Skygod
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Carrying off travelers
Trains and buses make inroads, but NY shuttles still prized
02:14 PM CST on Saturday, February 14, 2004
By ERIC TORBENSON / The Dallas Morning News
NEW YORK – Consultant Mike Peturcci takes off for Boston in a cushy black leather seat that just happens to be on a bus.
A mile away in midtown Manhattan at Penn Station, Judy Roberts heads home to Boston after a quick business meeting. She's taking the train.
Both say they prefer their choices to flying, and that's bad news for the airlines offering hourly shuttle flights in the Northeast. The shuttle air routes from New York's airports to Boston and Washington, D.C., flew 37 percent fewer passengers in the third quarter of 2003 compared with the same three months in 2000.
In some ways, the shuttles have become poster children for the decline in short-haul business flying since the September 2001 terrorist attacks.
Yet shuttle routes are still considered prized properties, worthy of a potential bidding contest by the nation's top carriers.
Analysts expect one could start soon. US Airways, which badly needs cash to avoid defaulting on loans, has asked Morgan Stanley to help it dispose of some assets. Carriers including American Airlines Inc. are having informal talks about acquiring its shuttle routes, though formal bidding hasn't begun.
Airlines crave the shuttle as a way to attract more business travelers, who fly frequently and generally are willing to pay much more to travel. Shuttle flights are typically laden with passengers toting briefcases and laptop computers. For a major airline, the shuttle offers a way to win loyalty not only between the major cities of the Northeast but for all their travel.
"If you have all these high-end business travelers in this corridor, they're a lot more likely to be loyal to you if they're flying on your shuttle eight times a month," said Kevin P. Mitchell, head of the Business Travel Coalition based in Radnor, Pa. "If you get them with the shuttle, you can convert them into other business."
American would have the most to gain by picking up the routes because they would fit nicely into its broader network, some analysts say.
"They would do the most with it of anybody," said Ray Neidl of Blaylock & Partners.
American told the board of directors of its pilots union last month that while it had not formally made an offer to US Airways, it may do so to protect market share in the crucial New York market. That's according to an internal electronic update to pilots from Gary Boettcher, who represents Washington members of the Allied Pilots Association.
American's labor groups have seen this before.
"It's always been 'deny,' 'deny' and then 'buy' "with these guys," said George Price, a spokesman for the Association of Professional Flight Attendants at American, which has 6,000 furloughed members who would probably want a chance to fly the routes if acquired.
Competition
Fort Worth-based American has coveted the routes in the past, nearly outbidding US Airways in 1997 for the rights to the shuttle. In the aborted United Airlines Inc. takeover of US Airways in 2001, American had agreed to take over half the shuttle in an effort to quell government antitrust concerns. But when that merger died, so did American's hold on the shuttle routes.
Analysts agree the shuttle's value has declined since 9-11, though they're not even guessing by how much. Delta Air Lines and US Airways are getting fares 44 percent lower today on the routes than they were in 2001, according to a business fare survey done by Harrell & Associates in New York. Large companies that use the shuttle regularly have negotiated steep discounts, consultants say.
Any decline could be just cyclical. Despite tough times, the gates and landing slots are likely to become much more valuable as business travel swells in coming years, Mr. Mitchell said.
"It's just a matter of time when that demand returns to a peak and having control of a finite amount of gates and slots is a good position to be in," Mr. Mitchell said. "When assets go for sale in an environment like this and if you can get them at the right price, it makes a lot of strategic sense."
Last time around, when US Airways bought the shuttle from investment banks in 1997, the landing rights, gates and facilities were valued at $285 million. By exercising a purchase right, US Airways kept the routes from American, which had bid $300 million.
The fare erosion on shuttle routes began when Amtrak launched its Acela high-speed train in early 2001. A decision last April to cap Acela basic fares at $99 helped the train gain a significant share of the total passengers traveling through New York to Boston and Washington, D.C., said Amtrak spokesman Dan Stessel.
On the ground
Amtrak's research suggests it captures 36 percent of all those passengers with its service today, compared with 18 percent before Acela debuted. Amtrak has benefited from a competitive price and extra frills. For example, first-class passengers who pay $50 more each way get a meal served on china.
Amtrak's traffic on shuttle routes is up 44.2 percent for the three months ending in December compared with the same three months in 2002, and Amtrak has launched a buy two trips, get one free promotion on the Acela train.
In the ClubAcela lounge where passengers wait for Amtrak's Acela trains, Ms. Roberts said she began thinking about the train as an alternative to flying the shuttle after one trip in which she faced a six-hour delay – and leg cramps.
"It's primarily a function of time for me," Ms. Roberts said.
But the train also offers food, which is harder to find these days on planes.
Other ground-based entrepreneurs are taking customers from the shuttle. The LimoLiner, a bus that began running three months ago between Hilton hotels in New York and Boston, offers perks such as a conference room, high-speed Internet access and live television.
"It's no longer cool to travel by air these days," said Fergus McCann, who developed the service, which uses 28-seat buses. "The airlines have turned it from a customer-driven business to a survival-driven business. All we've got to do is change the habits of these people."
LimoLiner has just a tiny slice of the overall shuttle market, but customers such as Michelle Lane of Boston say the four-hour ride is just as fast door to door, accounting for the time it takes to get to and from airports. "There's just way too much down time for a one-hour flight. We need to be able to work," she said just minutes before the bus was set to head north.
Mr. Peturcci agreed.
"If you're doing anything that's billable hours, this is the way to go," said the consultant, who likes that he can use his cellphone during the entire bus trip. "It's more the hassle of going to the airport and taking a cab from LaGuardia _ this is more convenient."
