Updated March 26, 2013, 10:02 p.m. ET
By SUSAN CAREY And JACK NICAS
The Wall Street Journal
The planned merger of AMR Corp.'s American Airlines and US Airways Group Inc. promises to produce more of a contender in the huge New York market.
After the two airlines combine, an enlarged American would get a nearly 64% increase in seats leaving New York's La Guardia Airport, the favored gateway for business passengers traveling domestically.
The growth would mostly come from the addition of US Airways' hourly shuttle service linking La Guardia to Boston and Washington. American would offer 30% of the seats departing La Guardia, second only to the 42% controlled by Delta Air Lines Inc., according to schedule data from Innovata LLC.
"This puts American in the big leagues for airlines in New York," says industry consultant Henry Harteveldt of Hudson Crossing. American is "now going to be a very credible No. 2 competitor to Delta." The merger still requires antitrust approval. A hearing on the plan is scheduled for Wednesday before the U.S. Bankruptcy Court judge overseeing AMR's case.
American faces a tougher slog at John F. Kennedy International Airport, where it would continue to trail JetBlue Airways Corp. and Delta, and at Newark Liberty International, where United Continental Holdings Inc. controls nearly 70% of the seats.
Airlines care deeply about New York because it generates the most fliers in the U.S. and has a high proportion of business travelers, who tend to fly more, pay more and travel overseas more than leisure travelers. But growth in New York is difficult because takeoff and landing slots are costly and in short supply. Carriers can generally expand only by adding larger planes—or merging.
By adding US Airways, American can offer companies a few more destinations from New York and more frequent flights on high-demand routes. And between the two world-wide, they will be able to create 1,300 new connecting opportunities, they say.
American's three big competitors vow they won't cede ground. "You have four carriers that regularly say they're New York's hometown airline," says Gail Grimmett, Delta's senior vice president for New York. "But nobody can say they own New York. It's a fight every day."
The battle for New York's skies extends to sponsorships. Delta is the official airline of the New York Yankees, Mets, Knicks and Rangers, while JetBlue sponsors the Jets. United sponsors Carnegie Hall and the Tony Awards, and American is the official carrier of more than 30 Broadway and off-Broadway theaters.
The rivalry puts globe-trotting New York business travelers in a sweet spot. "Each [airline] has its pluses and minuses. It depends on where I'm going," says Elliott Kroll, a lawyer who has logged about one million miles on American and nearly as many on Delta. He thinks American is best for transcontinental routes because it flies larger planes, while Delta has the nicest premium-cabin seats on international routes, and United offers the most flights to Asia and the Middle East.
Each of the four competitors has a niche. United controls Newark with more than 400 flights a day, and altogether it flies to 150 cities out of greater New York, compared with just 106 cities for Delta and 56 for JetBlue. JetBlue is the biggest carrier at JFK and flies nearly two-thirds of its New York seats to Florida and the Caribbean. Delta has the biggest operation at La Guardia and rivals JetBlue at JFK, offering its fliers two options.
Based on current schedule data, the new American would serve 59 destinations from New York, with two new cities—Phoenix and Philadelphia—coming from US Airways. That could change once the carrier revamps its combined route network, possibly by using US Airways' transatlantic gateway in Philadelphia as an alternative to the New York flights. American officials say they are eager to add the US Airways Shuttle to their arsenal because those flights build loyalty among business fliers. They also hope to capture more traffic between New York and the big banking community in Charlotte, N.C., a US Airways hub.
American Vice President Tim Ahern says the airline is well positioned on the most important business routes from New York: to London, Los Angeles and San Francisco. American, with European partner British Airways, is the top combination between the New York area and London, with 16 round-trip flights a day. "Everyone would love to own New York," Mr. Ahern says. "We will continue to fight to grow" there.
But Delta, which has gained its might at La Guardia since a 2011 slot-swap deal with US Airways, has another trick up its sleeve. In December, it said it will buy 49% of Virgin Atlantic Airways Ltd. and hopes to enter a transatlantic joint venture that would lift its market share to 35% between New York and Heathrow Airport in London, coming much closer to the 51% controlled by American and British Airways. Delta also plans to open a new $1.4 billion terminal at JFK in May and is investing $160 million to modernize its space at La Guardia.
United Vice Chairman Jim Compton insists his company is the top carrier in New York, offering the most destinations and operating a true connecting hub at Newark—unlike Delta and American, which split their flights between JFK and La Guardia. "Our network scope, with more international destinations, is a big part of the conversation" with corporate clients, he says.
JetBlue, which is based in Long Island City, N.Y., focuses on customers its rivals sometimes ignore, says Robin Hayes, its chief commercial officer. "Large, legacy airlines do a good job of looking after top-tier customers," he adds, but JetBlue aims to "serve the underserved," the leisure fliers, with its competitive pricing, new planes and free in-flight TV.
And JetBlue isn't standing still. Last week, Mr. Hayes told investors that in 2014 the company plans to roll out dedicated sections of premium seats on its new A321 aircraft, initially on daytime flights to San Francisco and Los Angeles from JFK. Mr. Hayes wouldn't say what the product will look like, but he says it is intended to close a revenue gap compared with JetBlue's rivals and give leisure fliers and small business owners a more comfortable option at an accessible fare.
If antitrust authorities require American and US Airways to divest themselves of landing slots at LaGuardia or Reagan National Airport near Washington, Mr. Hayes says JetBlue would be interested in picking them up. JetBlue also hopes to maintain or expand its passenger-sharing alliance with American in New York.
Given the level of competition and the size of the market, airline-consultant Mike Boyd of Boyd Group International says one thing is certain: "There ain't nobody that's going to be the dominant carrier in New York anytime soon."
Source: http://online.wsj.com
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