I briefly talked about Delta's (DAL) strategy to "win" New York last week, so today I thought I would elaborate on that. I had the chance to speak with Delta's SVP-New York Gail Grimmett on what they've been doing. My biggest question was . . . what does it mean to "win" New York?
New York is a crowded place. On the east side of town we have American (AMR), Delta, and JetBlue (JBLU) with substantial operations at JFK. When Delta takes over the US Airways (LCC) operation at LaGuardia, they will also be the leader at LaGuardia. But on the other side of the city, we have what is easily the best hub operation in New York - Continental's (CAL) Newark behemoth. So how is Delta going to "win" New York? They have three pieces to this plan.
Better Customer Experience This refers to a couple different areas. They've bulked up the premium offerings including flat beds to London and BizElite to LA and San Francisco (these came out of focus groups made up of corporate clients). On the ground, however, is the biggest issue. That disaster of a terminal known as the old Pan Am WorldPort (that's Terminal 3) needs to go. I asked Gail what was happening with that.
I would like to think that we're at a point where hopefully we can make an announcement within the next 6 months about what we want. There are various alternatives on the table but one that is not on the table is sprucing up Terminal 3. From our perspective, it needs to go. We've sunk $70 million into Terminal 3 and quite frankly, you can't tell.If we do hear in six months, then we'll probably see a new terminal in, oh, 2095? Maybe that's a slight exaggeration, but at this point, even announcing plans could be seen as a victory.
Growing the Network They've spent plenty of time adding flights over the last few years, but they aren't letting up. They're still looking at new international destinations and they're getting ready for this new LaGuardia operation. They want to make LaGuardia a regional hub that can serve local passengers flying to the cities within the 2,000 mile perimeter. JFK will be the international focus, but it will keep those regional flights that feed international. They've said they want to free up slots at JFK for more international, but if they're keeping the feeders, then I'm not sure how well that will work. Nobody wants to have a flight leave for Europe at noon. Gail addressed that.
It might be off-bank but there is still plenty of room to feed international opportunites. The time zones will allow us to feed JFK a little bit moreSo maybe we can look for some more creativity to places like Africa and Asia that have strong local markets out of New York. Not sure how many of those are left.
Becoming a Part of the Community Though I've listed this last, it was clearly Gail's main focus for our conversation. She started off right away saying that while they built up the operation quickly over the last few years, they effectively failed to really establish themselves in the community. That's why she was put in this job - to fix it.
We spent a lot of time putting the planes and the routes in but we didn't build the infrastructure within the community. Whether it's a community relations, political, or marketing standpoint, none of that was really here. The thing about New York is that a) nobody owns it and b) we're not getting our fair share in the market [based on capacity]. We should be getting a premium from New York, so #1 for us is to really move forward to get fair share and to be more engaged. We can't just serve the community but be a part of the community.So in that time, Delta has gotten involved. They now sponsor the Mets and the Yankees along with Madison Square Garden. I had to wonder why anyone would want to be associated with the Knicks in any way, but Gail noted that it's not just Madison Square Garden but a variety of other theaters under the same company. "What I found appealing about partnering with Madison Square Garden was that 84 percent of all entertainment tickets in New York are for a Madison Square Garden venue."
The strategy isn't just to plaster their name all over town, though that's obviously a big piece of it. They're also getting more involved with the community with volunteer work and philanthropy to some extent. Gail mentioned that they have 7,000 people working for the airline in New York so it's really important to get out more into the community.
So do we now know what it means for Delta to "win" New York? I think so. It means they want to start getting more than their fair share based on the capacity they have in the market. Building a better product, having a solid route structure, and getting more involved in the community are all part of that. But there really is one piece that I think is most important. As Gail says, "if you don't fix JFK, that piece of it alone will never let you get your fair share."