Delta Woos Teams With Legroom, Leather as Charters Pad Profit
The Auburn Tigers and Oregon Ducks football teams flew to Arizona for next week’s BCS National Championship game on Delta Air Lines Inc. charters that offer luxuries such as extra room and generate higher profits.
Instead of pretzels and peanuts, the college players noshed on Chick-fil-A sandwiches and Dove ice cream bars. Tucked into a drawer on the jets was a three-ring binder with details on each team’s no-alcohol policy, meal preferences and the brand of soda the head coach favors and whether he wants ice.
Those touches are part of Delta’s effort to expand the biggest charter operation among U.S. airlines, with $255 million in 2010 revenue. Sports teams made up almost half that total, and most of the rest came from military flying that is now shrinking as U.S. troops leave Iraq and Afghanistan.
“It would be totally impossible to transport 600 players, coaches, support staff, cheerleaders and band members there and back commercially,” said Jeff Hawkins, director of football operations at the University of Oregon in Eugene. “Delta bends over backwards to be hospitable to us.”
Delta ran 27 round-trip charters in this college football bowl season, capped by the Bowl Championship Series title game on Jan. 10 in Glendale, Arizona, between Oregon and Alabama’s Auburn University.
Two-thirds of National Basketball Association franchises and about half of the clubs in the National Football League and Major League Baseball have contracts with Atlanta-based Delta, which is aiming to add about six new teams a year as military revenue wanes, said Bill Wernecke, who runs the charter unit.
Charter sales have more than doubled in five years, buoyed by the 2008 purchase of Northwest Airlines Corp., as Chief Executive Officer Richard Anderson seeks revenue from sources besides fares. Delta’s cargo operations and aircraft maintenance for other airlines are the largest in the U.S. industry.
While charter revenue amounts to less than 1 percent of Delta’s total, each flight is “accretive to profitability,” Wernecke said. That’s not true of all of Delta’s passenger trips, because some make money, and some don’t, he said.
Profit margins on charters are “substantially higher” than Delta’s overall margins, Wernecke said, without being specific. Delta, the world’s second-largest airline, projected a profit margin of about 8.5 percent for the company in 2010, and its long-term target is 10 percent to 12 percent.
‘Back to Sleep’
Most charter providers aim for margins of at least 15 percent to 20 percent, said Mike Boyd, president of aviation consultant Boyd Group International Inc. in Evergreen, Colorado.
“If the margins aren’t at least that high, why are you doing it?” Boyd said. “Park the plane and go back to sleep.”
United Continental Holdings Inc., the world’s largest airline, doesn’t disclose charter revenue, said Mike Trevino, a spokesman. United is the No. 2 charter provider after Delta, with customers including the Chicago Cubs, Chicago White Sox and Houston Astros baseball teams, and the NFL’s Houston Texans, Denver Broncos and New Orleans Saints.
Delta’s 11 percent gain in 2010 trading beat AMR’s 0.8 percent advance while trailing the 85 percent jump for United Continental, which was formed in the October merger of United and Continental airlines. Delta was little changed this year through yesterday. AMR rose 4 percent and United Continental climbed 7.2 percent.
A Delta charter may cost $12,000 for a regional jet on a short U.S. route to $1.3 million for a widebody military flight to Afghanistan, Wernecke said. A sports team’s typical spending is $1 million to $3 million a season, he said. The NBA is Delta’s biggest sports customer, accounting for about 20 percent of charter revenue and 2,500 flights a year, Wernecke said.
Delta configures eight Airbus SAS A319s for NBA teams, whose players are an average of 6 feet, 7 inches (2 meters) tall. The jets’ 54 leather business-class seats have as much as 60 inches between the back of one seat and the front of another. Players can swivel to face each other and play cards on a table.
An A319 usually carries 124 passengers, with as little as 30 inches between seats.
“The legroom is unbelievable,” said Marvin Williams, a 6- foot-9 inch forward for the Atlanta Hawks. “We’re spoiled for nine months of the year.”
During the NBA’s off-season, Delta charters the A319s to baseball teams including the Minnesota Twins.
“That’s a rock-star configuration, and everyone can stretch out,” said Remzi Kiratli, director of travel for the Twins for 23 years. “They know how much attention each guy needs, and how players feel if they’re winning or losing, and the toll of long road trips.”
Oregon, which finished second in the BCS standings behind Auburn, chartered three Delta planes to fly to Phoenix for college football’s title game. Auburn’s contingent traveled on a Boeing Co. 747 jumbo jet, which can seat 400 passengers and is typically used on routes to Asia.
“We have over 300 people on a 4-hour flight,” said Jeremy Roberts, director of operational support services at Auburn. “We thought it was important to give everyone some breathing room and let them be comfortable and stretch out.”
The business isn’t that relaxing for Wernecke, 47, who carried a handwritten list of Delta’s bowl-season charters in his planner in recent weeks so he had access to the information when he wasn’t in his office.
When snow collapsed the Minneapolis Metrodome’s roof before a Dec. 12 home game for the NFL’s Minnesota Vikings, Wernecke had to rustle up an Airbus A330 from Delta’s schedulers so the team could play the New York Giants the next day -- in Detroit.
Jetliners booked for charter flights usually are taken out of regular service for a day or two, then returned to commercial routes when the trip is complete.
Those demands make it hard for smaller airlines to compete for charters, because they don’t have large enough fleets, said Boyd, the aviation consultant. Delta owns or leases 821 jets, and typically has a dozen or more spares.
“You have to be like Delta to pull off charters successfully,” Boyd said. “You have to be big, you have to have backup planes, and you have to be incredibly reliable. If you cause a team to miss a game, you’re going to get killed.”
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