=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/c/a/2005/10/09/BUGUOF46UO= 1.DTL --------------------------------------------------------------------- Sunday, October 9, 2005 (SF Chronicle) Struggling airlines boost the luxury quotient/Carriers add extras to vie wi= th fancier foreign offerings David Armstrong, Chronicle Staff Writer As the crowds of summer melt away and the price of fuel remains high, the airline industry is rolling out new amenities in the air and on the ground to woo travelers and raise revenue in a tough competitive environment. Consider a full-blown spa in an airport lounge, complete with pool and sauna. Home pick-up of your luggage, so you don't have to lug it to the airport. In-flight e-mail access. New flat-bed seats and new aircraft. Business-class-only flights from New York across the Atlantic and additional flights from San Francisco to the South Pacific. Many of the new bells and whistles are designed to please high-paying business and first-class customers at the front of the plane, as airlines struggle with a paradoxical problem: They are flying with full planes but losing money on many tickets because of historically low fares. Both domestic and foreign carriers traditionally offer sales in early fall, but such deals are short lived. The new wrinkles in service and infrastructure are intended to attract more passengers over the long haul than seasonal sales. Many of the boldest innovations are coming from foreign carriers, which tend to be less financially hard pressed than U.S. airlines that are still struggling to pull out of a four-year slump during which they have lost $32 billion. Air New Zealand, for instance, is boosting premium service to bring in revenue. The carrier, which is 80 percent government-owned but operates as a business without direct subsidy, is spending $800 million to upgrade its long-haul fleet, put in premium economy class on the upper deck of its Boeing 747-400s, install flat beds in business class and offer digital in-flight entertainment at every seat. A business class ticket on the popular San Francisco-to-Auckland route costs $6,000 for a round-trip flight in early December. The new premium economy class on the same route on the same dates goes for about 30 percent more than the $1,005 economy fare. Air New Zealand's business has been lifted by a 16 percent jump in forei= gn tourists to New Zealand over the past five years, after the scenic country's exposure in the "Lord of the Rings" film trilogy. The airline turned a $180 million profit in fiscal 2005, in spite of soaring fuel prices. It expects to pay for its upgrades with increased revenue, according to spokeswoman Lucy Powell. Air New Zealand, which began thrice-weekly service between San Francisco International Airport and Auckland, New Zealand's largest city, in June 2004, doubled the number of weekly flights last month. The carrier doesn't release the percentage of seats filled for specific routes, but Powell said the SFO-Auckland service "is doing very well." "With premium economy-class fares, which are available for 25 to 30 percent more than economy fares, we have already seen strong bookings in North America," said Gus Gilmore, Air New Zealand's vice president for the Americas. "Bookings have been especially strong in San Francisco and London." It's been a different story for money-losing airlines. Such changes are difficult for these carriers to pull off and could hurt them if people don't buy the changes, said Ann Heffron, a transportation analyst with Zacks Investment Research in Chicago. Heffron said that although airlines may take in more revenue from premium customers on international flights, it will not be nearly enough to offset oil prices and other high operating costs. The situation is dire for major U.S. carriers, some of which are in bankruptcy. They are furloughing workers, eliminating pretzels, pillows and magazines on domestic flights and trying to avoid pension obligations. Despite the tough environment, a handful of airlines are trying to innovate their way out of trouble. American Airlines opened an expansive Admirals Club lounge in a huge new $1.1. billion terminal at New York's John F. Kennedy International Airport in August. American spokesman Alan Phillips said that while the project was scaled back from $1.3 billion, the new terminal is still a major milestone for American, which plans to pay for it out of earnings. By cutting costs and gaining concessions from unions, the Fort Worth, Texas, carrier managed to post a $58 million profit in the second quarter after nearly landing in Chapter 11 last year. The expanded lounge for business- and first-class passengers is double t= he size of American's previous JFK lounge. It can seat nearly 200 premium customers, according to the airline, and includes a business center with free high-speed Internet access, showers and a children's room. American, the world's largest airline by passenger traffic, also recently opened a lounge in the Honolulu airport and plans to enlarge overhead luggage bins and install flat-bed seats in business class in 2006 and 2007. Such amenities may give big carriers an advantage over low-cost airlines, which have increased their market share to nearly 30 percent but generally do not offer connecting service, airport lounges or a wide range of comforts. But even American's sparkling new JFK lounge is more than matched by leading international carriers in important foreign airports. The revamped and expanded Virgin Atlantic Airways Clubhouse at London's Heathrow Airport, a lounge for travelers in Virgin's combined business and first class, includes what the airline says is the first airport spa anywhere, with a Jacuzzi and a sauna room. The lounge has had hairdressers, massages and showers, a restaurant-size kitchen for preparing hot meals and a bar for years. In the air, Virgin Atlantic, which operates one daily flight between SFO and Heathrow, offers massages, guided meditation tapes for fearful travelers or people just too frazzled to sleep, and free drinks for passengers in all three classes. Even startups are getting in on the action. Eos Airlines plans to begin service from JFK to London's Stansted International, a secondary airport outside the British capital, next month. Eos, which is privately held and based in Washington, plans to customize a small fleet of Boeing 757s by reducing the planes' capacity from 200 seats to 48 to create more space in an all-business-class configuration. Eos' investors include San Francisco's Golden Gate Capital. Former Charles Schwab Corp. chief executive David Pottruck recently signed on as the fledgling airline's nonexecutive chairman. In-flight amenities have been added to transpacific flights, which are longer than transatlantic flights. Additional flights from SFO to Down Under will start March 29, when Australia's Qantas Airlines starts thrice-weekly nonstop service to Sydney, one of San Francisco's official sister cities. A few carriers are extending new amenities to all passengers on a flight. Japanese carrier All Nippon Airways offers Internet and e-mail services from every seat in all classes on its 12-hour daily flights between SFO and Tokyo's Narita airport. Early next year, ANA plans to fly the route with its latest aircraft, the Boeing 777-ER. Singapore Airlines, long known for its exceptionally good customer service, is trying out what it calls Baggage Direct. For $30 for the first person flying and $15 for each additional member of a traveling party, the airline will pick up travelers' luggage at their home or office six to 24 hours before departure, check the bags at the airport and have the luggage waiting at the destination. For now, the baggage pick-up is available only to passengers from LAX, b= ut if it proves popular, the airline plans to introduce the service elsewhere. E-mail David Armstrong at davidarmstrong@xxxxxxxxxxxxxxxx --------------= -------------------------------------------------------- Copyright 2005 SF Chronicle