showed up as zero.

Passengers didnt check as many bags last year, perhaps in part due to those annoying baggage fees. Fewer than 4 bags per every 1,000 travelers were lost or damaged. The rate for lost bags last year was second best in the last 20 years and about half what it was in 2007.

Low-cost carrier AirTran fared best last year, with a mishandled bag rate of 1.67. The worst: Atlantic Southeast, at 7.87. Most of that airlines flights start, end or stop at Atlantas Hartsfield-Jackson, the worlds busiest airport.

The recession hit airlines hard, and they have scrambled for ways to generate income other than by raising fares. U.S. airlines collectively lost $8 billion in 2009, although regional carriers as a group were profitable, according to the Federal Aviation Administration.

More than 79 percent of airline flights arrived on time in 2009, 3.4 percent better than a year earlier. Fourteen of the 18 airlines included in the analysis improved their on-time performance from the year before. At the bottom was regional carrier Comair, with only 69 percent of flights on time. The airline, like Atlantic Southeast, operates Delta Connection regional flights. Only slightly better was Atlantic Southeast, 71.2 percent.

The ratings, compiled annually since 1991, are based on department statistics for airlines that carry at least 1 percent of the passengers who flew domestically last year. The research is sponsored by Purdue University in Indiana, and by Wichita State University in Kansas.

—

On the Net:

Study site: http://www.aqr.aero

Federal Aviation Administration: http://www.faa.gov

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But Canadian media reports indicate that WestJet is talking about a similar deal with Delta, which would transfer a few takeoff and landing slots at New Yorks LaGuardia Airport to the Canadian carrier.

Southwests executive vice president of planning, Bob Jordan, said Thursday that a WestJet-Delta deal could conflict with the Southwest-WestJet partnership. Jordan also said WestJet has made unacceptable demands of Southwest, which he didnt describe.

If the two cant work out their differences, Jordan said, Southwest will look for other ways to offer customers flights to Canada.

WestJet spokesman Robert Palmer said the Calgary-based airline “continues to have a strong relationship with Southwest and an agreement in place.” He declined to elaborate. Delta Air Lines Inc. declined to comment.

Dallas-based Southwest carries more U.S. passengers than any other airline, but it doesnt fly to other countries. In July 2008, CEO Gary Kelly announced that in “a big step,” the carrier would add service to Canada through a deal with WestJet.

Since then, Southwest announced plans to cooperate with Volaris on service to Mexico. It also would like someday to sell travel to the Caribbean and Europe.

Under a so-called code-sharing agreement, Southwest would sell seats on WestJet planes flying from a few locations in the United States to Canada. The two airlines would share the revenue. Code-sharing is cheaper for Southwest than expanding its own fleet for international flights.

The airlines initially planned to announce schedules and other details by the end of 2009. Gregg Saretsky, who became WestJets CEO on Thursday, has said Southwest wasnt ready.

In a statement Thursday, Southwests Jordan disputed Saretskys claim. He said the venture was going according to schedule.

“We are, and always have been, prepared to move forward to implement our agreement with WestJet,” Jordan said. If WestJet walks away to make a deal with Delta, he added, Southwest is still very interested in selling travel to Canada.

According to aviation consultant Robert Mann, Southwest ran into delays upgrading its technology to mesh with another airline in code-sharing.

Mike Boyd, who studied the deal for one of Southwests unions, said tapping the Canadian travel market, especially Toronto, with a partner would help Southwest but “is not an imperative.”

When Delta made LaGuardia slots available as part of a larger deal with US Airways, WestJet jumped at the opening, Boyd said.

WestJet started as a regional carrier in western Canada and has grown into a low-fare rival to Air Canada. Like Southwest, it uses Boeing 737 jets.

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“We are starting to see some blue skies ahead of us,” said IATA chief executive Giovanni Bisignani.

The group, which represents 240 airline companies worldwide, had predicted in December that 2010 losses would total $5.6 billion because of the “extraordinarily low” yields airlines are generating - the average price someone pays to fly one mile.

Yields are now expected to improve 2 percent for passenger planes, and 3.1 percent for cargo traffic this year, despite a glut of planes on the market and lower corporate travel budgets. Both key statistics dived 14 percent in 2009.

Passenger demand should grow 5.6 percent for the year, while cargo demand could jump 12 percent, IATA added. It said strong growth in Asia and Latin America was offsetting lagging demand in Europe and the United States.

