The competition heats up among low-cost airlines
When Song, Delta's new low-cost carrier, debuts this month with direct flights from New York's JFK to West Palm Beach, it will bring the imitation-as-flattery equation to new heights. Delta is making an obvious play for JetBlue, installing high-tech amenities—live television at every seat, Internet access, MP3 audio programming—and targeting the JFK-based airline's territory, kicking off with daily service from the New York area before tackling additional markets.
Other major carriers have attempted affordable spin-offs and failed: Continental Lite and US Airways' MetroJet have both been retired, and Song itself replaces Delta Express. How will Delta's new tune play out?Last year, the airline lost $1.3 billion; it's spending an estimated $75 million to launch the subsidiary. Even if, by a miracle, it matches the performance of JetBlue—which posted $100 million in profits in 2002, its second full year of operation—Delta's massive, unionized hub-and-spoke structure would probably eat up any earnings. Notes Jamie Baker, an airline analyst with J. P. Morgan: "We don't believe Song will be profitable on a stand-alone basis. The goal of Song is to slow, if not rechannel, the growth of discount carriers."
Meanwhile, the established low-cost carriers are ramping up their schedules. This month alone, America West begins service to Memphis and ATA is offering a new San Francisco-Cancún route. In May, JetBlue launches service from Long Beach, California, to Atlanta (Delta's hub) and Fort Lauderdale. AirTran just won valuable slots at Reagan National in Washington, D.C. And Air Florida Airways bows in June, flying from St. Louis to five cities, including Chicago.
At press time, Chapter 11-mired United had its own low-cost subsidiary, code-named Starfish, in the works, despite union resistance. Will it, too, offer in-flight TV?If so, expect a blackout on financial news.