Valets Skirt Lines for Fliers on Richest U.S. Air Route
Airlines are stepping up competition for full-fare passengers between New York and Los Angeles, with lie-flat seats, pricey French wines and personal valets to whisk travelers from curb to gate without wasting time in lines.
The latest dogfight over first- and business-class fliers involves five carriers on the most lucrative U.S. route. Delta Air Lines Inc. (DAL), American Airlines (AAMRQ) and United Airlines (UAL) are expanding space for high-end customers and offering goodies once reserved for international trips, such as mini-suites.
Joined by JetBlue Airways Corp. (JBLU) and Virgin America Inc., they’re chasing bankers, celebrities and others who buy tickets that can top $6,500. That market, a minority of passengers on any given trip, produces an estimated 75 percent of the revenue on cross-country flights -- a payoff for airlines’ investment in plusher cabins and four-course meals.
“I like my space, my privacy, so the comfort level of the seat is really important,” said Hal Biagas, general counsel at Excel Sports Management, which represents golfer Tiger Woods and the New York Yankees’ star Derek Jeter. “What I do tends to draw interest, and I can’t have someone looking over my shoulder and seeing a name on a presentation or contract.”
For those able to afford the fare, the pampering is worthwhile on a trip that spans 2,500 miles (4,000 kilometers) and lasts six hours going westbound because of headwinds. That’s only about 90 minutes less than flying to New York from London’s Heathrow airport.
“Unlike other domestic U.S. routes, there is significant demand from customers who are willing to pay full price to sit in the first-class cabin,” American Chief Commercial Officer Virasb Vahidi said.
At AMR Corp.’s American, the transcontinental-only perks include concierge employees who greet elite passengers at curbside and whisk them to a dedicated check-in room and a private elevator that skips to the front of security lines. Those fliers then go to the Flagship Lounge, a private facility within American’s Admirals Club lounges.
New York-Los Angeles is both the busiest long-haul U.S. route, at about 3.2 million passengers a year, and the most lucrative, at $1.43 billion in annual sales, according to the Bureau of Transportation Statistics. First-class fares on that trip may be 10 times as much as in coach, based on prices on airline websites.
“Pandering to business traffic is a lot more important than getting volume,” said Michael Boyd, president of consultant Boyd Group International Inc. in Evergreen, Colorado. He estimates that premium seats typically generate three-fourths of the revenue on a cross-country flight.
Airlines’ focus on the most-profitable flying breaks with their old habit of trying to grab passengers even if flights lost money. Investors are responding to that approach, sending the Bloomberg U.S. Airlines Index to a 41 percent gain this year through yesterday, more than twice the 17 percent advance for the Standard & Poor’s 500 Index. (SPX)
American, reorganizing in bankruptcy and poised to merge with US Airways Group Inc. (LCC), accounts for 32 percent of revenue on the New York-Los Angeles route, according to Boyd. By his estimates, Virgin America has 21 percent, Delta has 19 percent, United Continental Holdings Inc.’s United is at 16 percent and JetBlue has 11 percent.
“That transcon market is incredibly important because it helps you become the preferred carrier across the board,” said Gail Grimmett, Delta’s senior vice president for New York.
Any loyalty built for shorter domestic trips may be tested when elite fliers go abroad. United, Delta and American trail international rivals in operating the biggest and newest planes on overseas routes, which typically are the most profitable because of the lack of discount competition.
No U.S. carrier flies the Airbus SAS A380 superjumbo jet, which seats about 500. Emirates’ A380s feature private suites and showers, and Singapore Airlines Ltd.’s double-deckers have hand-stitched armchairs.
Lie-flat seats are the focus of the New York-Los Angeles jockeying.
Delta has taken some wide-body Boeing 767s with flat-bed seats off trans-Atlantic routes and put them on cross-country service. It’s adding flat-bed seats on existing 757s on those routes, replacing cradle-style units.
United is yanking out the 12 seats that tilt to not-quite horizontal on its narrow-body Boeing 757s on transcontinental routes. In their place will be 28 lie-flat seats as the Chicago-based carrier rearranges the cabins and goes to two classes of service from three, which adds 32 seats in coach to “help with the economics of the airplane,” Chief Revenue Officer Jim Compton said.
At Fort Worth, Texas-based American, new Airbus A321 single-aisle jets entering the fleet in November are being modified for transcontinental service. They will have 10 mini suites with flat-bed seats, 20 fully flat business-class seats and 36 coach seats with extra legroom. There will be only 36 traditional coach seats.
“You can tell quickly that this aircraft was not configured for leisure travelers,” Vahidi said.
Other coddling is available as well. Atlanta-based Delta pours Veuve du Vernay Brut sparkling wine from France’s Bordeaux region for its business/first passengers, along with premium California offerings such as Merry Edwards Sauvignon Blanc.
The market for high-dollar passengers is so tempting that even JetBlue is breaking with a tradition of all-coach service. It’s adding premium seats on A321s entering transcontinental routes next year, Chief Commercial Officer Robin Hayes said.
“Our No. 1 target is customers who are already flying JetBlue today, but we don’t always carry them on the transcon,” Hayes said in an interview. New York-based JetBlue hasn’t given details of its plans.
Virgin America, the low-fare carrier part-owned by Richard Branson and known for touches such as white leather seats and mood lighting, is considering upgrading cross-country food and entertainment, Chief Executive Officer David Cush said. Burlingame, California-based Virgin America doesn’t have lie-flat beds and isn’t planning to add them.
“The main thing I care about is how comfortable is the seat and are we on time,” said Jeff Straebler, managing director for aerospace in the bonds and corporate finance group at John Hancock Financial Services in Boston and a veteran of dozens of New York-Los Angeles flights.
That view was echoed by travelers such as Biagas, the sports agent, and Jay Levy, 32, co-founder and partner at New York-based venture capital firm Zelkova Ventures. He goes cross country every other week, usually on Delta or Virgin America, for trips that include checkups on his new California wine label, Uproot Wines.
“They’re upping their game,” Levy said. “There should be more first-class and business-class seats on these planes. It’s the main thing that matters.”
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