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 Delta is hoping to attract customers through its new partnership
with Virgin Atlantic, known for its high-tech and non-traditional
approach to flying, and its own boosted profile in New York, where
it expanded flights and renovated terminals.
Now under new management, American is trying to bounce back from
years of under-investment and market share losses, drawing from its
recent merger with U.S. Airways.
The New York-London route is popular with Wall Street executives who
are willing to pay for the priciest seats and who often travel at
the last minute. Eager for their business, airlines are using their
best planes on the route and investing in upgrades such as satellite
WiFi and seats that turn into flat beds.
The alliances provide more flights under one banner, and better
links to other U.S. and European cities. That convenience can win
over corporate accounts, locking in lucrative business travelers.
"This is a battle royale," said George Hamlin, an aviation
consultant in Fairfax, Virginia. "This is about who gets the
greatest number of the passengers who pay the most money."
American and joint venture partner British Airways <ICAG.L> have an
estimated 59 percent share of seats flown between the United States
and London's Heathrow airport, compared with about 24 percent for
Delta and Virgin, and United Continental Holdings Inc's <UAL.N> 14
percent share, according to a U.S. government filing by Delta and
Virgin.
IMPORTANCE OF NEW YORK
London is the top international destination from New York and
business-class fares can reach into the thousands of dollars, making
the route one of the most profitable.
For example, the highest possible business-class fare between John
F. Kennedy airport and London Heathrow on any given day is about
$18,200 round trip, according to Nick Fleetwood, a manager at Cook
Travel in New York.
While the airlines don't disclose New York-London revenue, their
Atlantic routes, which include destinations other than London,
account for significant income.
Delta's passenger revenue from Atlantic service rose 3 percent to
$5.7 billion last year, and the region supplied about 15 percent of
its operating revenue. American's 2013 Atlantic revenue rose 10
percent to $3.8 billion, accounting for about 14 percent of overall
revenue.
Delta says corporate customer interest has increased since its
Virgin venture formally began in January. While Virgin's hip image
and planes fitted with mood lighting and futuristic bars are part of
the lure, Delta is also aiming to win business travelers who
previously shunned it because of its weak schedule to London
Heathrow.
Delta offered just three nonstop daily flights between New York's
JFK airport and Heathrow before the tie-up. Starting next month, its
venture with Virgin will operate nine nonstops between the New York
area and London, and aim for flight times that are more convenient
for business travelers.
That compares with 17 daily flights between the New York area and
London from American Airlines and British Airways.
Delta-Virgin customers will also have greater choice flying to
London from other parts of the United States as the two airlines
fill holes in each other's route maps.
"Delta prior to this merger was a player but not to the extent that
it will be able to compete now," said Goran Gligorovic, executive
vice president with Omega World Travel, an agency that handles
corporate contracts with airlines. "The more reach an airline has,
either with alliances, code-shares or its own service, the more
interesting partner it becomes for any corporation," he said.
[to top of second column] |
FENDING OFF THE CHALLENGE
American must work through labor problems, complete gate
divestitures and meld computer systems following its exit from
bankruptcy and merger with US Airways late last year. Now the
world's largest carrier by traffic, American will refresh its fleet
with hundreds of new planes over the next few years.
American has put its flagship aircraft on the New York to London
route: a new extended range Boeing 777-300 that has separate cabins
for first and business class with fully reclining seats, as well as
coach seats with power outlets and USB jacks. Late last year,
American took an older 777 used on the route out of service to
upgrade it with lie-flat seating, citing a need to be competitive
with the Delta-Virgin venture.
Once the top carrier at both LaGuardia and JFK airports, American
lost its lead over the past decade. Meanwhile, Delta added flights
and upgraded facilities at Kennedy and LaGuardia, United merged with
Continental and built a fortress hub in Newark and JetBlue Airways <JBLU.O>
expanded at JFK.
American is now second behind Delta in passenger market share at
LaGuardia, and ranks third at JFK, behind JetBlue and Delta,
according to data for 2013 from the Port Authority of New York and
New Jersey.
American faces an uphill battle "to re-gain in a place where Delta
has staked a strong claim," said aviation consultant Hamlin.
One area where the American-BA partnership has a strong hold is in
first-class service, analysts said. Delta-Virgin and United offer
business-class seats from the New York area.
"BA has cornered off large parts of the corporate travel market,"
Goodbody analyst Donal O'Neill said. "That's hard to compete
against."
The American-BA partnership operates more than 50 round-trip daily
flights under its transatlantic venture, compared with more than 30
flights planned by Delta and Virgin.
And American-BA is adding flights. In early March, British Airways
began service from Heathrow to Austin, Texas, with flights five days
a week on a Boeing 787 Dreamliner.
O'Neill notes that British Airways has another advantage over
Delta-Virgin with short-haul connections within Britain and Europe
that bring more people to Heathrow and onto the transatlantic route.
The addition of US Airways hubs in Philadelphia and Charlotte, North
Carolina, strengthened American's East Coast U.S. reach and will
help it gain corporate contracts, said Kurt Stache, the airline's
senior vice president of alliances.
In addition, American benefits from US Airways' corporate accounts
in New York and the Northeast, said Robert Mann, an aviation
consultant in Port Washington, New York. "American is now going to
battle back after having been either in retreat or certainly not
quite as aggressive," he said.
For a graphic showing passenger counts to London from various U.S.
airports, see http://link.reuters.com/cyg97v.
(Reporting by Karen Jacobs in Atlanta, additional reporting by
Victoria Bryan in Frankfurt; editing by Alwyn Scott, Christian Plumb
and Frances Kerry)
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