Delta Store

[sf3boy]

I read in the USA Today of 7 Nov that Delta is going into the retail business opening a "virtual airline store" Gourmet airline food and selling time in sims should be all the rage in NYC. It appears to me that DAL management is thinking that their airline is operating healthy & cost effective and they have some extra cash to dabble in other area of the private sector.

 

[House_X]

Strengthening the "brand" of an airline is always a good move...the only problem is that Delta should have executed this concept years ago...I think the public is much too jaded (9/11) about airline travel and they won't "buy into" a Delta store.

 

[snowback]

I think you're thinking of the "Song" store in the Soho part of NYC.

 

[sf3boy]

Did Delta sell "Song?" To me it equates to Delta opening a Comair store in LEX or Northwest opening a Pinnacle store in ERI.

 

[snowback]

Did Delta sell "Song?" To me it equates to Delta opening a Comair store in LEX or Northwest opening a Pinnacle store in ERI.

Nope. It's just a Song store. Like opening a Pinnacle store in whatever their largest market is. It doesn't say it in this article, but CASM for song was reported at 7.5 cents, with high overhead from DAL (who knows what that includes...probably stuff like gate leases, interest on debt, etc.).


Dow Jones Business News
Delta's Song Fills 70% Of Seats Through Experimentation
Thursday November 6, 5:53 pm ET
By Elizabeth Souder, Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--Delta Air Lines Inc. (NYSEAL - News)'s new low-cost airline, Song, is filling around 70% of its seats seven months after it launched operations, marketing the brand as a more feminine form of leisure travel.
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The marketing of the new airline lives up to one of the mandates that Delta gave Song: to experiment.

"We're the low-cost carrier, and we're also the incubator," said Song Chief Executive John Selvaggio in an interview with Dow Jones.

On Thursday, Song opened a store in New York's Soho neighborhood to market its product: low-cost air travel to sunny destinations aboard brightly-colored planes full of high-tech gadgets.

With flight attendants wearing Kate Spade outfits and selling mini spa kits, as well as yogurt, bagels and fruity cocktails, Song is hoping to appeal to female travelers. Selvaggio said women make most of the travel decisions for U.S. households.

"We could have easily been another sardine-can low-cost-carrier, shuttling customers around," Selvaggio said. But he thought giving Song a distinct image was important to attracting passengers. "I'm certain we're stimulating demand," he said.

So far, customers are biting, though Selvaggio said Song hasn't tallied the number of female passengers compared with male passengers. He said the airline's load factor is around 70%, close to Delta's 72.9% in October.

Selvaggio said he expects Song to contribute around 10% of Delta's total revenue this year. That contribution could rise to around 20% in a few years, he said. In 2002, Delta's total revenue was $13.3 billion.

Song began operations in April, and has since expanded, flying 36 Boeing 757 199-seat airplanes to 13 destinations. Song is taking over routes flown by Delta Express, Delta's previous attempt to create a low-cost leisure airline.

Like Delta Express, Song flies leisure passengers from large cities in the Northeast to popular, sunny locations in Florida and California. And like Delta Express, Song's routes do not overlap Delta routes. Song flies point-to-point routes, while Delta focuses on its hub-and-spoke system.

But Song flies larger planes than Delta Express, offering Song more revenue potential on it routes, but less flexibility in choosing routes that aren't the most popular. Song flies 757s once operated by Delta, but redesigned in Song's signature lime green.

And unlike Delta Express, Song is experimenting with fitting its planes with digital entertainment systems that offer television stations, music and video on demand, and eventually may include Internet access.

Similarities With JetBlue

The entertainment system and unique marketing approach are much like those of JetBlue Airways Corp. (NasdaqNM:JBLU - News) , one of Song's chief rivals. JetBlue and Song compete head-to-head on many routes, though Song operates out of all three major New York-area airports, with JetBlue limited to John F. Kennedy airport.

But while JetBlue is moving toward service with smaller planes on less-popular routes for both business and pleasure, Song's Selvaggio said his focus is the most popular leisure routes, leaving smaller routes to Delta. Selvaggio said the idea to fly international routes has come up, but he would have to find very popular tourist destinations, and such a move would be far down the road.

Song also is trying out ways to boost productivity of its employees and equipment. The airline has cut the amount of time between landing a plane, getting passengers off, boarding new passengers and taking off to 45 minutes from the 50 minutes the airline had first budgeted. Selvaggio said that means Song can fly 20% more flights, often staffed with the same employees.

Song hired many of its employees from Delta's ranks, and offers the same salary scale as the main airline. But to keep costs lower than the main airline, Song allows its employees to work more overtime. Another cost advantage compared with the main airline is that Song's employees, on average, have fewer years of experience than Delta employees.

Selvaggio said Delta is watching his experiments to find ideas that could by used for the entire company.

Delta isn't the only airline keeping an eye on Song. Other major carriers are tracking Song's success as they consider whether to build their own low-cost airlines.

UAL Corp.'s United Airlines announced in September it will start a low-cost airline to halt the slide of market share in Denver toward rival low- cost carriers.

And AMR Corp. (NYSE:AMR - News) Chief Executive Gerard Arpey said Thursday he's watching experiments by both carriers to see if such an approach might work for American Airlines.

"You have to make sure when you pursue such a thing that what you are creating is truly low-cost" rather than just low-fare, Arpey said at a meeting with analysts.