East Coast Sizzles

<B> East Coast Sizzles</B>
<I>US Airways, Delta Shuttles Flex Their Corporate Muscles</I>

By Jay Campbell

Following US Airways' purchase last winter of the Boston-New York-Washington shuttle, the carrier has gone on the offensive for additional corporate market share in these massive and business travel-intensive city pairs.

The aggressive sales effort is increasing competition for the dollars of many corporate buyers, but also putting a few in the unwelcome position of choosing between two long-time partners.

Meanwhile, both the US Airways and Delta Shuttles have developed databases that ensure that managed travelers can access their corporate rates at checkin. The technology also tracks frequent flyer miles and expedites the transfer of corporate spending data to other systems.

In terms of competition between the two airlines, the US Airways-owned shuttle now is a stronger player, relative to Delta, than it was previously. In the past, the USAir Shuttle--of which USAir owned 47 percent--was managed separately and had no coordinated corporate sales between the mainline and shuttle operations.

"Historically, our salespeople couldn't sell the Shuttle because they didn't have it in their portfolio," said Steven Tracas, US Airways' vice president of global sales (see interview, page 1). "It was natural for corporations to ask, but our people couldn't talk about it from a pricing standpoint."

This also meant customers could not take advantage of the combined network and, on the flip side, USAir could not leverage a corporate customer into using its shuttle in order to earn discounts on the mainline--but Delta could. Although Delta remains a much bigger airline, overall, than US Airways, the latter's strength in the Northeast markets--soon to include an expanded shuttle on Boston-Washington--is putting it in its best-ever position.

Boston-New York/LaGuardia and New York-Washington/National are the fifth and ninth most heavily traveled routes in the country, according to 1997 figures printed in Aviation Daily. Boston-Washington/National moved from 27th to 24th between 1996 and '97. Also in 1997, US Airways and Delta were the number one and two carriers, respectively, in all three airports.

While competition between the two carriers may be heating up, for some corporations the changes disturb a careful balance of usage between the two carriers, according to travel managers speaking on condition of anonymity.

"I'm a victim of circumstance," said one travel buyer. "We've used the Delta Shuttle for five years. We also have front- end deals with both airlines on their mainline routes. A month ago, my US Airways rep came to me and said the airline's new policy is that all new agreements will include the shuttle. My agreement comes up for renewal in December.

"I need the mainline deal with US Airways, but I have a great relationship with the Delta Shuttle--my rates are frozen until 1999. I want to hold onto both."

Another buyer said that although he had yet to hear from US Airways, the scenario sounds familiar based on previous experience. "We had a deal with both of the shuttles, and then one comes in and leverages the rest of the business," he said. "Delta usually won because USAir was big only in the Northeast, which isn't good enough for a corporation of our size."

But Tracas said there is "not a mandate that all new contracts must include the shuttle. Everything is up for negotiations--you can take the shuttle out or leave it in, just like any other part, transcontinental or transatlantic or North-South on the East Coast."

Other non-airline sources welcomed the stronger US Airways Shuttle. "USAir had been at a disadvantage for years because it didn't own the shuttle, but lately I've seen some aggressive pricing actions, and they've been very aggressive with a lot of our corporate customers," said Michael Boult, director of supplier relations for Rosenbluth International.

Apparently US Airways is shaking up the somewhat standardized negotiated rates that had been in effect, where a certain number of segments earned a certain flat fare for the contract. As part of the pricing matrix, corporations with several thousand segments a year are earning one-way unrestricted fares of under $100. Those with a few thousand segments are paying around or just over $100. The regular one-way full fare is $202.

Competing on the service side, both shuttles are changing the way corporate travelers buy their tickets at the airport. New internal databases--branded SkyCard at Delta and Shuttlematic at US Airways--are enabling the shuttles to offer corporate rates even as last-minute travelers buy their tickets at the airport.

SkyCard, which had been in testing for about a year and was first offered to large customers in May, now is in use by "thousands of travelers, with a quick expansion on the way," said a Delta spokesperson. When the passenger swipes his corporate card to buy a boarding pass for the Delta Shuttle using Delta's Automatic Ticketing Machines, the computer charges the appropriate negotiated fare and also credits the passenger's frequent flyer account.

The concept grew out of Delta's smart card tests on the shuttle (<I>BTN,</I> June 24, 1996). Traveler and travel manager feedback from that test told the airline that travelers didn't want to carry an extra card. Some travelers still have the smart card, but it is not being rolled out to new users.

"SkyCard is available to any company that wants to sign up," said Gary Swanson, Delta's director and general sales manager. He said the product helps the Delta Shuttle maintain on-time performance in the high 90s; for corporations, the program helps improve "processes and transaction costs. It's all electronic, no reservations, so the billing and ticketing info goes straight into the credit card info."

Philip Dunphy, manager of corporate travel for Pfizer Inc. in New York, said that "based on what I've heard, this is exactly what we're all trying to achieve--simplicity." Dunphy has been talking to Delta about joining the program, but has yet to do the preliminary research of traveler patterns, profiles and card numbers.

A travel manager from one New York company that signed on to the SkyCard program a couple of months ago was a bit less enthusiastic, saying the program "had a couple of kinks in the beginning."

Kevin Brady, vice president of travel and executive services at Merrill Lynch, said he was offered the SkyCard program but couldn't take it because one requirement is a full-fledged corporate card program. "Delta's been pushing the program and it's a pretty good discount. It's like an electronic form of bulk buying," he said. "One thing, though, is that sometimes travelers like to take their paper ticket over to US Airways if they miss a flight, and you can't do that with this. Also, having them stop at machines is something new for them to learn."

Swanson agreed that shuttle passengers are "very habitual."

Shuttlematic, acquired by US Airways along with the shuttle last November, expedites the ticketing process and includes information on the traveler's preferred seating and billing method and also provides the corporate discount. Travelers simply buy their tickets at the counter or gate checkin as they always have. The airline was reluctant to reveal how many passengers or companies are using the product, but Tracas did say it is available to all the carrier's corporate customers as well as to other business travelers.

Also new as part of the Delta Shuttle operation is the expansion of the Delta Water Shuttle from LaGuardia to a third stop in Manhattan. Now the water shuttle stops at 62nd, 34th and Wall Streets.

"This is the best-kept secret in New York," Swanson said, jabbing his competition by noting that "you can't move water over to US Airways' terminal."

Though the US Airways Shuttle may not offer a water component, it has upgraded its snack service and is in the process of enhancing the aircraft interiors. US Airways also plans to soon offer something even bigger--a third leg on the shuttle between Boston and Washington.

According to a January press statement, "The Shuttle system soon will be expanded to include non-stop flights between Boston and Washington. With the addition of up to 17 daily non-stop flights between Boston and Washington, the Shuttle system will expand to as many as 49 round-trip flights daily, which are expected to carry more than 2 million passengers annually."

Delta has "no such plans now," said Swanson, though he added that the carrier "continues to look at Boston-Washington, but resources are at a premium."

Already, the mainline US Airways flies hourly service between Boston and Washington/Dulles. US Airways is planning to complement these changes by teaming its frequent flyer program with that of American Airlines, offering miles incentives specific to the shuttle.

Both shuttles in February moved to enhanced facilities at Washington's Ronald Reagan National Airport. The new terminals--B for Delta and C for US Airways--are offering special new checkin counters, including one each near the Metro station, covered parking, separate ticketing and baggage check-in facilities, as well as a variety of airport specialty shops and restaurants.