This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ Explore more of Starbucks at Starbucks.com. http://www.starbucks.com/default.asp?ci=1015 \----------------------------------------------------------/ Delta Gets Some Stiff Competition on a Key Route May 28, 2003 By EDWARD WONG LOS ANGELES, May 27 - Delta Air Lines is scrambling to cope with competition that has spread as quickly here as a California wildfire: two low-cost airlines are challenging it for passengers between this city and Atlanta, on what until now was the country's biggest nonstop route with no rivalry. The entrance of JetBlue Airways and AirTran Airways into the market is forcing Delta to increase by about 50 percent the number of daily flights and to offer triple miles to frequent fliers on that route. Most noticeably, it has also drastically cut fares - from at least $1,151 for a one-way walk-up ticket in March to $249 for a nonrefundable one-way walk-up fare in June. Delta's response is typical of the behavior of big network carriers when low-cost rivals encroach on their routes. JetBlue made its inaugural flight between Atlanta and the airport in Los Angeles County's second-largest city, Long Beach, on May 8, and AirTran is starting twice-daily service on June 4 between Los Angeles International Airport and Atlanta, which serves as a hub for both it and Delta. The Los Angeles-Atlanta route is Delta's second-largest domestic market, and the airline is not about to give up those passengers without a fight - even if that means losing money in the short term by ramping up its operations at a time when air travel is sluggish. The intense rivalry on this route and the consequent benefits for travelers are emblematic of large-scale changes taking place in the airline industry. Seeking new markets to conquer and taking advantage of technological improvements that let smaller jets fly longer and higher, the low-cost carriers like Southwest Airlines are moving more and more into the transcontinental routes once dominated by network airlines. The recent decisions by network airlines to scale back on flights because of the weak economy also leave them more vulnerable to attack from the expanding low-cost carriers. When threatened like this, the traditional airlines either drop the routes altogether or they cut fares and add capacity - at a time when executives and industry analysts say there is an oversupply of seats in the air. "It would be quite a stretch to interpret Delta's capacity increase as simply a response to strong demand," said Jamie Baker, an analyst at J. P. Morgan Chase. "Rather, it's a response to strong competition." In June, AirTran will be flying 312 seats a day each way between Los Angeles International Airport and Hartsfield Atlanta International Airport. JetBlue is already flying 486 seats a day each way between Long Beach Airport and Hartsfield. Mr. Baker calculated that Delta is offering 2,876 seats one way on a typical weekday this June - a 38 percent increase over June last year and a 30 percent increase over June 2001, before the Sept. 11 attacks caused air travel to plummet. Delta's sudden infusion of seats is all the more surprising because it goes against the airline's general strategy to cope with the weak economy, which is to cut domestic capacity by 12 percent, Mr. Baker said. Catherine Stengel, a spokeswoman for Delta, acknowledged that increased competition was one factor spurring the addition of flights, but she also said that "there's such a strong passenger demand for our Atlanta-Los Angeles service that we thought we'd be able to meet that demand." She added that Delta was cutting fares, even with strong demand, to stay competitive with its rivals. Delta's lowest one-way fare in June between Los Angeles and Atlanta is $119, charged for a nonrefundable ticket bought at least a week before departure, said Terry Trippler, an fare expert at Cheapseats.com. That matches the lowest fare from both AirTran and JetBlue, though JetBlue requires tickets be bought 14 days in advance to get that fare. Last June, Delta's cheapest ticket was a $198 round trip that required a 14-day advance purchase and a Saturday night stay. A business traveler who had to buy a ticket less than two weeks in advance paid at least $1,031 each way last June. For years, Delta was shielded from market pressures on the Los Angeles-Atlanta route because it had very little nonstop competition. Eastern Airlines dropped out about a decade ago, and United Airlines left in September 2001 after flying the route for two years. Then on Feb. 18, JetBlue said it would start service three times a day in May between Long Beach and Atlanta. David Neeleman, chief executive of JetBlue, said that his airline had picked the new route because Delta's monopoly hold on nonstop flights probably meant that the market was underserved. JetBlue, with its fleet of new Airbus A320's, is doing more transcontinental flying than any other low-cost carrier. Robert W. Mann, an industry consultant based in Port Washington, N.Y., said that long-haul flying allows airlines to get more from passengers for the fixed fees it has to pay out, like the $2.50-a-leg security tax levied by the government and suspended by lawmakers until Sept. 30. Long-distance routes also allow airlines to schedule late-night flights, which ratchet up efficiency by increasing the number of hours a day a plane is used. Improvements in aircraft technology are also opening up the world of transcontinental flying for low-cost airlines. In the early 1990's, most low-cost airlines used DC-9's or second-generation Boeing 737's, neither of which could fly from coast to coast. But Boeing and Airbus soon began improving the range of their smaller aircraft, and even Southwest - founded in the 1970's to provide short-hop service in Texas - has begun flying cross-country routes, starting with Baltimore-Los Angeles last September. JetBlue will start its next transcontinental flight on June 26, when it will begin flying once a day between San Diego and Kennedy International Airport in New York, a nonstop route dominated by American Airlines. It will add a second flight each day, starting on July 14. To match JetBlue's lower prices, American, a unit of AMR, has begun offering a $139 one-way nonrefundable fare that has to be bought one week in advance. AirTran announced on March 4 that it would start flying twice a day between Los Angeles and Atlanta, starting on June 4. AirTran will fly the route with two Airbus A320's leased from Ryan International Airlines, based in Wichita, Kan. Those planes can fly farther than the Boeing 717's that comprise virtually all of AirTrans's fleet. By leasing them, Mr. Mann said, AirTran can test the market without putting up the cash to buy planes. AirTran is also introducing flights between Atlanta and both Denver and Las Vegas this summer. It has also put out a call for proposals for an order of 100 new aircraft from Boeing or Airbus. Those planes, with delivery to begin in 2004, would give AirTran the flexibility to add more transcontinental routes. Two days after AirTran said it would start service between Los Angeles and Atlanta, Delta said that it would add five flights from Atlanta to Los Angeles and four from Los Angeles to Atlanta throughout the summer. It also said it would add, starting this coming Sunday, an additional flight each way between Atlanta and Ontario, a suburb east of Los Angeles. Many of the fares on these flights matched those of AirTran and JetBlue. Mr. Mann, the airline consultant, said that the market had probably been underserved since only one airline controlled it. Both he and Mr. Baker, the J. P. Morgan analyst, said the addition of so many flights might seem extreme, but that it was not surprising that a network airline would do this to try to protect market share. "They're certainly going to lose a lot of money," Mr. Neeleman of JetBlue said. "But carriers faced with competition in markets, they can look the other way or they can react. To react is their prerogative." Mr. Neeleman declined to say if JetBlue's three-times daily flights between Long Beach and Atlanta were making money. "I don't really know for sure whether they're profitable at this point," he said, "but they're certainly not weighing down the company." http://www.nytimes.com/2003/05/28/business/28AIR.html?ex=1055129981&ei=1&en=c6fa84885e8e5b12 --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! Click here: http://www.nytimes.com/ads/nytcirc/index.html 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@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company