Delta plans new low-fare service

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Delta plans new low-fare service
By Marilyn Adams, USA TODAY

Delta Air Lines, the USA's third-biggest carrier, on Wednesday will=20
announce outlines of a risky new low-fare service to combat aggressive=20
discounters JetBlue, Southwest and AirTran Airways. In a move sure to be=20
closely watched by the industry, Delta is expected to announce it's=20
expanding =97 perhaps coast to coast =97 and renaming its Delta Express=20
low-fare subsidiary, people familiar with the planning say. Delta Express=20
was launched in 1996 to compete with low-fare giant Southwest Airlines on=20
lucrative routes between the Northeast and Florida. But the new service=20
will include flights from the East Coast to Las Vegas and possibly other=20
destinations in the West, people with knowledge of Delta's plans say. Las=20
Vegas, a major leisure destination, lost some service with the recent=20
shutdown of National Airlines. JetBlue just started service to Las Vegas.=20
Low-fare airlines =97 with lower cost structures and simpler fleets =97 have=
=20
become a presence in as much as 50% of Delta's domestic system, company=20
officials say.

Delta CEO Leo Mullin has repeatedly said low-fare carriers are his biggest=
=20
worry: Southwest is powerful in the Northeast and Florida. AirTran is based=
=20
in Delta's hometown of Atlanta. Two-year-old start-up JetBlue has quickly=20
become a force in New York, the nation's biggest air market. Delta's plight=
=20
is shared by American, United and the other traditional airlines that have=
=20
relatively high labor costs and fly many types of aircraft to both domestic=
=20
and international cities. But in an interview last spring, Delta Executive=
=20
Vice President Vicki Escarra said the airline is "more exposed than anyone=
=20
else" to discounters.

Delta spokesmen would say only that today's announcement will describe a=20
broad strategy, without details. But people with knowledge of Delta's plans=
=20
say they include:
=B7       Rebranding the low-fare service without Delta's name to separate=
 it=20
from the main airline.
=B7       Changing from Delta Express' Boeing 737s, which Southwest also=20
flies, to larger 757s so that labor and other costs can be spread among=20
more passengers per flight.

The strategy is viewed as risky in part because Delta's pilots union has=20
not been asked for wage concessions to support the new venture. Labor costs=
=20
at low-fare airlines are lower. Also, other airlines' low-fare subsidiaries=
=20
have failed. After the terrorist attacks, US Airways shut down MetroJet,=20
its answer to Southwest, because it wasn't profitable. United closed its=20
Shuttle by United in California for similar reasons. After the terrorist=20
attacks, Delta cut Delta Express flights in half to trim costs, and they=20
have not been fully restored. Florida is the source of 25% of Delta's=
 revenue.


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