Delta Air: Unit Will Launch 36 Boeing 757s In 2003

[BillLumbergh]

[SPAN class=headline][SPAN class=headline][A href=http://biz.yahoo.com/prnews/021120/nyw084_1.html]Delta Air Lines Announces New Low-Fare Subsidiary[/A][/SPAN][A href=http://biz.yahoo.com/djus/021120/0828000401_1.html][BR][BR]Delta Air: Unit Will Launch 36 Boeing 757s In 2003[/A][BR][BR][SPAN class=headline][A href=http://biz.yahoo.com/djus/021120/0913000435_1.html]Delta to Create Low-Fare Carrier to Challenge Discount Rivals[/A][/SPAN][/SPAN]

 

[ITRADE]

Isn't DLs plan essentially what Gangwal had proposed after the collapse of the UA/US merger - that US run 757s down to Florida owing to the lower CASM of the aircraft.

 

[ChairPrefRes]

Actually it will be interesting to see how Gordo responds with the pending codeshare with DAL and NW seeing his pax riding up and down the coast on Delta Express...When AWA introduced value pricing he dropped that Codeshare...

 

[AAG2000]

This one will be interesting to watch. A 199-seat 757 should have pretty good operating costs. However, considering that JetBlue is the primary target here, they'll need more than just low fares. I am particularly curious as to what sort of branding they will come up with. They might not need TV's and leather seats per se, but they will need something with more cachet than Delta Express. If they do it right, and make it seem just as trendy and image-conscious as JetBlue, they could have a strong contender. Just look at Go...hard to believe that stodgy BA was ever involved with that one.

DLX was a step in the right direction--I've actually been very pleasantly surprised with their service. But they need to take things to the next level if they want to keep JetBlue from dominating the Northeast-Florida market. If done right, I think this could be successful. There are plenty of people who, all other things (i.e., fare, quality of service, perceived image) being equal, would rather have Skymiles than True Blue points.

 

[AirplaneFan]

[P]The DL announcement is totally laughable. They have been flying DL Express from the Northeast to Florida for a number of years. They have been pulling out of many markets. Then DL gets McKinsey (high powered consulting group) involved. They spends millions of $ to get a strategy to compete against the low fare carriers. And what is the end result.... a newly christened Delta Express (but with a jazzier name) and a different aircraft. THAT'S IT. And their pricing is between $79 and $299 one-way .... thats not even lower than the low-fares have on their routes when they have specials.[/P]
[P]The only outstanding question is the compensation question. In the last contract, DL EX pilots were to get a BUMP in pay to get rough parity with their mainline counterparts. Now I will assume this new airline will not pay what DL EX was paying. On one hand, that's a good move, because I'm sure the unemployed pilots out there would gladly take a job at half the pay they were making before the recession.[/P]
[P]And how does DL EX2 strategy differ from DL EX? And what happens if they are successful? If JetBlue has to pull some of its 16 nonstops between JFK and FLL then where will it put them? Might they go to ATL or CVG? It just seems that its a terribly flawed strategy to believe you can knock off the low-fare carriers with a contived airline. If they tie themselves too closely to DL then they lose the impact of the jazzy name. If they distance themselves too far from DL than they run the risk of being another Kiwi Air or New York Airways. Will passengers call into the same reservation number or a different one? Will DL have a Class A and Class B employee system? And do Class B's have the opportunity to become Class A's? Share Freq. flyer points? Will DL EX2 have to check with Atlanta before any expansion plans? Won't that depress moral when DL EX2 doesn't have many of the excitement of a new start-up (stock options, new cities, plenty of room for advancement), but all of the drawbacks (low initial salary). [/P]
[P]If you were to ask me what the most successful strategy to compete against the low-fares its simply to lower your costs where you can effectively compete. Mix pay with profit sharing, when times are good all benefit; when times are bad, all share the sacrafices.[/P]
[P]But this current plan is just like all of the DL plans. Create subordinate airlines that will generate huge operating margins that help to subsidize the mainline company and its employees. But it didn't work against SW and JB a few years ago and am hard pressed to figure how it will effectively compete now.[/P]

 

[N305AS]

Good idea, bad implementation.

As mentioned above, DL could simply refit 36 of their mainline B-757s with the new seating configuration and operate them on a closed cycle within the mainline, not letting them be used outside of the markets they intend to run them in. Along with doing this, they could realign their fares within these markets to reflect the pricing structure of this low cost unit, restricting them to nonstops within those flights only.

Doing the aforementioned tweaking would enable DL to run their low-cost unit within DL mainline, but operating it seamlessly between both. There isn't a necessity to create a new brand identity; many consumer surveys have shown that people actually tend to be confused by airline within an airline branding, and that it can cause more harm than good overall.