“We are seeing a definite two-speed industry,” Bisignani told reporters. He noted that American and European travelers may take a longer time to return to higher-priced business class seats for short-haul flights, and said markets in their regions continued to contract.

European carriers are expected to post a $2.2 billion loss, the largest in the world, while North American airlines could lose $1.8 billion because of a jobless recovery and poor consumer confidence, the group said. By contrast, Asian-Pacific companies could make $2.7 billion and Latin American carriers another $800 million.

Bisignani said 2010 represents the halfway point in a recovery effort that could take three years - even if that still doesnt mean profits. Airlines should generate $44 billion in revenues more than last year, but that is still be $43 billion below the industrys 2008 peak, he said.

IATA warned, however, that higher fuel costs would hamper any industrywide rebound. It is now gauging an average oil price of $79 a barrel for the year, meaning $132 billion in costs for carriers. Thats over a quarter of all operating costs.

“Oil is a wild card,” Bisignani conceded.

Speaking on industry developments, he noted over 30 airlines were knocked out of business since the crisis began and that carriers have lost nearly $50 billion in the last decade. They now hold over $200 billion in debts.

“This is not the time for increases in salaries or prices for services,” Bisignani said, without mentioning specifically Lufthansas strike last month or similar action threatened at British Airways.

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If rivals are supportive, regulators said they would move to make the three airlines offer legally binding and drop an antitrust case that could have racked up millions of euros (dollars) in fines.

One rival, Virgin Atlantic, said the airlines offer was “woefully inadequate in counteracting the anticompetitive harm of a combined BA/AA,” claiming that it would hurt consumers by raising prices and destroying competition.

The three airlines currently coordinate how they sell and operate flights between the 27-nation EU and the United States. They now want to expand their oneworld alliance to jointly manage schedules, capacity and pricing on flights from Canada, Mexico, Puerto Rico, Norway and Switzerland as well.

That triggered antitrust investigations in the EU and the U.S. as regulators worried that combining the services into new territories would limit competition and hike fares on lucrative trans-Atlantic routes.

BA, American and Iberia claim that the planned new alliance would reduce fares and give passengers more convenient connections and better access to some 500 destinations.

Virgin said BA and American would have a monopoly or be dominant on some of the busiest and most profitable routes between the U.S. and London Heathrow, where they would control 47 percent of slots.

From Heathrow, the two would control all flights to Dallas Fort Worth, 80 percent of capacity to Boston, 70 percent to Miami, 68 percent to Chicago OHare, 62 percent to New York JFK and 48 percent to Los Angeles.

The EU has long been suspicious about how airline alliances such as oneworld and Star Alliance affect prices for flying between Europe and the United States. It is still investigating the Star Alliance run by Lufthansa, Continental, United and Air Canada as well as SkyTeam, which combines Air France/KLM and Delta/Northwest.

Airlines do not compete directly against other alliance partners on some routes and instead may share a code for the same flight and pool some staff and services to lower costs. Such alliances emerged because many national rules discourage airlines from merging for fear of losing exclusive rights to flying routes.

American Airlines and BA have tried twice in the past decade to form a closer alliance, but the carriers withdrew those bids after regulators insisted that they give up sought-after landing and takeoff slots at Londons Heathrow Airport, Europes largest air hub.

The airlines seem to have soothed antitrust concerns this time with their new offer to give up slots at key airports.

They also said they would help new services to connect with airlines on their own networks and would regularly tell regulators about their cooperation to help the EU evaluate how the alliance is affecting competition. A trustee will be appointed to monitor the offer.

The EU executive said it has been in “close contact” with the U.S. Department of Transportation, which is also investigating the airlines deal.

The Department of Justice said in December that the tie-up would cause competitive harm and hike prices unless the airlines surrendered some takeoff and landing slots.

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Other carriers have stumbled in the wake of the global financial crisis - notably Japan Airlines which filed for bankruptcy in January. Analysts say many of Air Indias problems are homegrown, born of decades of mismanagement and underinvestment.

And some feel the proposed fixes dont go far enough, largely because political pressures make layoffs difficult.

The National Aviation Company of India Ltd. (NACIL), which runs Air India, has agreed to trim costs by 19.1 billion rupees ($412.7 million) in the fiscal year ending in March.

