This article from NYTimes.com has been sent to you by psa188@juno.com. 3rd Shuttle Being Added to Busy Skies Over East Coast September 18, 2002 By EDWARD WONG On the surface, it makes as much sense as dumping gasoline on a raging fire. American Airlines, which has been trying to cut costs and scale back its flight schedule, will dive headfirst into the East Coast shuttle market next Tuesday, when it starts hourly flights from La Guardia Airport to Boston. On Oct. 1, it will begin hourly flights between La Guardia and Washington. American is introducing the service at a time when passenger volume on shuttle flights for both US Airways and Delta Air Lines have dropped significantly. Many business travelers are shying away from short-haul flights because of what airline executives call the "hassle factor" of airport security, and Amtrak has been drawing more Boston-to-New York travelers. But while American's strategy appears at first glance to have as much lift as a punctured balloon, the airline says that it can make money with a shuttle service by drawing members of its frequent-flier program away from US Airways, Delta or Amtrak's hobbled Acela service. American is offering triple miles until Dec. 31 on shuttle flights. Because American will be operating Embraer regional jets with 37 or 44 seats, it will need to fill fewer seats to break even than US Airways or Delta, which use larger jets as shuttles. The larger planes may give the two airlines a marketing advantage (more room to stretch out, anyone?) but their operating costs for each mile flown will be higher. "I think overcapacity is a common refrain in the entire route structure, but in this particular market, we feel there's a void for us to fill as a company," said Lisa Bailey, a spokeswoman for American Eagle, which runs American's regional jets. She said she expected many American frequent-flier members to fly the shuttle to accrue miles. Ms. Bailey said the fares for American's shuttles would be competitive. A walk-up one-way ticket from New York to Washington or Boston costs $226.50 on the Delta and US Airways shuttles. Prices could drop if one airline starts a fare war with the increase in competition, or if the addition of American's flights results in an oversupply of seats. The last year has not been kind to the shuttles. In the first six months of this year, Delta flew 345,220 passengers on its shuttle, while US Airways flew 322,776, according to the Bureau of Transportation Statistics. Those numbers were down more than 19 percent and 23 percent, respectively, from the period last year. Delta uses 156-seat Boeing 737-800's on its routes, while US Airways uses 150-seat Airbus 320's. Such planes are generally more comfortable than regional jets. They have also been outfitted with amenities, like power sockets for laptops on US Airways flights. "We believe we have a superior product," said David Castelveter, a spokesman for US Airways. "The Airbus airplane offers more head space, roomier space that is more important to business customers." But by using the low-cost regional jets, American will not have to capture a large market share to turn a profit. Darryl Jenkins, director of the Aviation Institute at George Washington University, said American's flights would account for about 10 percent of the seats in the market. American needs to get only 10 percent to 15 percent of the passengers to make money, he said. What is more, the carrier will need to fill only slightly more than 60 percent of each flight's seats for the flight to break even, Mr. Jenkins added. "They have reasonably good thinking," he said. "It makes it much, much easier to enter a market because you have less at risk." American's new shuttle could also be an attempt to defend against a possible East Coast market incursion by United Airlines, its largest rival, Mr. Jenkins said. United and US Airways have agreed to a code-sharing partnership, which is subject to government approval. American is betting that its shuttle service will break even because of its many frequent fliers. Some come from the many East Coast companies that have corporate travel discounts with American, providing an instant customer base. Measured by revenue, American has the largest market share in Boston and is tied with Continental Airlines in the New York area, said Jamie Baker, an airline analyst at J. P. Morgan. "Given American's market shares in New York and Boston, it certainly makes sense to connect the two cities," Mr. Baker said. But he pointed out that American was "using a regional-jet product, which some travelers might find to be less desirable." But the timing of American's entry could capitalize on technical problems with Acela train service, which has been cut back between Boston and Washington. This Friday, Amtrak will have a total of 40 Acela departures from Boston, New York and Washington, down 20 percent from the usual schedule. Amtrak estimates that it lost 76,000 passengers in the Northeast in late August because of Acela's problems. In mid-March, Continental, which has a hub in Newark, started a partnership with Amtrak to compete with the shuttles. Continental's frequent fliers earn miles when they buy tickets on certain trains that run between Boston and New York, or on trains that run from Newark to four nearby cities, said Bill Schulz, a spokesman for Amtrak. US Airways and Delta have tried hard this summer to lure travelers away from Amtrak with big advertising campaigns and offers of free miles or discounts if passengers spend more than 20 minutes getting from the ticket counter to the gate. Although American's shuttle will match its rivals with many amenities, like free coffee, snacks and newspapers, Ms. Bailey said, it has not put in place the 20-minute guarantee, and it will not have a special check-in area. http://www.nytimes.com/2002/09/18/business/18AIR.html?ex=1033353897&ei=1&en=51a2f811f8b217a8 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company