American Airlines, through its regional affiliate American Eagle, this fall will enter the Northeast shuttle battle against longtime incumbents Delta Shuttle and US Airways Shuttle, as well as Amtrak Acela. American Eagle will ramp up a new brand, Business Express, offering 10 roundtrip flights between New York LaGuardia and both Boston Logan and Reagan Washington National aboard 37- and 44-seat regional jets. Business Express operations will include Eagle's existing Boston-Washington service.
Meanwhile, American, Delta and United are taking aim at low-cost competitors by matching fares or launching competitive services.
AA's thrust into the Northeast, and efforts to lure additional corporate business, will compete head-on against two well-entrenched major network competitors and the nation's only high-speed rail service. Though American already provides frequencies between the region's business centers, including service from multiple New York airports, Business Express will become AA's de facto shuttle on traditional, business-focused routes in the Northeast corridor.
Fares for Business Express, though not publicly announced, have been loaded and are comparable to Delta's and US Airways'. "As far as pricing, the goal is to be very competitive" in pursuing our corporate partners, said Chuck Imhof, AA managing director of the greater New York area. "This helps position us even better with a majority of our largest customers."
Imhof said Boston and Washington National represent the two largest origin and destination markets from New York, but there had been a noticeable gap in American's network. "If you look at our growth over the past few years, we are trying to position ourselves as the New York airline," he said. "We heard from frequent flyers and corporate customers that this is really where we need to be."
New York LaGuardia-Boston Logan flights will start Sept. 24, followed a week later by the launch of New York LaGuardia-Reagan Washington National service. A sixth daily flight between Boston and Washington National will be added on Aug. 1.
American began approaching corporate clients about Business Express the day the service was announced. "We are letting them know we answered their requests," Imhof said. Considering pressures on short-haul flying, however, some area travel managers are not certain a third air shuttle will succeed. "Looking just at the shuttles, is this David trying to knock off Goliath?" asked Phil Dunphy, Pfizer Inc. corporate travel manager. "People are very accustomed to the level of service they receive from the existing products."
Gabriel Eshaghian, PricewaterhouseCoopers manager of global airline and car rental programs, agreed. "Hurting AA in the short term is their product offering on these routes vis-a-vis the competition. Jet service is much preferred by business travelers over small regional jets, making it difficult for AA to attract customers in this market," he said. "This will result in some serious discounting, therefore diminishing the yield necessary to maintain route profitability."
Delta and US Airways use larger planes for their shuttle products—Boeing 737s and Airbus 319s/320s, respectively—operate more daily frequencies (between 15 and 17 on each of the routes) and offer business travelers various conveniences
(BTN, June 3)."The shuttle is one of our jewels," said Paul Leyh, US Airways global director of corporate programs. "We have worked at aligning the needs of our customers with the services we provide to offer arguably the best product in the market." He pointed to US Airways' dependability, such airport facilities as self-service kiosks and inflight services as differentiators. "We continue to aggressively sell the shuttle to the corporate market. It is included in corporate programs because our customers want it, need it and view it as superior," he added. Delta would not comment on AA's entry against its shuttle product.
Business Express Embraer ERJ-135 and ERJ-140 aircraft will feature leather seats in a one-by-two arrangement, large overhead bins, beverages, snacks and newspapers. AA recently ordered additional self-service kiosks for deployment at LaGuardia. Marty Heires, an AA spokesperson, said Business Express "will be setting expectations to get from the curb to the gate" to mitigate the concerns about security-related airport delays. Delta and US Airways guarantee shuttle passengers will move from checkin to the boarding gate within 20 minutes, backed by 20,000 frequent flyer miles and $200 vouchers, respectively. Both guarantees expire at the end of August.
Part of the motivation behind AA's move was slot regulations at LaGuardia. The carrier, which last year gained slots from the TWA acquisition, faced losing some at the end of October unless it began using them. Despite deploying regional jets, AA officials said the carrier "would find a way" to increase capacity, if needed, and pointed to previous successes in growing markets from RJs to larger aircraft. "It would be great if that could happen, but we don't see it anytime soon," Heires said.
Separately, AA on Sept. 4 will launch new service between Chicago Midway and New York LaGuardia using 87-seat Fokker-100 jets. Three daily frequencies, which complement existing service between New York and AA's Chicago O'Hare hub, will compete directly against low-cost carrier American Trans Air.
American is not the only major carrier responding to growing low-cost carriers. United Airlines matched Frontier Airlines' new fare structure out of Denver (see story, page 1) and the Delta board last week began reviewing a recently completed study examining potential responses against the likes of AirTran Airways, JetBlue Airways and Southwest Airlines, according to Aviation Daily. The report suggested the Delta Express unit's wide-reaching RJ fleet would combat the advance of low-cost competitors.
Delta on Sept. 1 will launch regional jet service between Dallas Ft. Worth and Chicago O'Hare aboard Delta Connection carrier Comair. The five daily frequencies will compete between American's largest hubs.
Regarding Chicago, AA and United continue their longstanding turf war. United president Rono Dutta recently told analysts that United had regained its 10 point marketshare advantage over American at their shared O'Hare hub. He said American in April had closed the gap to five points with capacity increases, but United countered in June to again extend its advantage.