A rush to grab a slice of the transatlantic revenue pie is bringing growth-hungry US carriers into new territory, potentially pitting alliance partners against each other.

The move is led by SkyTeam's Delta Air Lines and Northwest Airlines, which have used bankruptcy to bring their operating costs below those of some of their partners and competitors. Northwest is poised for a summer 2007 transatlantic expansion that cuts its reliance on SkyTeam partner KLM, while Delta is in the midst of a massive transatlantic growth pattern that may see it bump against partner Air France and eastern European allies.

The Northwest expansion relies on a technological advance - it is installing winglets on its 160-seat Boeing 757s, which will be used on a new route between Amsterdam and Bradley airport near Hartford, Connecticut. Bradley has never had scheduled international service, and Northwest is receiving incentive payments and fee discounts of almost $500,000 to operate the route.

The Northwest expansion is a catch-up move, says RW Mann and Associates consultant Bob Mann, who says the carrier has long relied on KLM for much of its transatlantic growth. Using the modified 757s, Northwest will also begin service from its Detroit hub to Brussels and Düsseldorf next June. Mann suggests the cost-savings that Northwest has achieved during its 15 months of bankruptcy reorganisation "now make it cheaper for the airline to operate its own metal rather than to split revenues with a partner".

At Delta, where a 2006 growth spurt saw it open a dozen new transatlantic markets, non-stop service starts next year from its New York JFK hub to promising smaller markets including Pisa/Florence, Bucharest and Shannon. Delta will also start using its Atlanta hub next spring for some seemingly eclectic route choices such as Vienna and Prague. Delta intends to increase its international revenue from about 35% of its total this year to 50% within the next five years.

Some of the new routes such as those to emerging markets like Bucharest are strategic steps towards this goal, says Helane Becker, an analyst with Benchmark Group. She says: "In many cases, the Delta name already has brand recognition through SkyTeam. They're staking out growth opportunities now that Delta has lower costs than the national flag carriers or even its SkyTeam ally in some of the countries it's going into."

Delta's network executive vice-president, Glen Hauenstein, notes that on 16 transtlantic routes it will offer shorter journey times than European carriers. To attract more business flyers, Delta has rolled out a new business-class lie-flat bed.

Both Delta and Northwest seem to be following the lead of SkyTeam partner Continental, which has based its international growth on routes from Newark to both primary and novel secondary European destinations such as Bristol, England. While many of these routes are thin, Continental claims success, having grown markets such as Bristol and Belfast in the UK from five weekly Boeing 757 frequencies to daily.

United Airlines, while having just transferred its New York-London traffic rights to Delta, is focusing on international growth at its Washington Dulles hub. It will launch its eighth transatlantic route from Dulles in April, when it begins a Rome service.

Not all US majors are so keen on adding transatlantic capacity, however. American Airlines chairman Gerard Arpey warns some European markets other carriers are launching may not be able to sustain profitable year-round service "and you just starve for nine months". But Delta's Hauenstein says its summer 2006 international expansion of about 30% in capacity succeeded and did not dilute yields. By next summer Delta will serve 36 transatlantic markets from its two hubs.


Source: Airline Business