The airline will cull its fleet from 146 aircraft to 105 by March 2011, to save an estimated 9 billion rupees ($194.4 million) in annual maintenance, inventory, personnel and fuel costs, the ministry said.

But, unlike Japan Airlines which has said it will lay off 16,000 staff, Air India has not announced layoffs - a politically delicate issue analysts say is necessary for a meaningful turnaround. Instead, the airline plans to farm off staff to newly created subsidiaries.

An attempt to trim performance-linked pay resulted in a five day strike by pilots in September, with some 400 canceled flights.

“I dont see in the current political environment how you can have layoffs,” said Kapil Kaul, chief executive of the India unit of the Center for Asia Pacific Aviation, an independent aviation research group.

But, he added, “If they are to do a meaningful restructuring, they will have to first ensure that headcount is substantially reduced.”

He estimates that the airlines 30,000 staffers cost about $800 million a year and should be slashed by half.

He said Air India has also accumulated an unserviceable debt burden of about $8 billion, which could rise to $15 billion as the company completes its acquisition of new aircraft.

The Ministry said Thursday that Air India managed to reduce its operating loss for the first half of the fiscal year by 23 percent, to 20.3 billion rupees($438.2 million) from the year-ago period, but Kaul says thats far from enough.

It has been a long fall from grace for the airline, which was founded by JRD Tata, one of Indias most revered industrialists, who built the salt-to-SUV Tata Group.

In 1932, Tata flew from Karachi to Mumbai in a single-engine de Havilland Puss Moth to inaugurate the first commercial air mail route in his budding corporate empire.

After Indias independence, the government took a majority stake and Tatas airline - which was ultimately christened Air India - became the nations flag carrier.

Kaul said that when India opened its skies to foreign carriers in the early 1990s, Air India, plagued by years of political interference and underinvestment, could not compete.

“It was an international symbol of India before we initiated liberalization,” he said. “It was a world class airline.”

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Theres been a surge over the last few years of U.S. carriers seeking joint ventures with foreign airlines to share costs and revenue on certain flights, regardless of which company owns or flies the aircraft. Those tie-ups could affect fares.

The Justice Department has said that allowing the American-British Airways venture could cause fares to rise up to 15 percent on some trans-Atlantic routes. A final decision by the DOT on the carriers antitrust immunity application will follow a 60-day public comment period.

Despite the antitrust concerns, the DOT said that it believes allowing the deal between American, British Airways, Iberia Airlines, Finnair and Royal Jordanian Airlines would provide travelers and shippers with lower fares on more routes, increased services, better schedules and reduced travel and connection times. It would also create competition with other carrier alliances.

Delta Air Lines Inc., the worlds biggest airline, and Air France-KLM already have antitrust immunity as part of their trans-Atlantic joint venture.

Joint ventures differ from codesharing agreements where one airline bears all the costs but another might get a share of the revenue for booking a customer on a flight.

American said in a statement Saturday it was pleased with the decision, though it didnt specifically address the conditions the DOT said it would require. American said it would respond in more detail later. It added that it is continuing discussions with European regulators.

The American plan could harm competition on select routes between the U.S. and Heathrow, where the availability of takeoff and landing slots is limited, the DOT said. Thats why the department is requiring some of the carriers slots be given up.

A slot is an interval of time during which an airline can takeoff or land its aircraft at an airport.

DOT also would require changes to the agreement to ensure capacity growth, and require the carriers to submit traffic data and implement the proposed alliance within 18 months of a final decision.

Separately, American, a unit of AMR Corp., based in Fort Worth, Texas, is seeking antitrust immunity with Japan Airlines to form a joint venture across the Pacific. Delta had tried to lure JAL to join its SkyTeam alliance, but was unsuccessful.

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“The cost reductions seem to be kicking in quite well,” said Gert Zonneveld, a transport analyst at Panmure Gordon. “Its a good performance but there is still a long way to go,” said the London-based analyst, who has a “hold” recommendation on the stock.

The airline reduced expenses by more than 10 percent in nine months, with reductions gathering pace to 14 percent in the third quarter, BA said in a presentation to analysts. Employee costs declined 10.2 percent in the quarter 492 million pounds and the fuel bill plunged 22 percent.

British Airways advanced as much as 4.9 pence, or 2.3 percent, to 216.2 pence in London trading and was up 1.5 percent at 8:25 a.m. BA has advanced 68 percent in 12 months. Air France-KLM Group, Europes largest carrier, fell 1 percent to 11.89 euros in Paris, and Deutsche Lufthansa AG, the continents No. 2, declined 2.1 percent in Frankfurt.

