U.S., International Airlines See Paths Diverge

"If you look at Asia, they clearly have hit a soft patch, [while] in Europe, you're starting to see a lot of softness," says Dan Kasper, managing director of Cambridge, Mass.-based consulting firm LECG. "On the North Atlantic, there has been a lot of capacity added, and that has brought down business fares, particularly into Heathrow."

"Most airlines are much more dependent on international [markets] than U.S. carriers are," Kasper says. "Our portfolio has more domestic in it, which hurt for a while, but the carriers have finally gotten things under control."

Among U.S. airlines, international capacity makes up the largest percentage of flying for Continental (CAL Quote), this year reaching 50% of its total. By contrast, Lufthansa doesn't even break out its home country of Germany in its reporting. Instead, it includes Europe and Germany as a single category, accounting for 68% of 2007 passenger revenue.

Industry consultant Robert Mann says rising fuel costs and reduced business travel are humbling European carriers.

"In the last six to eight weeks, some ominous noises have been coming out of Europe," because, until recently, the dollar's decline against the euro was making higher energy costs more evident, Mann says. Additionally, an increase in premium capacity across the North Atlantic -- including new Paris to New York flights by British Airways subsidiary OpenSkies -- seems to have coincided with a decline in travelers paying high ticket prices for the best seats.

"Every time you get to the end of a business cycle, the amount of premium fare travel goes down, because deals aren't being done and consultants, lawyers and investment bankers aren't traveling in first class any more," Mann says.