Delta Refocuses On Its Service
Carrier, No Longer the Biggest, Retunes Its Marketing
By MIKE ESTERL
ATLANTA—No longer the world's biggest airline, Delta Air Lines Inc. is shifting its focus—and marketing—from size to service.
After putting its energy into the 2008 acquisition of Northwest Airlines, the Atlanta-based carrier plans to spend more than $2 billion through 2013 to lure travelers with new flat-bed seats, video on demand and upgraded facilities in hotly contested markets such as New York.
Delta says it has a two-year head start on Chicago-based United Continental Holdings Inc., the industry's new biggest carrier by traffic, which only now is embarking on the difficult task of integrating two huge airlines.
"We ultimately believe the carrier providing the best customer service will win," Glen Hauenstein, Delta's head of network planning and revenue management, said in an interview.
United Airlines parent UAL Corp. and Continental Airlines Inc. closed their $3.2 billion merger Friday, supplanting Delta as No. 1 in size. AMR Corp.'s American Airlines is a distant third among U.S. airlines.
United Continental Chief Executive Jeff Smisek acknowledged the new carrier has "a lot of hard work ahead" as it melds operations but told reporters Friday, "We're going to have the world's best network." Executives of the airline also said a modern fleet and the world's largest frequent-flier program will help the airline win lucrative business travel.
From January through August, United and Continental flew a combined 142 billion revenue passenger miles, the number of revenue-paying passengers multiplied by the distance traveled. That was 8.7% more than Delta. United and Continental posted a combined net profit of $506 million in the quarter ended June 30, compared with $467 million at Delta. And United Continental is a member of Star Alliance, a partnership of international carriers that is larger than Delta's competing SkyTeam.
Delta began an advertising campaign in September that plays down size. "No one who flies is waiting for a bigger airline, they're waiting for one that's committed to making flying better," says a print ad developed by the Wieden+Kennedy agency. A television commercial says the best airline is the one whose employees "know how to put themselves on the other side of the counter."
Neither carrier boasts a significant edge, according to industry observers. United Continental and Delta each has nearly a 20% market share in the U.S. United Continental is larger in Asia and Latin America, but Delta is bigger on trans-Atlantic routes to Europe and Africa.
"I think both of them are on equal footing for the business traveler," said Dale Eastlund, a director at Carlson Wagonlit Travel, which advises companies on travel budgets.
Some of Delta's consumer rankings sagged after it combined operations with Northwest. The carrier had the highest percentage of consumer complaints in the first half of this year among 18 U.S. airlines, according to the Department of Transportation. Delta ranked 14th for on-time performance in the 12 months through July, while United and Continental ranked 3rd and 8th, respectively.
Separate consumer-satisfaction surveys published in June by J.D. Power and the American Customer Satisfaction Index ranked Continental ahead of Delta, with United behind both. United and Continental will continue to fly as separate airlines for as long as 18 months while they await regulatory approval to fly as one carrier.
Delta already enjoys an edge in one area: Internet service for domestic passengers. Fliers aboard more than 500 of its airplanes have Wi-Fi access, compared with 13 at United and zero at Continental.
But Delta is playing catch-up on other fronts. As part of its planned upgrades, Delta is installing video on demand for movies and TV programs in economy class on its larger jets. Continental already offers the service aboard many of its long-distance flights.
Delta also plans to have 50 of its transoceanic airplanes outfitted with flat-bed seats in business class by next summer, and double that number by 2013. Yet United Continental expects more than 100 planes, or about 65% of its international fleet, will have flat-bed seating by the end of this year.
The Atlanta-based carrier's biggest push is in the New York area, where Continental is the market leader through its hub at Newark Liberty International Airport in New Jersey. Delta is breaking ground this autumn on a $1.2 billion overhaul of its outdated terminals at John F. Kennedy International Airport and expects to be finished by 2013.
United Continental notes that Newark's airport is only half an hour by train from Manhattan. Its customers in New York can fly "without enduring the hassles and delays of a major construction project," a United Continental spokeswoman said.
Delta also is updating dining options at its terminal in New York's LaGuardia Airport. Delta had hoped to get dozens of US Airways Group Inc.'s slots at the airport this year, but the deal was rejected by regulators. Delta has appealed and is "very hopeful" of a favorable ruling, Mr. Hauenstein said.
Jim Corridore, an airline analyst at Standard & Poor's Equity Research, thinks United Continental has an advantage with hubs in bigger markets, such as Chicago and Los Angeles.
But he also believes Delta enjoys an edge by having already completed its integration of Northwest. "These things don't always go smoothly," Mr. Corridore said. Other analysts also caution that United Continental will have its hands full as it tries to combine fleets, computer systems and employees. And pilots at the merging airlines haven't agreed on new contracts, injecting additional uncertainty.
Mr. Hauenstein said both carriers' hubs "have their strengths." But he likened Hartsfield-Jackson Atlanta International Airport, the world's busiest, to "the Boardwalk," referring to the prime spot on the game Monopoly.
—Susan Carey contributed to this article.