<B> Shuttles Shooting It Out</B>
By Jay Campbell
The East Coast continues to be a hotbed of airline competition as Delta and US Airways plan the expansion of their shuttle products, and United grows its Washington Dulles hub. The developments have travel managers, particularly in the Boston and Northern Virginia areas, eagerly awaiting new cost-savings opportunities through both published price competition and negotiations.
US Airways had previously hinted at expanding the shuttle brand to the Boston-Washington leg (<I>BTN,</I> Aug. 3, 1998), but it was Delta that, on April 4, said it would offer nonstop shuttle service every other hour between Logan and Washington National airports beginning in June.
Just five days later, US Airways responded by announcing that its existing hourly jet service between Boston and Washington National will become part of its shuttle system on July 9. But "within the next few months" it also will rebrand as the US Airways Shuttle its current hourly services between Dulles and both Boston and New York LaGuardia.
In perhaps a more blatant attack on Delta, US Airways also will raise from one to three the number of nonstops it flies between Atlanta and both Washington Dulles and Boston, beginning in mid-August.
Corporate buyers welcome the competition. "What a wonderful opportunity we have here in Boston," said Fred Fischer, manager of corporate travel services at John Hancock Mutual Life Insurance. "We work with both carriers and I can't wait to see what they offer. I'm really delighted."
Although US Airways declined to comment on how the shuttle changes could affect corporate negotiations, Delta spokesperson Jackie Pate said companies would be rewarded for additional business, to be worked out case by case.
One buyer source heard from Delta even before its announcement. "Both carriers have since called me, and they said new offers are on the way that would be separate from our existing shuttle contracts," he said.
Delta and US Airways in recent weeks have indicated they shortly will begin retiring the B727-200 aircraft that have made up both shuttle fleets since before these airlines even owned them. Delta will sell to United Technology's Pratt & Whitney unit a total of 119 727s--starting with 20 in 1999--but did not indicate exactly when the shuttle fleet would be replaced.
"All the 727s, including shuttle, will be retired by 2004," said Leo Mullin, Delta's president and CEO. "We're not sure, but we would anticipate their replacement by the new 737-800s. They are more cost-efficient than 727s on fuel and on labor because you go from three in the cockpit down to two. The benefit of those cost savings will accrue to the customer."
US Airways, in an 8K filing with the SEC this month, indicated that it will retire eight of its 12 B727-200s this year. The airline has Airbus 319 and 320 aircraft on order that would replace the 727s, which average 29.6 years old.
While awaiting its new 737s, Delta's new Boston-Washington service will be operated with a fleet of two dedicated Delta B-727 aircraft and one Canadair regional jet, flown by Delta Connection carrier Comair. "It's not an ideal situation to go in with different fleet types, but we needed slots at National from Comair," said Pate. "We felt it was worth losing the commonality to provide high frequency, and it is only temporary."
Neither airline revealed anything about how the inflight service could be reconfigured, but clearly some new services and products will be available on the new planes. Delta said it will continue its shuttle's "guaranteed seat" policy on the new route.
US Airways' entry of the shuttle brand into flights out of Dulles Airport is only the latest in an escalating war between it and United Airlines. United, partially responding to US Airways' bulk-up between Dulles and New York LaGuardia (<I>BTN,</I> Jan. 11), is in the midst of a 60 percent expansion at its East Coast hub.
"We downsized the hub at Dulles in 1990 and '91 from 110 to 50 flights because, although it had a good location and connecting opportunities, it didn't have a large local population of businesses and residents," said Dan Walsh, United's vice president of the Eastern region. "It's fundamentally business growth driving the demand."
Airbus, Marriott, Mobil, MCI, Oracle and TRW are among the major corporations that either are moving to the area or already have large offices there. Dozens of smaller companies, particularly in technology, also have moved in.
Cheryl Hutchinson, travel manager at American Management Systems in Fairfax, Va., said the new competition is "fantastic," adding that "there is tremendous growth in this technology corridor. Now we need is a low-fare carrier because BWI doesn't bring down Dulles prices."
Business fares might be held down by United and US Airways themselves as they flood the airport with service. Already, the two carriers have offered summer sales for leisure travel booked on their Web sites.
While agreeing that the region has seen strong business growth, Paine Webber airline analyst Sam Buttrick said, "United's and US Airways' capacity combined will go up by over 100 percent in 1999--the market's not growing at that rate. But a lot of passengers will be seeing the Dulles Airport hub for the first time this year as its catchment base expands.