With the launch of its low-fare Express concept, Delta Air Lines will want to avoid repeating the disastrous low-fare Continental Lite experience on the US east coast and mirror that of the Shuttle by United, whose performance has been good enough for United to give it a dedicated fleet of B737s to compete against Southwest Airlines in western states.
Delta Express, too, will be attempting to counter Southwest's low-fare approach and will operate a dedicated fleet of 25 B737-200s when service begins 1 October. The operation will be centred at the carrier's Orlando hub and will also link Florida's main leisure markets of Tampa, Ft. Lauderdale, Ft. Myers and West Palm Beach to 10 northeast and midwest destinations, including Nashville, Boston, Columbus, Newark and Washington/Dulles. Mimicking Southwest's discount pricing and frequencies (up to seven daily flights in markets like Orlando-Newark), Express will begin operating with 62 daily flights and increase the amount each month until the experiment tops out at 128 dailies.
Emphasising that the low-fare initiative is an experiment, Delta nonetheless has altered its structure enough to ensure Express will be around for the long term. The importance of the project, which has been under study since Delta announced its 'Leadership 7.5' cost-cutting programme in 1994 and is largely reliant on pilot concessions negotiated earlier this year, dissipated after ValuJet was shut down in June. The growing threat of Southwest, which began service in Florida in January and is now working its way northward, has analysts applauding Delta's move.
The effect of the Express programme on the east coast will almost certainly mirror that of the competition between Southwest and the Shuttle on the west coast: lower fares and yields. As successive waves of low-fare initiatives have hit the region - first Continental Lite, then ValuJet (which is planning to restart limited service by September from Atlanta) - USAir has been at the biggest competitive disadvantage. Though the Arlington-based carrier is reporting long-overdue profits it is still at a major cost disadvantage. Delta recently gave up on its goal of getting costs down to 7.5 cents per available seat mile by next year, but has nonetheless been able to cut costs over the past two years.
Analysts believe Delta Express, like the Shuttle, will probably be less a profit generator than a broad revenue contributor. The two-year-old Shuttle has been estimated to contribute as much as $20 million annually to United, but profits appear to remain elusive. Still, United has enough confidence in the operation to expand its service to six more western cities from San Francisco, including Salt Lake City, Santa Barbara, and Reno, and give it a dedicated fleet of 45 B737-300s and -500s.
Mead Jennings
Source: Airline Business
