UAL, Delta May Woo New York Business Class Fliers With Perks

New York business travelers may see a flurry of seat upgrades and free airport lounge passes as carriers fight for the most valuable passengers when Continental Airlines Inc. and United Airlines merge.

United, Delta Air Lines Inc. and AMR Corp.’s American Airlines will probably step up their pursuit with better seats and perks like greater access to last-minute tickets on overbooked flights, said Chris McGinnis, a consultant and travel-blog editor in San Francisco.

At stake is a bigger slice of the $13.6 billion spent each year by passengers who start or end trips in New York, which no carrier dominates. More than 100 million people, including the corporate travelers who pay the most for business-class and walk-up tickets, flew through the world’s largest aviation market last year.

“The airlines are going to have to shower these passengers with free lounge access or upgrades if they want their loyalty,” said McGinnis, who flies to New York several times a year.

Spokesmen for Continental, UAL Corp.’s United, Delta and American declined to discuss specific plans to win business at Kennedy, LaGuardia and Newark airports.

One service the merged United-Continental should expand is United’s P.S. three-class flights from New York to Los Angeles and San Francisco, which include lie-flat seats in first class, business-class cradle seats and as much as 5 more inches of legroom in coach, said McGinnis. He flies P.S. several times a year and pays as much as $3,000 per trip.

‘All the Difference’

“Those extra inches of legroom make all the difference in the world, and it’s kept a lot of travelers faithful to United,” he said.

Delta recently added a perk for its American Express SkyMiles card holders that allows travelers to check one bag for free, a savings of about $50 per round trip. Continental has a similar offer through its Chase credit card.

The competition will create “one of the best times for a traveler to belong to a frequent-flier program,” said Henry Harteveldt, a senior analyst at Forrester Research Inc. in San Francisco.

United-Continental will displace Delta as the world’s biggest carrier, and be the largest U.S. airline across both the Atlantic and Pacific, offering more direct service from its 10 hubs. The carriers announced their all-stock merger on May 3, and say the deal will be completed by year-end. The company plans to keep United’s name and Chicago headquarters, and be run by Continental Chief Executive Officer Jeff Smisek.

Biggest Market

New York differs from most hubs, where one carrier dominates. Delta accounts for 70 percent of passengers in its hometown of Atlanta, while American handles 85 percent at Dallas-Fort Worth.

Continental flew 29 percent of New York area travelers in 2009, while United had 4 percent, according to U.S. Bureau of Transportation Statistics. Delta handled 23 percent, JetBlue Airways Corp. had 16 percent and American had 15 percent.

“This is going to become a gloves-off, brutal, three-way battle between United, American and Delta,” said Harteveldt. “You better get the emergency services on standby, because blood is going to be shed.”

The new United will focus on corporate sales accounts, especially in Manhattan, in a bid to win business from Delta and American, United CEO Glenn Tilton said yesterday after speaking at a hearing in Washington.

“What this combination does is makes us competitive with American, both in Latin America and in New York,” Tilton said. “That’s just something we lacked, and that’s something Continental brings.”

Top Travel Agencies

The two companies also reached out to their top travel agencies. Within hours of announcing the merger, Continental executives called and e-mailed Jennifer Wilson-Buttigieg, co- president of Manhattan-based Valerie Wilson Travel Inc., which books travel for business clients on American, British Airways Plc, Delta and Continental. United officials visited that week.

“It made all the difference in the world when they simply said, ‘Thank you for your business,’” said Wilson-Buttigieg. “Something as simple as how they handle a meet-and-greet with clients or work with us on sales calls lets us know how important we are.”

The stiffest competition will be for business fliers who buy first-class and walk-up tickets, often determining whether a flight makes or loses money.

Continental charges $6,149 for a walk-up ticket in business or first class from Newark to London Heathrow, while an advance- purchase coach ticket to Los Angeles is $482, according to the Houston-based carrier’s website.

‘Hotbed for Competition’

“The $3,000 to $5,000 ticket range is going to be a hotbed for competition,” said Rick Seaney, CEO of Dallas-based FareCompare.com, a ticket pricing and research firm. “If there’s discounting, that’s where you’re going to see it.”

The carriers have also invested to spruce up facilities. Continental spent $1.5 billion at Newark over the past 25 years, primarily for a new concourse and international arrivals center because that airport is “one of our key strengths,” said Julie King, a spokeswoman for the carrier.

American spent $1.3 billion on an international terminal at Kennedy that opened three years ago, and is investing $30 million at LaGuardia. In March, American proposed a flight slot- swap with JetBlue to expand at Kennedy.

Best Customers

“We want to be sure we’re big in the markets that matter most to our best customers -- New York to London, for example,” Dan Garton, American’s executive vice president for marketing, said in an interview.

Delta established an international hub at Kennedy airport with service to 30 new cities abroad, and is trying to expand at LaGuardia by swapping flight-slot rights with US Airways Group Inc.

Delta hasn’t yet renovated its facilities in New York, and Treasurer Paul Jacobson last month likened its 1960s-era Kennedy terminal to “third-world” conditions. Delta is in talks with the airports about improvements, said Heather Faulkner, a spokeswoman for the airline.

“New York will remain the most contested and competitive aviation market in the world, and we are and will continue to be fiercely competitive,” Faulkner said.

The winner will be whoever can lure an extra three to five passengers per flight and take market share profitably, said Michael Derchin, an analyst at CRT Capital Group LLC in Stamford, Connecticut. He recommends buying Delta shares, and holding American, United and Continental.

“We’ll have three hungry airlines who all want this corporate business, and whoever is the most aggressive will win,” Derchin said.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

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