ATLANTA/WASHINGTON (Reuters) - Delta Air Lines Inc (DAL.N) kicked off a sale on Memorial Day weekend that offered flyers one-way fares from New York’s LaGuardia Airport to Philadelphia for as low as $69.
The sale, which ended on Wednesday, was aimed at drawing attention to a host of new flights that forms the centerpiece of Delta’s effort to gain long-term supremacy in New York, the busiest U.S. air travel market.
Delta is spending at least $1.4 billion to add scores of flights and refurbish terminals at LaGuardia and John F. Kennedy International airports. In April it signed a pioneering deal to buy a Pennsylvania refinery to cut East Coast fuel costs. And it has invested heavily to boost its New York community profile, with major sponsorships of the Yankees, Mets and Knicks sports teams, as well as signing on as the official airline of Madison Square Garden.
Delta’s aggressive expansion positions it to woo business travelers from No. 1 United Continental Holdings Inc (UAL.N), the dominant carrier at New Jersey’s Newark airport, while also challenging bankrupt American Airlines and discounter JetBlue Airways Corp (JBLU.O), which are investing millions in their Big Apple hubs.
“Years ago, American was pretty large in New York. Now, Delta is dominant,” said Bebe Doyle of Doyle Associates, a corporate travel consultant based on Long Island, New York. “The Delta name is all over.”
At LaGuardia, Delta is offering 100 new nonstop flights this summer to 26 new destinations. The expansion was made possible by an unusual deal with US Airways Group Inc LCC.N, which swapped air traffic slots at LaGuardia for Delta assets at Reagan National airport in Washington.
By summer’s end, Delta will operate more than 260 flights out of LaGuardia in addition to 180 mainly international routes from JFK, where it is spending $1.2 billion on a terminal upgrade. New York will be Delta’s biggest hub after its home base of Atlanta.
More than 105 million passengers passed through the New York area’s major airports in 2011, more than any other U.S. market.
“New York is a dogfight, and it’s really the holy grail for many of the competitors out there,” said Chuck Imhof, Delta’s managing director for New York sales.
Delta’s New York connection dates to 1937. Acquiring Pan Am assets in 1991 gave Delta the shuttle service that provides flights between LaGuardia and key business cities such as Boston and Chicago, as well as the iconic saucer-shaped Worldport building at JFK, which will meet the wrecking ball by 2015.
But LaGuardia, the site of a former amusement park 8 miles from midtown Manhattan in Queens, is the key piece of Delta’s New York strategy.
New flights focus on key regional markets as well as destinations including Dallas, Louisville, Kentucky, Miami and Burlington, Vermont. Delta is counting on boosting connecting traffic at LaGuardia to 25 percent, from 5 percent before the flight expansion, said Glen Hauenstein, executive vice president for network planning and revenue management.
Helane Becker, a New York-based airline analyst with Dahlman Rose & Co, says LaGuardia will prove more profitable for Delta than it was for US Airways because of the use of larger planes. Delta is using two-class regional jets that carry 70 passengers on many of its new flights, while US Airways had flown lots of smaller turboprops that seated 50 or fewer.
Vaughn Cordle, a consultant with AirlineForecasts LLC, which analyzes data for investors, estimates the flight growth could bolster Delta’s revenue from LaGuardia by $300 million to $500 million annually over time, while adding $10 million to $30 million to annual profit.
Delta has estimated the new flights from the slot swap could boost revenue by $200 million.
The carrier says it is already seeing a payoff from the LaGuardia changes with gains in higher-paying corporate clients. In April, the first full month after the swap took effect, unit revenue, an important industry measure, rose in the high-single digits at the old US Airways facility it is using at LaGuardia, Delta said.
Doyle, the travel planner, said a major United corporate account switched to Delta recently, citing the increased service in New York and in other cities. She said business travelers like recent upgrades such as Delta’s Economy Comfort seats that offer more legroom.
Ed Grassi, a vice president at investment counseling firm J.W. Burns & Co in East Syracuse, New York, who flies to LaGuardia every other week or so, said Delta’s regional jets make for smoother flying than the US Airways turboprops.
“Now I use Delta exclusively if I can,” Grassi said. He said the Delta’s fares are “very comparable to a lot of other airlines and lesser than US Airways.”
Delta is not the only airline pouring money into New York. American Airlines, which has been operating under Chapter 11 protection since November, is spending $30 million on renovations at LaGuardia. In 2007 it spent $1.3 billion to complete its JFK terminal.
American once had a leading position at LaGuardia but now ranks No. 2 behind Delta, according to figures from the Port Authority of New York and New Jersey. American has also lost ground at Kennedy, where it ranks third in market share by passengers after JetBlue and Delta.
“Now that (American is) in restructuring, competitors will probably try and take advantage of that,” said Ray Neidl, an aerospace analyst with Maxim Group. A merger with US Airways, which has expressed interest in a tie-up, would help American better compete in the U.S. East, he added.
JetBlue Airways, meanwhile, is upgrading its facilities at JFK, where it completed a $743 million terminal in 2008. This summer it plans to start building international gates there.
The new investments and competition in New York add up to good news for consumers.
Blake Fleetwood, president of CookTravel.net, an online travel agency, noted that in recent years, Delta has offered competitive fares to Europe as it seeks to gain a foothold in New York.
Fleetwood recently flew out of LaGuardia to Richmond, Virginia, on a new route Delta added in late March.
“Before, I was trekking out to Newark or JFK” for that flight,” Fleetwood said. Delta “is going to swing a lot of business travelers over to their new service.”
Editing by Patricia Kranz and Prudence Crowther