Delta Merges First And Business Classes

<B> Delta Merges First And Business Classes</B>

By Jay Campbell

Basing much of its decision on market research among corporate travel managers, travelers and travel agents in the United States and abroad, Delta Air Lines last month said it will drop its traditional three classes of service--coach, business and first--on transatlantic, transpacific and Brazilian flights.

Instead, the airline in December will begin adopting a hybrid business/first class, similar to that offered by Continental Airlines, Virgin Atlantic Airways and several others.

The change will make Delta the largest carrier in the world to adopt the still uncommon two-class service model.

"The main conclusion of our research was that corporations have reduced the number of passengers who are eligible to fly first class internationally," said Stephan Egli, Delta's vice president for Atlantic/Pacific. "Because of that, corporate travel managers told us they often have trouble finding business class seats, so not a single travel manager or travel agent had a negative thing to say about this."

Delta's focus group meetings with corporate travel managers and travel agents were supplemented by analysis of booking data from the computer reservation systems and interviews with travelers both by telephone and at the airport. Egli said most of the input came from corporate travelers working under managed travel programs.

Delta's CRS research concluded that in 1997, the intercontinental business class market, in terms of total passengers, is seven times larger than first class--and growing approximately four times faster. The findings are similar to those revealed in past studies, including The Corporate Traveler, a survey of 1,600 frequent travelers (<I>BTN,</I> Nov. 11, 1996). In that survey, only 12.4 percent of business travelers said they regularly fly first class internationally, while 58.2 percent said they choose business class.

Delta's traveler surveys concluded that 55 percent of business class passengers would increase their travel on an airline with a premium business class product and 82 percent of first class passengers would try a premium business class product.

Egli also noted that the overall number of first class seats on intercontinental flights is shrinking by as much as 30 percent on some carriers. He pointed out that Singapore Airlines, which is world-renowned for the quality of its service, last month announced plans to shrink the number of first class seats on its flights from 24 to 12 (see story, page 18).

Furthermore, said a Delta spokesperson, Delta does not compete in the top first class markets, such as on routes from major U.S. cities to Heathrow Airport in London, and from New York's Kennedy Airport to Paris. And, she noted, only 13 percent of Delta's first class passengers pay full fare.

One unsurprising finding in Delta's research was that 96 percent of passengers said superior seat comfort was "extremely" or "very important" when choosing a carrier. Delta promised in its announcement to "redefine" its intercontinental business class standards to provide "industry-leading comfort, superior personalized service, unsurpassed meal selections, new wine varieties and a state-of-the-art inflight entertainment system."

The airline will stop short, however, of offering the sleeper-style seats made famous by Air France and British Airways.

Egli would not say how many of the new seats will be installed, nor would he indicate their seat pitch, though he did say they will be "electronic." Another Delta source confirmed that the seats will offer power outlets for laptops.

Egli said the airline garnered "tremendous feedback" after a test in which more than 80 people, in shifts of six, spent eight hours "eating and sleeping" in the seats during a simulated long-haul flight at the Renaissance Hotel in Atlanta.

The airline will provide further details on the new seats in late November or early December, just before the first phase of installation begins.

Meanwhile, the interiors of Delta's intercontinental fleet, including 42 B-767ER aircraft and 15 MD-11 aircraft, will be redesigned over an eight-month period, and the 12 B-777 aircraft that Delta currently has on order will be delivered with the new two-class interiors.

Ground and in-flight elements of the product will be introduced in the spring of 1999, and completion of aircraft modifications and consistent product delivery is scheduled for that summer.

The carrier's $100-125 million investment in the redesign and new seats comes not long after Delta revamped its international business class last year (<I>BTN,</I> Oct. 6, 1997)--but it clearly dwarves that effort in terms of cost and service improvement.

"That was a minimal investment," said Egli. "We were matching the industry trend of offering 40- to 50-inch seat pitch, but we didn't have to buy new seats."

At the time, Delta was operating under different management, with Ron Allen as chief executive and Robert Coggin as head of marketing. Both have since retired and were replaced by Leo Mullin and Fred Reid, respectively. In June, the carrier also announced the creation of a new position, vice president of customer service, and named Vicki Escarra to the post.

Following a customer and employee backlash against Allen's Leadership 7.5 program, which was designed to reduce Delta's unit costs to 7.5 cents per mile (<I>BTN,</I> Oct. 2, 1995), these management changes and a heartier financial picture for the airline have led to a management style more focused on customer service.

"There are cross-divisional task forces working on several fronts, including on-time performance, airport technology upgrades, delay handling and recovery, recognition programs for key customers and inflight meal service improvements," said Dan Cupertino, director of industry sales. "We will not give up the painful, hard-won cost advantages achieved during the early 90s, but we are making intelligent investments in customer-service improvements--and they are paying off."

One interesting fact about the new hybrid business/first product is that Delta, once Virgin Atlantic's major U.S. codesharing partner, now is making its interiors look more like Virgin's than ever. It was partly the commonality of their business/first products that gave Virgin reason to hook up with its current partner, Continental (<I>BTN,</I> March 17, 1997).

Now Delta has gone with the same cabin configuration. This is a move that, in addition to a number of other reasons, has prompted speculation among several airline industry observers that Continental and Delta might be ready to reconsider the partnership they were attempting to hash out before Northwest showed up with a better offer (<I>BTN,</I> Feb. 23).