Watch CBSN Live

Three Reasons Why Delta Slashed First Class Fares Between New York and the West Coast

It looks like Delta (DAL) is sick of watching premium passengers between New York and both LA and San Francisco fly on other airlines. They've recently upgrade the aircraft on those routes to have their international BusinessElite product, and now, they've dramatically slashed fares for those comfy seats.

Though February 1, you can fly one way between New York and LA or San Francisco for $499 a week in advance or $699 less than a week out. Those are huge cuts from what's out there right now. Virgin America will be double that at least and United (UAUA) and American (AMR) charge even more for their Business Class. So what's motivating this? What are they thinking?

I think there are a few things that are pushing them to do this.

Delta Wants to Win in New York The terminology sounds pretty goofy to me, but Delta has this notion of trying to "win" in New York, as if only one airline can win the entire market. When it comes to big business in the premium cabins between the coasts, American and United are the clear leaders. Delta may not have the corporate contracts, but if the prices are that much lower, then travel managers are usually willing to let their employees go outside the policy.

Virgin America Announced an Operating Profit Just last week, Virgin America said they had posted an operating profit. Existing airlines don't like when newbies make money. Virgin America offers a very nice product up front, so Delta must want to fight them on price. If it happens to knock their revenues down a few pegs, I don't think they'll be sad to see it.

United Killed Upgrades on These Flights United may have rolled out its new unlimited free upgrade program on domestic flights, but they carved out their three cabin p.s. service between New York and both LA and San Francisco. Upgrades are no longer allowed, and that has frequent fliers on those routes steamed. Well, now Delta will let them sit up front for cheap. If they like what they see, maybe they'll switch their business over.

So while these fare cuts are pretty substantial, you can see that there are plenty of reasons for Delta to want to do something like this. I'll get into the "Win New York" strategy in more detail next week. I spoke to Delta's VP of New York Gail Grimmett to figure out exactly what that means. Until then, Merry Christmas to those who celebrate.

View CBS News In