DL would be wise to not pursue an entirely different branding. There's simply no need to, and the costs incurred for promotions, signage, uniforms, and new livery could be better spent elsewhere. Also, this enables DL to have greater flexibility to expand this concept to other markets where and when they see fit.

 

[N421LV]

[blockquote]

The DL announcement is totally laughable. They have been flying DL Express from the Northeast to Florida for a number of years. They have been pulling out of many markets. Then DL gets McKinsey (high powered consulting group) involved. They spends millions of $ to get a strategy to compete against the low fare carriers. And what is the end result.... a newly christened Delta Express (but with a jazzier name) and a different aircraft. THAT'S IT. And their pricing is between $79 and $299 one-way .... thats not even lower than the low-fares have on their routes when they have specials.[/P]

[/blockquote]


AirplaneFan I believe the exact quote from DL was a snappier name for the LCC.

DeltaSnap, anyone?


Oh well, if at first you don't succeed.....

 

[7.5victim]

Well, I suppose DeltaSnap could work....

After all, AC has Tango, Jazz, Zip and Jetz...

It'll be interesting to see if the DL name is in the new carriers name, when all is said and done. I think they'll have to find some way to tie it to DL in order for it to attract attention. They haven't said if the new network will offer SkyMiles, or if the flights will operate under a DL code. I'll assume yes to the miles, but at a reduced rate from the mainline ops (again, similar to AC).

Will existing DL pilots HAVE to fly these airplanes? Or because it will be a wholly-owned subsidiary (like ASA?), will DL be able to hire pilots off the street at a new wage scale?

 

[DLFlyer31]

[blockquote]
----------------
On 11/20/2002 11:32:22 AM AirplaneFan wrote:

And how does DL EX2 strategy differ from DL EX? And what happens if they are successful? If JetBlue has to pull some of its 16 nonstops between JFK and FLL then where will it put them? Might they go to ATL or CVG? It just seems that its a terribly flawed strategy to believe you can knock off the low-fare carriers with a contived airline. If they tie themselves too closely to DL then they lose the impact of the "jazzy name". If they distance themselves too far from DL than they run the risk of being another "Kiwi Air" or "New York Airways". Will passengers call into the same reservation number or a different one? Will DL have a Class A and Class B employee system? And do Class B's have the opportunity to become Class A's? Share Freq. flyer points? Will DL EX2 have to check with Atlanta before any expansion plans? Won't that depress moral when DL EX2 doesn't have many of the excitement of a new start-up (stock options, new cities, plenty of room for advancement), but all of the drawbacks (low initial salary). [/P]


If you were to ask me what the most successful strategy to compete against the low-fares its simply to lower your costs where you can effectively compete. Mix pay with profit sharing, when times are good all benefit; when times are bad, all share the sacrafices.[/P]
----------------
[/blockquote]

You might find this plan laughable, but most people found WN pretty laughable when they first started.....remember the cheesy ads, cheesy uniforms and ugly planes.

Passengers will likely call into the same reservation system, though its possible DL could create a new system. Ideally, a bulk of the pax will book on-line, so DL shouldn't need new res agents.

The pilots will be totally left alone. They will keep their current payscales for the 752 and fly the new low-fare carrier as if it was regular DL. I guess further down the road DL might try to push for concessions, but by DL's own current projections, they can get a low enough CASM with the pilots paid as is.

Maintenance will also be kept inside the existing DL since the infrastructure is already in place and it's actually cheaper for DL to keep the maintenance in-house.

Other employee groups are likely to be hired from the outside and at a lower pay scale and less benefits. Obviously morale at the DLX2 might be lower, but no lower than at any other start-up. There's no room for advancement at most low-fare carriers so what's the big deal. Do you really think your average 22 yr old going to work for AAI (or any lowfare carrier)as a baggage handler really expects to climb the ranks? Not in today's world.

You're right that the best strategy is to lower cost in order to compete and DL is doing that. However, it is IMPOSSIBLE for DL to ever get its costs as low as WN,JBLU,etc. So DL has to come up with new tools to compete or they can take the strategy of other carriers like US and simply do nothing.

 

[UnitedChicago]

How about Jet BluER?

 

[AirplaneFan]

[blockquote]
----------------
On 11/20/2002 315 PM DLFlyer31 wrote:


You might find this plan laughable, but most people found WN pretty laughable when they first started.....remember the cheesy ads, cheesy uniforms and ugly planes.

