Flying Higher

If you haven't booked a flight recently, you aren't missing much. According to a recent J.D. Power & Associates survey, customer satisfaction with the North American airline industry has hit a three-year low. That's not surprising, considering that a reduced number of flights has led to more crowded planes, skyrocketing fuel prices have boosted fares and the airlines' staff cutbacks have hurt customer service.

But while America's carriers are curtailing amenities, tightening frequent-flier mile programs and reducing routes, international passengers are enjoying better amenities and more destination options. What makes them so lucky? NEWSWEEK's Arlyn Tobias Gajilan spoke to Virgin Atlantic CEO Steve Ridgway about why international airlines are doing better than domestic carriers, whether increased fares are inevitable and whether biofuels can save the industry. Excerpts:

A weak economy and soaring fuel prices have forced America's legacy airlines to reduce flights, cut back on amenities and charge for checked baggage. Meanwhile, international carriers like Virgin have added routes and increased creature comforts. What do you know that U.S. airlines don't?
Steve Ridgway: We've done a lot of growing in the last four years, but we saw the writing on the wall and foresaw the other side of the economic cycle. We decided about two years ago to defer our aircraft orders, and we were also aggressive when it came to hedging our fuel costs; that's provided us a cushion but hasn't made us immune to the problems out there. The rising price of oil was not something we could foresee, and it's certainly sent everyone reeling. Also, as a long-haul carrier based out of London, we've been able to set our sights abroad and position ourselves to take advantage of growing international markets. It's important, we think, to invest heavily in our product time and time again, during the good times and the bad. We are riding high at the moment and are continuing to build our cash reserves.

Are you planning to use that cash to add more international routes? Or are you looking to expand by acquiring smaller airlines?
Potentially to do both. Europe's big carriers are in a strong position. It's the lesser carriers operating around them that are facing uncertainty. America's airlines are going through a consolidation period, and there will likely be a similar process in Europe. You will definitely see a big change in the names and the numbers of airlines flying.

When you talk about expanding, it doesn't sound like you're necessarily talking about more flights to the U.S. or in Europe. Where are you headed?
We made a conscious decision after 9/11 to diversify. At that time, 75 percent of our business was crossing the Atlantic. We've changed that and are focusing on getting 50 percent of our business into new markets that include Africa, where we're trying to offer a better level of service. We're in South Africa, [we] started flying to Kenya last year and are also in Lagos. We've also found that our level of service is in demand in Dubai and the [Arab] Emirates. And with the growth of India, we've begun daily direct service to Delhi and Mumbai.

Virgin helped pioneer the über-luxury class of service and amenities. Other airlines, like Emirates, Singapore and others, have followed up with private cabins, etc. What's Virgin doing to keep up?
We've always positioned ourselves differently. The real first-class market is extremely rarified. What we do is offer upper class at business-class fares. Our flatbed seats are still winning awards, and we've extended the experience outside of our cabins to our clubhouses, like the one at Heathrow's Terminal 5. There we've got a dedicated security facility that's 40 feet from the gate, and we can escort you through in under 10 minutes.