The U.K. carrier said its nine-month loss widened as the slump in demand for air travel persisted in the wake of the global recession.

Nine-Month Loss

The company had a loss of 245 million pounds, or 22.4 pence a share, in the three quarters though Dec. 31, compared with a loss of 127 million pounds, or 12 pence a share, a year earlier, it said in the statement. Sales fell almost 13 percent to 6.14 billion pounds, though the revenue slide eased to 11 percent in the fiscal third quarter.

British Airways has slashed capacity and pushed back aircraft deliveries as it seeks to preserve cash. BA is confronting its first strike since 1997 after failing to resolve a dispute with cabin crew over working terms.

“We still expect to make record losses this year,” Chief Executive Officer Willie Walsh said in the statement. “Permanent structural change is being introduced in all areas and will return us to sustained profitability.”

BA said it will have will have “similar” improvement in the fourth quarter compared with last year, excluding “any impact of potential industrial action.” The operating profit progress refers to earnings before interest and taxes.

Strike Threat

The group is also balloting members on strike action after a vote on a 12-day walkout was voided by a U.K. judge because it included workers who had already agreed to leave the company.

The airline is conducting informal talks aimed at averting a strike, the Unite union said yesterday. The two sides are “not miles apart,” the group said.

British Airways said Feb. 1 its presenting proposals to employees to address a 3.7 billion-pound pension deficit and enable a merger with Iberia Lineas Aereas de Espana SA. The merger with Madrid-based Iberia is subject to resolution of discussions between BA and pension trustees. The airline has a June 30 regulatory deadline to come to a pension agreement.

American Cooperation

British Airways also is seeking approval for a trans- Atlantic alliance with AMR Corp.s American Airlines.

BA and American, the two leading carriers in the Oneworld alliance, have asked for permission from U.S. and European regulators to create a joint venture for services across the north Atlantic, for the third time since 1996. The last attempt foundered in 2002 after U.S. regulators indicated theyd require the surrender of some London Heathrow airport flights to competitors.

The airlines are seeking clearance to cooperate on flights between the U.S., Mexico and Canada, the 27-nation EU, Switzerland and Norway.

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“These numbers are really shocking,” Bisignani said in an interview in Singapore today. “Weve had a terrible 10 years. It would take at least three years to recover the level of growth we have lost.”

Airlines worldwide suffered the worst drop in passenger demand since World War II last year, IATA said on Jan. 27. The global travel slump has pushed carriers including Singapore Airlines Ltd. and British Airways Plc into losses and forced Japan Airlines Corp. to file for bankruptcy.

Traffic, a measure of passengers flown multiplied by the distance travelled, dropped 3.5 percent last year, with declines exceeding 5 percent in Europe, North America and the Asia- Pacific region, said IATA, which represents 230 carriers.

The economic slump and credit crisis have cost carriers 2 ½ years of growth in passenger markets and 3 ½ years in freight, so that 2010 will be “another spartan year” of cost controls and capacity caps, Bisignani had said earlier.

British Airways, Europes third-biggest carrier, expects a “bigger loss” in the 12 months ending March 31 than it had in fiscal 2009, Chairman Martin Broughton said on Jan. 25. Singapore Air, the worlds second-largest carrier by market value, may have its first annual loss as a publicly traded company, the carrier said in July.

Bankruptcy

Japan Air this month became Asias first major flag carrier to seek bankruptcy protection after four government bailouts failed to revive the regions most indebted carrier.

More airlines will go bankrupt, Bisignani said today. About 34 carriers have gone out of business since 2008, according to IATA. Passenger yield, or the average price a traveler pays to fly one kilometer, will remain “flat” this year and increase only next year, Bisignani said.

Globally, airlines will probably post losses totaling $5.6 billion this year, the trade group had estimated. Thats about half of last years estimated $11 billion deficit.

While the industrys worst loss to date was almost $13 billion in 2001 following the Sept. 11 terror attacks, an $80 billion revenue decline last year was “vastly bigger” than anything previously experienced, according to IATA Chief Economist Brian Pearce.

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Japan Air has lobbied retirees to accept lower pensions as the carriers largest creditors are set to agree on a court-led bankruptcy. The Tokyo-based airline, also known as JAL, has already won approval from current employees for a 50 percent reduction in pension benefits as it is forecast to post a record loss.

