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Delta takes cut-rate route
By STEVE HUETTEL, Times Staff Writer
Delta Air Lines is breaking out a new weapon to battle low-fare competitors for budget-minded travelers headed to Florida. The nation's third-largest carrier will launch a new, all-coach airline in the spring, initially flying nonstop from New York and Boston to the Sunshine State's two biggest leisure markets: Orlando and Fort Lauderdale. One-way fares will range from $79 to $299. Flights to Tampa International Airport will follow soon after, John Selvaggio, who will be president of the as-yet-unnamed airline, said Wednesday. The Delta offshoot also will perform some maintainance work on its Boeing 757s at Delta's hangar at Tampa International, he said, and use Tampa as a work base for flight attendants. "Tampa is very much a part of this," said Selvaggio. "Tampa's at the top of our list." The new airline will expand to other Florida cities later next year and eventually branch out to more large markets in the East and Midwest. Delta expects to announce the new name and start accepting reservations in February. The low-fare carrier replaces Delta Express, launched six years ago after Southwest Airlines first touched down in Florida. Delta has been promising for several months to come up with the new strategy it announced Wednesday. Delta remains the biggest airline in Florida but has lost market share to Southwest and two other low-fare competitors, JetBlue Airways and AirTran Airways. At Tampa International, Delta holds a thin lead over Southwest as the top carrier, with each flying about 21 percent of the airport's passengers. "Low-fare carriers have been making significant inroads," said Leo Mullin, Delta's chairman and chief executive. "Delta intends ... to meet the low-fare carriers head-on -- first to halt their progress and then to regain competitive share." Big hub-and-spoke airlines such as Delta have lost billions of dollars and cut tens of thousands of jobs as the industry struggles through its worst financial slump in history. Their biggest problem is the decline in revenue from business travelers, who either aren't flying or refuse to buy full-fare tickets. More than 70 percent of customers now make their purchase decision "almost exclusively on price," said Delta president Frederick Reid. Only a handful of airlines with low operating costs -- Southwest and JetBlue among them -- have been able to squeeze out a profit. Delta plans to cut costs at the new carrier with larger planes, more intensive schedules and technology that lets customers book their own flights and check themselves in. The airline will fly 757s with 199 seats, about 50 percent more than Delta Express' Boeing 737s. Fares from the extra passengers will more than offset additional fuel and other higher costs of flying a bigger plane, Delta officials say. And the new airline's planes will spend more time in the air -- an average of 13.2 hours a day. That's two hours longer than Southwest, an industry leader in aircraft utilization. Delta expects to get more out of the low-fare carrier's employees as well. Four flight attendants will work each flight, compared five or six on Delta 757s with two classes of service and nearly 20 fewer seats. "Say we've got a gate in Tampa averaging four flights a day now, and with the new airline we can get five or six with the same number of employees," said Selvaggio. He also hopes to cut costs by processing as many passengers as possible without using employees. By promoting its Web site in advertising, the airline expects to book 70 percent of customers online. People shopping by phone will be steered to an automated reservation system, Selvaggio said, although a live person will always be available. At the airport, passengers will be encouraged to check in and get boarding passes at computer kiosks, freeing up ticket agents for other tasks. The new airline will have its own pilots and flight attendants separate from Delta, he said. In some large cities, baggage handlers and customer service agents will work exclusively for the low-fare carrier. New employees will be recruited from Delta's ranks and be paid the same salaries as regular Delta employees, Selvaggio said. The history of major airlines beating low-fare carriers at their own game is littered with failures. Continental Airlines, US Airways and United Airlines launched low-fare divisions in the last decade, only to fold them when times got tough. They couldn't match Southwest's low costs or lean operating style. "The big airlines have to do something to compete with low-cost carriers," said Ray Neidl, a Blaylock & Partners analyst. "Delta can do this a little bit more easily than the other network carriers because they are largely non-union." -- Information from Bloomberg Business News was used in this report. Steve Huettel can be reached at huettel@sptimes.com or (813) 226-3384.
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From the Times Business report
From the AP
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