By Karen Jacobs
ATLANTA (Reuters) - Delta Air Lines (DAL) has been making inroads in the dogfight over the lucrative market for business travel between New York and London, but the newly merged American Airlines Group (AAL.O) is fighting back.
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 (IAG.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) 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.
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) 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)