“The company hasnt decided anything,” Satoru Tanaka, a Japan Airlines spokesman, said. “It is making every effort to get approval.”

The Yomiuri newspaper earlier today reported on the plan to dissolve the pension fund, which has 291.8 billion yen ($3.15 billion) in assets, the paper said.

The former employees have until Jan. 22 to accept or reject the proposed cuts. About 45 percent had accepted them as of Jan. 9.

Pension reductions are part of wider cost cuts aimed at helping return the airline to profit after three losses in four years. JAL is also cutting jobs and routes following a slump in international travel demand and is seeking loan write-offs.

Banks Agree

JALs biggest banks are set to agree to a bankruptcy proceeding, people familiar with the matter said yesterday. Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. are prepared to go along with a proposed court-led reconstruction of the airline, while state-owned Development Bank of Japan already agreed to the plan, people said.

JAL owed 429 billion yen to the banks, its four largest creditors, at the end of March, according to the company.

The carrier will file for bankruptcy in the week starting Jan. 18, and the Enterprise Turnaround Initiative Corp. will provide financial aid to keep the airline in operation, two people familiar with the negotiations said yesterday, declining to be named.

Shares of Japan Airlines fell 12 percent to 67 yen at the closing of trading on Jan. 8. The stock slumped 68 percent last year, compared with a 19 percent gain by the benchmark Nikkei 225 Stock Average.

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“Everything is the same. There is no extra security,” said an aviation official in Lebanon, one of the countries on the list. The official spoke on condition of anonymity because he was not authorized to speak publicly.

The administration of President Barack Obama ordered the changes after what authorities say was a failed attempt by a Nigerian man to blow up a jetliner bound from Amsterdam to Detroit on Christmas Day.

The U.S. Transportation Security Administration said the enhanced screening techniques would include full-body pat-downs, searches of carryon bags, full-body scanning and explosive-detection technology.

On Monday, passengers arriving on international flights reported they had been patted down individually, or had their luggage inspected by hand - steps that have been in place on many international flights since the failed bombing.

Passengers on a flight from Stockholm to Newark, New Jersey, were patted down and had their bags checked at the gate, flier Mark Biddle said. He said no passengers had been singled out for special attention.

In Nigeria, one of the nations on the U.S. list for additional security, there were long lines on the first day of the new rules. At the airport in Lagos, Mine Oniovosa, a 24-year-old student, said she had been told to show up more than seven hours ahead of time for a flight to Atlanta.

A Nigerian official pledged that everyone would be patted down at the countrys international airports. In Lagos, guards wearing latex gloves combed through bags, spending more than a minute on each one.

But at international airports in Lebanon, Syria and Libya, all on the list, there were no visible changes in screening. And several European governments, including Germany, France and Spain, said they were still studying the rules before tightening security any further than the steps they took after the failed Christmas attack.

“We will continue to work with our airline and international partners to ensure they meet both international and TSA security standards,” said Greg Soule, spokesman of the U.S. Transportation Security Administration.

Among the 14 nations are four - Cuba, Iran, Sudan and Syria - that the U.S. government considers state sponsors of terrorism. The list also includes Afghanistan, Algeria, Iraq, Lebanon, Libya, Nigeria, Pakistan, Saudi Arabia, Somalia and Yemen.

Passengers arriving at U.S. airports on international flights described a wide range of screening methods - from being separated by gender and patted down to nothing more invasive than normal airport security.

The additional security caused her flights to leave an hour later than scheduled, said Habhab, who is originally from Detroit and now lives in Washington.

“I felt personally violated, but I understand why the procedures are necessary,” she said.

Implementation of the tighter security measures that went into effect Monday depends on where airlines are operating, said Steve Lott of the International Air Transport Association. “It can happen in a matter of hours or it can happen in a day or two,” he said.

If the security measures are not followed, the U.S. Transportation Security Agency can penalize the airlines, according to a TSA official who was not authorized to speak about the enforcement rules. The penalties could include warnings and fines, and recalcitrant airlines could ultimately be barred from flying to the U.S.

In the Cuba, the Communist Party newspaper Granma denounced the new airport security measures adopted by the United States as a product of “anti-terrorist paranoia.” Cuba is one of 14 countries affected by the new measures because Washington considers the island a state-sponsor of terrorism.

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