Delta Air to Unveil Plans For a Low-Cost

[Indapool]

Grabbed this off of PPRUNE
Anyone else hearing this?



posted 15th November 2002 05:37
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Delta to Launch Air Sunshine II
Delta Air to Unveil Plans
For a Low-Cost Carrier

By MARTHA BRANNIGAN and NICOLE HARRIS
Staff Reporters of THE WALL STREET JOURNAL


ATLANTA -- Delta Air Lines, heading into territory where other major carriers have failed, is expected to unveil its plans for a low-cost carrier next week, relying in part on efficient scheduling of jets and crews.

The nation's No. 3 carrier plans to use a fleet of Boeing Co. 757s -- narrow-body jets with more than 180 seats -- providing substantial capacity to compete against low-cost foes like JetBlue Airways, Southwest Airlines and AirTran Airways, according to people familiar with the effort.

These individuals say the new airline-within-an-airline will include a snappy new name -- to try to upstage JetBlue, the new darling of the low-cost sector -- but with an emphasis that Delta's operating expertise stands behind it.

Efforts to operate low-cost carriers within major airlines, including Delta's 1996 launch of Delta Express, have fallen short of expectations. Continental, for example, closed its Continental Lite operation, which muddled its marketing by mixing mainline and discount flights on the same routes.

Yet Delta, faced with nimble, low-cost competitors like AirTran, a unit of AirTran Holdings Inc., and JetBlue in a majority of its markets, sees little choice but to try again. A Delta spokesman declined to comment on the much-guarded plan.

Delta expects low-cost competition to grow to between 30% and 40% of the industry's domestic capacity by the end of the decade from roughly 22% now, and wants to ensure it participates in that growth.

Low-cost carriers such as Southwest and AirTran are among the few making a profit since last year's terror attacks weakened demand. "The low-fare guys are stealing market share, they're bringing down prices and they can make money at those prices," said Ray Neidl, an analyst with Blaylock & Partners LP in New York.

Delta's new venture is expected to serve more markets than Delta Express, which it will succeed next year. It hopes to get more hours of flying out of the unit's aircraft by scheduling planes point-to-point, and avoiding congested hubs.

The project envisions scheduling flight attendants for longer work days than they typically average, thus boosting productivity. It isn't clear whether the airline will ask its pilots to help it cut costs. Karen Miller, a spokeswoman for the Air Line Pilots Association, which represents Delta pilots, said Thursday: "They haven't asked for any concessions."

 

[fr8doggydog]

Aside from using 757s vs. 737s, can someone please explain to me how this differs from the creation of Delta Express ? If memory serves, DLX was started as this "airline within an airline" to go specifically against SWA, AirTran and all the other LCCs predominantly in the NE. Why not just replace the 737s with 757s for Express ? It's got to be confusing to the general public.

 

[CCDiscoB]

Because Delta will save a lot more money folding Express, and opening a new company. Tax write-offs. Why do you think your favorite night club keeps changing names every two years.

 

[BLUE BAYOU]

Continental Lite, Metrojet, United Shuttle, Delta Express were the majors' answer to the SWA, AirTran, and JetBlues. My belief is Delta's new LCC will come to fruition but how long will it last? I've seen a sizable amount of discussion on this matter, but I think we're hiding the root cause of the majors' disdain. The industry was already in an emergency descent early last year before Sept. 11. It is easy to blame the decline on either the economy, 9/11, or these budget carriers. But folks, the days of true first class travel or last minute business trips paying full fare are fading fast. We're seeing a change in the industry and it is in part due to the travelling public (the consumer). As fast as Walmart has gained its market share, the LCCs are doing the same by offering cheap seats. This has taken hold in Europe with the likes of Easyjet and Ryanair, and definetly has its place here in the USA. If the majors are to contend with these LCCs, they must bring their CASM (Cost per Available Seat Mile) down to the level of the LCCs. I'm rather skeptical about Delta's LCC chances. I understand that they'll be able to obtain FAs at a low rate and high productivity. I'm not certain they can do the same with the pilots. Furthermore, in JFKs market, jetBlue is a darling. They've got live TVs, 162 leather seats, and an expanding consumer following. If anything, Delta's LCC will only get spillover traffic from this carrier.

 

[Ty Webb]

Because Delta will save a lot more money folding Express, and opening a new company. Tax write-offs. Why do you think your favorite night club keeps changing names every two years.

Tax "write-offs" are really misunderstood. The only thing that a write-off does is offset profits.

Delta has no profits right now to "write-off" anything against. The last thing that they need are more losses, which is what write-offs are.

I don't think this thing will succeed, simply because it would be too painful to change Delta's corporate culture. Mullin's background is regulated industries like utilities and banking- hardly the scrappy innovator required to pull this thing off.

AirTran succeeds because we have shrewd airline management and pilots who have been through tremendous ups and downs. Most of the pilots here have had seniority numbers at three, four, five or more different carriers, and have become convinced that the best way to look out for the pilot group is by making sure the company is profitable, and doing our part to make that happen . . . this is the reverse of the major airlines, whose pilots believe that the way to be compensated fairly is to put financial penalties on the company to protect "their" flying . . .

I think Delta ought to focus on being Delta- delivering a quality product, with a frequent schedule throughout a nationwide network, insyead of losing hundreds of millions trying to protect "market share" which really translates into fighting scrappy carriers for the bottom-paying passenger.


Sheesh!

 

[rjcap]

Delta has zero chance of beating Southwest at its game.

Southwest wrote the book on the LCC and has been rewriting it for 30 years. Now all of sudden Delta is going to jump in to the LCC game and be competitive ???

Delta already has its LCC - DCI.

 

[Jeff G]

Delta has zero chance of beating Southwest at its game.

The question is: can Delta beat JetBlue at its own game? They'll try to go against the smallest carrier first. It's possible that Delta's LCC will be bigger than all of JetBlue. They'll try to dump capacity first. This will get real interesting.

Southwest wrote the book on the LCC and has been rewriting it for 30 years. Now all of sudden Delta is going to jump in to the LCC game and be competitive ???

No, that was Delta Express. It didn't work. Southwest is too big to kill that way, with an airline-within-an-airline.

Delta already has its LCC - DCI.

DCI is not low cost, not even close. CASM for RJ's is far higher than for larger airplanes. You could pay the pilots nothing to fly RJ's, but you just don't have the seats to spread fixed costs around.

 

[rjcap]

No, that was Delta Express. It didn't work. Southwest is too big to kill that way, with an airline-within-an-airline.

So Delta Express was in existence before Southwest ????

You lost me here.

 

[rjcap]

What he is saying is that Deta Express was designed to go after SWA and failed

Great ! So what is different this time.

 

[rjcap]

Jeff G,

DCI is not low cost, not even close. CASM for RJ's is far higher than for larger airplanes. You could pay the pilots nothing to fly RJ's, but you just don't have the seats to spread fixed costs around.

Well maybe its not low cost but it sure generates positive cash flow. Just look around. DCI is growing like a weed.