This is going to be very interesting to watch. Acquiring a domestic airline may help Delta across the USA. However, if there is an acquisition looming on the horizon it will probably be one that helps Delta secure its dominance in NYC. This is going to be very fun to watch!
[B]BIG APPLE BATTLE: To play in the big leagues and score a profitable future, Delta Air Lines is going all out in one of the world's most fiercely competitive markets.[B]
By Jim Tharpe
The Atlanta Journal-Constitution
Published on: 10/21/07
NEW YORK —-
Delta Air Lines has declared what promises to be an expensive and very uncivil war in the Big Apple.
The Atlanta-based carrier, which emerged from bankruptcy last spring, has decided to bet a huge chunk of its future on one of the most hotly contested markets in the world —- a landscape dominated by well-heeled fliers, aging terminals, crowded airspace and fierce rivals who aren't shy about calling you out by name.
"This is a battleground for us," Delta President Ed Bastian said during a recent interview as he made his way through the frenetic lunch crowds in Midtown Manhattan.
Just a few blocks away, Delta competitor Continental Airlines had hoisted huge billboards near the intersection of Seventh Avenue and West 49th Street. One read: "Who flies to the most destinations in France? (Hint: It ain't Delta.)"
Delta has fired back by naming Mike Medeiros vice president of airport customer service at John F. Kennedy International Airport, one of only two such vice presidents at the airline; the other is Greg Kennedy at Atlanta's Hartsfield-Jackson International Airport.
The airline has spent $50 million to spruce up two 40-year-old terminals at JFK, the nation's international gateway. And it recently announced 14 new international flights from the hub, with more planned.
"JFK was one of the most difficult decisions we made," Bastian said. "We had to decide if we were going to stay and fight and win in this market or walk out and downsize and become a small little niche carrier."
In the end, Delta decided to play in the big leagues, setting in motion an aggressive series of moves the airline hopes will boost highly lucrative international and top-tier business travel. That strategy, Delta officials hope, will ultimately boost the carrier's bottom line.
The stakes are huge as the major airlines go head to head in an industry dominated by razor-thin margins, soaring fuel costs and near certainty that takeovers and mergers will trim the six legacy carriers to four or fewer within the next decade. Dozens of international airlines fly from JFK, but Delta's primary competitors are old-line domestic carriers Continental and American.
"Atlanta is Delta's home, but New York is up for grabs," said Joan Vincenz, Delta's marketing director of global development. "Delta has to be here. If we didn't think we could win, we wouldn't be here."
The airline recently took out full-page ads in The New York Times touting what it calls "T2," the JFK terminal dedicated to its upscale passengers. A refurbished Pan Am facility, T2 —- one of nine terminals at JFK —- is at the center of Delta's New York battle plan. T3 is primarily for Delta's domestic flights.
With its no-wait security lines and business-class lounge with wooden-door showers, the terminal focuses on Delta's plan to pamper its highest-paying customers—-those who sit in the front of the plane and worry more about time and convenience than the cost of a ticket.
Some of those customers could be paying $10,000 per seat next year when Delta introduces its new "lie-flat" seats that collapse into beds for its transoceanic flights.
A recent rainy Wednesday found Business Elite and Medallion passengers at Delta's JFK lounge nibbling on fruit and cheese, sipping free drinks and taking turns lounging in black-leather massage chairs as they awaited their flights.
Delta has contracted with U.S. Helicopter for another premium perk. It flies its top-paying customers to and from JFK aboard an eight-passenger chopper that can reduce the commute time to Midtown or Lower Manhattan from more than an hour by traffic-snarled taxi to about eight minutes in the air.
Delta still needs the passengers who search the Internet for the best possible deals on air travel. Those fliers fill the bulk of its seats. But the airline believes it is the big spenders like those who await boarding calls in the upscale JFK lounge who will drive future profits.
Atlanta is by far Delta's fortress in this fight, with 1,000 daily flights and 118 million "available seat miles," the metric airlines use to gauge performance. Cincinnati comes in second for number of flights, about 400 daily. But the New York market is Delta's No. 2 hub in available seat miles and revenue.
"Cincinnati and Salt Lake City are nice hubs, but they are small," Bastian said. "They can't take on the weight of Atlanta to provide some counterbalance. New York can."
Pam Elledge, Delta's senior vice president for global sales and distribution, estimates that one in four of Delta's premium customers comes through the New York market: JFK, La Guardia or Newark. Most fly from JFK.
She helped host a gathering earlier this month for New York-area corporate travel planners and travel agents at a Delta function in Midtown Manhattan.
After a few welcoming remarks, Elledge pointed to a stunning statistic that shows why the airlines are battling over the city. There was, she said, more than $1 billion worth of revenue wandering around the room that night.
"New York will be one of the most profitable areas we have," Elledge said in an interview. "This is a long-term commitment for us."
That commitment is not without considerable risks. The U.S. Department of Transportation has called on the airlines to meet later this month to discuss how to reduce chronic delays out of the New York area, one of the most crowded airspaces in the world.
And Delta will have to look at spending big bucks if it continues to focus on JFK.
In Atlanta, the airline plans to spend about $100 million to upgrade its antiquated luggage-handling system. Any major attempt to upgrade the JFK facilities—-moving to another terminal or building another one—-could cost much more.
"It could be $1 billion; it could be $2 billion," Bastian said. "You're talking billions, not millions, when you talk about New York."
DALE E. DODSON / Staff
INTERNATIONAL CROSSROADS
JFK International Airport is New York's gateway to the world. Among airlines operating there: Aeroflot (Russia), Aerop Mexico,
Air China, Air France, Austrian Airlines, Japan Airlines, Korean Air, Turkish Airlines, South Arican Airways, Biman Bangladesh,
LOT Polish and British Airways.
Map of JFK International Airport locates the nine terminals, including Delta's terminals (2 and 3).
Source: Port Authority of New York and New Jersey
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