Passengers will likely call into the same reservation system, though its possible DL could create a new system. Ideally, a bulk of the pax will book on-line, so DL shouldn't need new res agents.

The pilots will be totally left alone. They will keep their current payscales for the 752 and fly the new low-fare carrier as if it was regular DL. I guess further down the road DL might try to push for concessions, but by DL's own current projections, they can get a low enough CASM with the pilots paid as is.

Maintenance will also be kept inside the existing DL since the infrastructure is already in place and it's actually cheaper for DL to keep the maintenance in-house.

Other employee groups are likely to be hired from the outside and at a lower pay scale and less benefits. Obviously morale at the DLX2 might be lower, but no lower than at any other start-up. There's no room for advancement at most low-fare carriers so what's the big deal. Do you really think your average 22 yr old going to work for AAI (or any lowfare carrier)as a baggage handler really expects to climb the ranks? Not in today's world.

You're right that the best strategy is to lower cost in order to compete and DL is doing that. However, it is IMPOSSIBLE for DL to ever get its costs as low as WN,JBLU,etc. So DL has to come up with new tools to compete or they can take the strategy of other carriers like US and simply do nothing.
----------------
[/blockquote]

1) Then how does this differ from DL EX

2) But I agree with you, the strategy just seems like its to tread water unti better days come (hopefully soon)

 

[PLANES333]

Here are the answers to some of your questions. On the Delta Employee Intranet the link to the page about the new LCC ends with Freshair so this will very liekly be the name of the new carrier. The airline will take over DLX operations in early 2003. The carrier will hire Flight Attendants and Airport Customer Service Agents from active Delta employees who are not affected by the furlough and then go to furlough employees. They do not plan to hire off the street at all until they have to. Pilots will be Delta pilots with no B scale. The CVG reservations center will handle the bulk of the calls and a dedicated staff will be trained on the product in the CVG center to handle the calls. Overflow calls will be diverted to the SLC call center. All other work including MTC will initially be contracted out to Delta, but will eventually go to the lowest priced vendor. The new president says that the airline will be able to decrease its costs by doing the following.

Using newer planes with a single cabin decreasing MTC
Costs.

Reducing the turn time to 50 minutes increasing aircraft utilization to 13.2 hours per day, higher than WN and FL but lower than B6

Using 4 flight attendants instead of the six used on mainline 757 flights

Using automated telephone reservations systems and promoting Internet booking and check-in reducing distribution costs

Using airport Kiosks and automated aircraft loading and boarding technologies to increase productivity.

Overall the presidents states that the carrier will have a CASM 20% lower than Mainline, and being that DL Mainline’s CASM is about 10.2 cents that brings its cost in line with other low cost carriers enabling it to be more competitive in key markets under attack by FL, B6 and WN.

Interviews for employment will be taking place in December and as soon as the employees are in place at JFK and Florida, the new carrier will take over the operation of Delta Express. At JFK starting JAN 03 DLX flights will gradually be replaced by 757-200 mainline flights and then the 757's will undergo the aircraft repainting and seat re-config process and by the end of 2003 all 36 757-200 aircraft will be in service and all DLX 737's will go to mainline.

They showed some proposed advertisement posters on the employee intranet and it looks as if the airline will be taking a Jetblue style, retro marketing technique. Eventually the airline will expand into other markets in the US and even into DL hubs. Although it was not discussed in the letter to employees I assume that although the carrier will appear separate from DL, passengers can connect onto DL flights and get FF benefits. DL employees can also non-rev on the new carrier.

 

[ct]

Replacing mainline 752s with 732s coming back from DL Express will make it much harder to get F upgrades on the affected routes.

 

[FrugalFlyer]

DL is taking a page from AC. ACTango seems to be working well (for now). All you pay for is a seat, literally, if you want a soda then you pay for it. I believe ACTango does not interline with mailine AC (or anybody esle) but I think you may be able to accumulate AC frequent flyer points. Now there is ACZip, which is still a low cost unit but they codeshare, interline, etc. with the mailine AC.

I guess an airline within an airline may work if managed properly. It will be interesting to see whether DL LCC becomes a success or another Metrojet.

 

[Tango-Bravo]

[blockquote]
----------------
On 11/20/2002 315 PM DLFlyer31 wrote:

You might find this plan laughable, but most people found WN pretty laughable when they first started.....remember the cheesy ads, cheesy uniforms and ugly planes.
[/blockquote]

There was however, a huge difference with WN when they first started -- and since -- that has made all the difference between them and the likes of DL, AA, UA, et al: It's spelled L-E-A-D-E-R-S-H-I-P; a concept that is totally lacking at the U.S. cartel airlines.