Delta Sharpens NYC Fight With $1.4 Billion JFK Terminal

Delta Air Lines Inc. sharpened the jockeying for the highest-paying passengers in New York, the biggest U.S. aviation market, as it opened a $1.4 billion terminal at John F. Kennedy International Airport.

A venture with Virgin Atlantic Airways Ltd., in which Delta is taking a 49 percent stake, will include seven daily JFK flights to London’s Heathrow airport once the purchase is completed this year, President Ed Bastian said in an interview before today’s inauguration of the international facility.

“JFK is going to be a big driver for us in getting international seats, a big driver in the Virgin transaction, a big driver for us in New York with banks and financial service providers,” he said May 22 at Bloomberg’s New York headquarters. “Today since we’re a relatively small player in that market, we don’t have a frequency pattern that appeals to the business traveler.”

Wooing corporate fliers in the nation’s financial capital is part of Delta’s strategy to focus on travelers who buy the priciest tickets. No carrier dominates service across New York’s three major airports, where government controls curb growth and force airlines to fight each other for passengers.

JFK is a critical piece in Delta’s plan, and its aging facilities there had become a liability in an industry where carriers set themselves apart through creature comforts such as upscale food at terminal restaurants and quiet lounges.

Competitor Upgrades

JetBlue Airways Corp.’s Terminal 5 at JFK opened in 2008 and cost $743 million, and American Airlines parent AMR Corp. spent $1.3 billion on a Kennedy terminal in 2007. Continental Airlines, a United Continental predecessor, invested $1.4 billion in 2001 at New Jersey’s Newark Liberty airport and the combined company announced today that it’s offering lie-flat seats on all long-haul, international flights from New York.

Delta hired Harry Olsen, who built the $1.5 billion baseball stadium for the New York Yankees, to oversee the project, which adds 16 international gates, automated baggage screening, more customs inspection booths, and an airport lounge as big as five basketball courts.

In a second phase of construction, another 11 gates will be added to connect passengers to international flights, at a cost of $175 million. The first phase cost about $1.2 billion.

Delta Chief Executive Officer Richard Anderson promised the airline would undertake another Kennedy expansion when demand warrants.

Third Phase

“We want to keep investing and someday build a third phase,” Anderson said at today’s ceremony.

Delta has doubled its workforce in New York over the past six years, to 7,000 people, and will bring more growth in the coming years, said Mayor Michael Bloomberg, who is the majority owner of Bloomberg LP, the parent company of Bloomberg News.

The new terminal allows Delta to demolish the adjacent 1960s-era Terminal 3, a saucer-shaped building previously known as the Pan Am Worldport, which a Delta executive once said passengers equated to a “third-world country” because the facility was so dilapidated and worn. That space will be used for aircraft parking.

Delta climbed 2.4 percent to $18.93 at the close of trading in New York. The stock previously advanced 56 percent this year, outpacing a 16 percent gain by the Standard & Poor’s 500 Index.

Before it's here, it's on the Bloomberg Terminal.