Airport and Aviation Marketing Special Report


The Commodity Airlines That Wish They Weren't

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ATLANTA ( -- Today was just another day in Airworld. As they say, if it's Tuesday, is must be ... Atlanta, in my case. I rolled out of bed (next to gate E18), jumped in the shower (at the Delta Crown Room Club), checked e-mail and somehow still managed to set off late for the office (at gate C20), where I was due to meet AirTran's director of marketing.

Pink plane
Actually, it was one of the busiest days I've spent in transit so far. I was lucky enough to be invited to a party -- Song's unveiling of a pink plane in honor of October's Breast Cancer Awareness Month -- held in one of Delta's hangars. Several hundred Song employees grabbed sack lunches and milled about as the airline-within-an-airline's president, Joanne Smith, introduced a video of cancer survivor testimonials. The tie-in makes perfect sense considering the airline's target demographic, women.

Song was launched after Delta's internal research demonstrated that 62% of leisure travelers were women, 75% booked their families' travel plans, and 90% were making the decisions on when and where to travel. Ergo, Song would speak first and foremost as a brand to women.

But that's a relatively narrow reading of the data, which revealed a broader sentiment among travelers that "uniformity was the enemy, and that travel was tiresome," said Smith. "What if you could bring the glamour back to air travel? What the industry needs to deliver is a low fare and a better experience."

Lifestyle experiences
The small galaxy of brands that surrounded Song at its birth

Photo: AP
Unveiled in Atlanta this week, Song's new pink plane was created in partnership with the Breast Cancer Research Foundation to support awareness of the cause.
and continue to do so today -- the Dave Lieberman sandwiches, the Rande Gerber cocktails, the Spades' uniforms, etc. -- were designed to link Song with the brands its desired customers have already aligned themselves with, e.g. Whole Foods, the W Hotels, Kate Spade and Jack Spade. (Last month, when I breathlessly explained my premise to the architect David Rockwell, who is designing the interiors of rival JetBlue's new terminal, he just shrugged. "Of course. People are interested in synergistic lifestyle experiences." Duh.)

That was the theory. What I wanted to know form Smith and her chief of marketing, Tim Mapes, was whether it was working. The short answer is, Who knows? Its financial performance is buried deep inside Delta's hemorrhaging balance sheet, and neither Smith nor Mapes is willing to reveal any useful numbers -- load factors, costs or revenues per passenger seat mile, passenger yields, anything -- "that will almost certainly be read by our competitors," according to Mapes.

Load factors and yields
But they did offer a few vague pieces of evidence. Load factors hover around a respectable 80%, Smith said. (Southwest's and JetBlue's are stilll higher.) Yields and fares are both rising, and Song

is hitting its internal benchmarks, said Smith, whatever they might be. Mapes said some fares have risen about $35 since Song's inception two years ago, which just about covers the corresponding increase in oil prices during that span. They both vow that the airline's blizzard of branded amenities -- which its competitors view as needless, expensive frills -- are profit centers.

"It's an extremely attractive proposition, that's all I'll say," Mapes said. "It's more attractive than flying people ... which isn't that much these days." Smith was more measured in her answer: "It's a small profit, and we ultimately have to fill the plane. ... The reality is that there is only a very thin margin from those customers willing to pay. But if [the flight] is priced the same as our competitors and we get the sale, then we're happy with that. In this market, a thin margin ..." she trails off.

She believes the airline industry isn't doomed to become a pure commodity business ("Brands will become more important"). And now that Delta is in chapter 11, looking to potentially shed its pension obligations and whatever other costs it can find, Delta is learning a lot from Song -- faster turnaround times, greater productivity. It's not much of a stretch to argue that at this point, if Song were a stand-alone entity, it'd be more valuable than Delta itself.

One of the reasons Delta landed in chapter 11 was because an old-school, low-cost carrier set up shop on its home turf, driving down fares. That was AirTran, the airline formerly known as ValueJet until the infamous 1996 Everglades crash and ValueJet's subsequent purchase of the smaller (and untainted) AirTran. AirTran has low fares, a business class cabin (upgrades are just $35) and a fleet full of young "baby Boeing" 717s and workhorse 737s. The net result, according to Director of Marketing Tad Hutcheson, "looks like a legacy airline," with lower fares (and a smaller route system, of course). It looks close enough to have increased its market share at Atlanta Hartsfield -- Delta's home and the busiest hub in the world -- from 5% to around 14% during Hutcheson's time there.

Out west in Denver, Frontier Airlines has pulled a similar trick on United. In July, the airport's busiest month ever, Frontier increased its market share to a record high 18.5%, mostly at United's expense. "They started Ted because of us," said Diane Willmann, the Frontier's director of advertising. United executives didn't respond when I brought this assertion up in conversation last week in Chicago, but it is clear that United has spent the last two years trying to swat low-cost carriers popping up in its hubs at Denver (where Ted launched with a legendarily weird guerilla marketing campaign) and Washington Dulles, where Independence Air emerged last year to cannibalize the fares of its former partner. (In a previous life, it was one of United's regional partners.)

My Independence flight Tuesday night would be the last U.S. leg of my journey before heading abroad Thursday, leaving the low-fare carriers -- and the American pod of Airworld -- behind.

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