Why U.S. Airlines Can’t Compete

Meanwhile, aging jets are a big reason for the growing number of "air rage" incidents on U.S. flights. The older planes need more fixes, which wreaks havoc on tight schedules. To cut costs, major carriers have also retired some airplanes, so flights are more crowded: 80 percent full on average, up from 55 percent in the late 1970s. Yet with fewer attendants and support staff per passenger, it takes longer to board, to sort baggage and so on. If there's a problem with the plane, there are few spares, and delays tend to metastasize (a canceled flight can lead to a five-day wait for another one). No wonder travelers are fed up.

Even if airlines could afford new planes, it wouldn't be easy to add more flights. The busiest airports, such as JFK, don't have any more landing spots to sell, and regulations are so strict that it takes 15 years to build new runways. Several analysts suggested that Lufthansa bought a 19 percent stake in JetBlue this December mainly to get access to JetBlue's JFK landing slots.

More such deals are likely, assuming regulators let them happen. U.S. law forbids foreigners from controlling more than 25 percent of the voting shares of an American airline. So while Air France may be willing to shell out $1 billion to nab more U.S. routes with a stake in Delta and Northwest, the barriers are still daunting. Even Virgin doesn't control Virgin America, the airline it fought for years to launch here.

In many ways, the U.S. airline business is like steel. Americans once led the world, but as globalization took its toll, barriers erected to protect the industry ended up tanking it. The airline business is now being forced by necessity and by new trade regulations to open. The new deals will improve transatlantic travel, but it's hard to say whether they'll lead to steadier profits, or a better domestic ride. If you're looking to get from Phoenix to Philly, there's always the bus.

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