Trains and buses make inroads, but NY shuttles still prized
02:14 PM CST on Saturday, February 14, 2004
By ERIC TORBENSON / The Dallas Morning News
NEW YORK – Consultant Mike Peturcci takes off for Boston in a cushy black leather seat that just happens to be on a bus.
A mile away in midtown Manhattan at Penn Station, Judy Roberts heads home to Boston after a quick business meeting. She's taking the train.
Both say they prefer their choices to flying, and that's bad news for the airlines offering hourly shuttle flights in the Northeast. The shuttle air routes from New York's airports to Boston and Washington, D.C., flew 37 percent fewer passengers in the third quarter of 2003 compared with the same three months in 2000.
In some ways, the shuttles have become poster children for the decline in short-haul business flying since the September 2001 terrorist attacks.
Yet shuttle routes are still considered prized properties, worthy of a potential bidding contest by the nation's top carriers.
Analysts expect one could start soon. US Airways, which badly needs cash to avoid defaulting on loans, has asked Morgan Stanley to help it dispose of some assets. Carriers including American Airlines Inc. are having informal talks about acquiring its shuttle routes, though formal bidding hasn't begun.
Airlines crave the shuttle as a way to attract more business travelers, who fly frequently and generally are willing to pay much more to travel. Shuttle flights are typically laden with passengers toting briefcases and laptop computers. For a major airline, the shuttle offers a way to win loyalty not only between the major cities of the Northeast but for all their travel.
"If you have all these high-end business travelers in this corridor, they're a lot more likely to be loyal to you if they're flying on your shuttle eight times a month," said Kevin P. Mitchell, head of the Business Travel Coalition based in Radnor, Pa. "If you get them with the shuttle, you can convert them into other business."
American would have the most to gain by picking up the routes because they would fit nicely into its broader network, some analysts say.
"They would do the most with it of anybody," said Ray Neidl of Blaylock & Partners.
American told the board of directors of its pilots union last month that while it had not formally made an offer to US Airways, it may do so to protect market share in the crucial New York market. That's according to an internal electronic update to pilots from Gary Boettcher, who represents Washington members of the Allied Pilots Association.
American's labor groups have seen this before.
"It's always been 'deny,' 'deny' and then 'buy' "with these guys," said George Price, a spokesman for the Association of Professional Flight Attendants at American, which has 6,000 furloughed members who would probably want a chance to fly the routes if acquired.
Competition
Fort Worth-based American has coveted the routes in the past, nearly outbidding US Airways in 1997 for the rights to the shuttle. In the aborted United Airlines Inc. takeover of US Airways in 2001, American had agreed to take over half the shuttle in an effort to quell government antitrust concerns. But when that merger died, so did American's hold on the shuttle routes.
Analysts agree the shuttle's value has declined since 9-11, though they're not even guessing by how much. Delta Air Lines and US Airways are getting fares 44 percent lower today on the routes than they were in 2001, according to a business fare survey done by Harrell & Associates in New York. Large companies that use the shuttle regularly have negotiated steep discounts, consultants say.
Any decline could be just cyclical. Despite tough times, the gates and landing slots are likely to become much more valuable as business travel swells in coming years, Mr. Mitchell said.
"It's just a matter of time when that demand returns to a peak and having control of a finite amount of gates and slots is a good position to be in," Mr. Mitchell said. "When assets go for sale in an environment like this and if you can get them at the right price, it makes a lot of strategic sense."
Last time around, when US Airways bought the shuttle from investment banks in 1997, the landing rights, gates and facilities were valued at $285 million. By exercising a purchase right, US Airways kept the routes from American, which had bid $300 million.
The fare erosion on shuttle routes began when Amtrak launched its Acela high-speed train in early 2001. A decision last April to cap Acela basic fares at $99 helped the train gain a significant share of the total passengers traveling through New York to Boston and Washington, D.C., said Amtrak spokesman Dan Stessel.
On the ground
Amtrak's research suggests it captures 36 percent of all those passengers with its service today, compared with 18 percent before Acela debuted. Amtrak has benefited from a competitive price and extra frills. For example, first-class passengers who pay $50 more each way get a meal served on china.
Amtrak's traffic on shuttle routes is up 44.2 percent for the three months ending in December compared with the same three months in 2002, and Amtrak has launched a buy two trips, get one free promotion on the Acela train.
In the ClubAcela lounge where passengers wait for Amtrak's Acela trains, Ms. Roberts said she began thinking about the train as an alternative to flying the shuttle after one trip in which she faced a six-hour delay – and leg cramps.
"It's primarily a function of time for me," Ms. Roberts said.
But the train also offers food, which is harder to find these days on planes.
Other ground-based entrepreneurs are taking customers from the shuttle. The LimoLiner, a bus that began running three months ago between Hilton hotels in New York and Boston, offers perks such as a conference room, high-speed Internet access and live television.
"It's no longer cool to travel by air these days," said Fergus McCann, who developed the service, which uses 28-seat buses. "The airlines have turned it from a customer-driven business to a survival-driven business. All we've got to do is change the habits of these people."
LimoLiner has just a tiny slice of the overall shuttle market, but customers such as Michelle Lane of Boston say the four-hour ride is just as fast door to door, accounting for the time it takes to get to and from airports. "There's just way too much down time for a one-hour flight. We need to be able to work," she said just minutes before the bus was set to head north.
Mr. Peturcci agreed.
"If you're doing anything that's billable hours, this is the way to go," said the consultant, who likes that he can use his cellphone during the entire bus trip. "It's more the hassle of going to the airport and taking a cab from LaGuardia _ this is more convenient."
