By Joe Brancatelli
June 30, 2010 -- First, an apology to you Middle Americans who live in flyover country, you average Americans who hate New York, you salt-of-the-earth folks who despise smug, self-righteous New Yorkers, and you red-state realists who detest how New Yorkers think they are the center of the universe.

But, like it or not, New York and New Yorkers matter more than you. At least as far as business travel is concerned. Everyone who puts metal tubes in the sky for profit knows it. They aren't ashamed to admit that New York is the center of the aviation universe. And they are spending billions of dollars to cater to the foibles of flyers in the New York metropolitan area.

Grin and bear it, America. Money talks, New Yorkers talk the loudest, and airlines are listening the hardest.

"The New York market is so large that I don't think any one carrier can own it. That alone makes it unique," says Jim Carter, a vice president of American Airlines, one of four domestic airlines in a Texas Death Match for control of the Metropolitan area's travel market.

Large is actually an understatement when you consider the economic impact of New York, which in aviation terms is a "catchment" area that includes the five boroughs of New York City, Long Island, most of Connecticut, northern and central New Jersey, parts of northeast Pennsylvania, affluent Westchester County, and other suburban areas of New York State.

An estimated 130 million travelers annually use the region’s three major airports (John F. Kennedy, LaGuardia, and Newark) as well as three secondary aerodromes (Islip on Long Island, Westchester County, and Stewart Airport in New York's Hudson Valley). New York generates $8 billion annually just in domestic revenue for airlines. A third of all transatlantic traffic flows through New York, four times more than the next largest U.S. market. Eighty international airlines service the area. The world's most important international route, New York-London, is part of the mix. New York is also on one end of eight of the 10 busiest domestic routes. And airline insiders say New York-Los Angeles, the nation's busiest domestic route with more than 4,000 passengers a day, accounts for more revenue than some smaller airline hubs.

Then there's the, um, "quality" of the New York travel market. Even with the rapid decompression of the financial markets, New Yorkers are willing to pay more to fly and represent a disproportionate percentage of travelers booking expensive full-fare coach, business-class, and first-class flights.

"The premium market is so large in New York, the airlines fly all this premium capacity into and out of New York and the stakes are huge," says Robin Hayes. He should know. Hayes is currently the chief commercial officer of Kennedy Airport's largest airline, JetBlue Airways, which has positioned itself as both a "premium" and "value-oriented" airline. Before that, he was the top U.S. executive at British Airways, the international airline with the largest presence in New York.

So it's no surprise that the competition is ferocious, the expenditures extravagant, and the infighting brutal. The airlines battle over airport facilities, publicity, routes, in-flight services, and even the key sponsorship of the city's cultural, sporting, and entertainment life.

One example: Delta Air Lines, headquartered in Atlanta. It is so intent on positioning itself as a native New Yorker that it has paid big to sponsor both the New York Mets and New York Yankees. It is also the sponsor of Madison Square Garden. That means Delta is also the brand involved with the city's basketball teams (the Knicks for men, the Liberty for women), its hockey team (the Rangers), and entertainment venues such as Radio City Music Hall and the Beacon Theater.

"Eighty-three percent of all entertainment tickets sold in New York go through the Garden," explains Gail Grimmett, a Chicago native who is now Delta's senior vice president for New York.

Other carriers have their own city sponsorships—American Airlines has its name on the marquee of a Broadway theater, for instance—but the real battle now is for airport facilities. To be charitable, New York's major airports have long been inferior, but that is changing, albeit it slowly and at great cost.

In 2008, JetBlue, which commands about half of the traffic at Kennedy, spent nearly $750 million to open Terminal 5, its hometown hub. The building has won plaudits for its myriad of dining options and bright, cheerful public spaces.

Across the airport, Dallas-Fort Worth-based American Airlines spent eight years and $1.3 billion to refashion and recreate Terminal 8, its mostly international hub at Kennedy Airport. Only fully opened in 2007, American is talking about a new project to expand and "co-locate" its Oneworld Alliance partners (primarily British Airways, but also Iberia of Spain, Cathay Pacific of Hong Kong, Qantas of Australia, Finnair, and Japan Airlines) into an expanded Terminal 8. "People buy differently now, they make decisions on networks of flights," explains Art Torno, American Airlines' vice president for New York. "Having all of the Oneworld partners under one roof would be a game changer."

American also cut a deal in March with JetBlue to feed each other traffic at JFK. The deal helps American keep pace with Delta and Continental, which controls about half the traffic at Newark Airport. JetBlue gains by funneling some of American's arriving international passengers into its extensive domestic network of flights.

The current open wound at Kennedy belongs to Delta. Although it controls about 20 percent of JFK's traffic, it pushes them through two buildings at least 20 years past their useful lifespan. Terminal 2 was built in 1962 for the now-defunct Braniff and Northwest Airlines, which was merged into Delta last year. The round, iconic Terminal 3, still known as the Worldport by some New Yorkers, was built in 1960 by Pan Am.

"The JFK experience is not what we need to deliver," admits the diplomatic Grimmett. "It's the worst facility we operate," says the more blunt Ed Bastian, Delta's president.

A $1+ billion renovation of Delta's facilities was announced almost a decade ago, but scuttled due to the travel slump after the 9/11 terrorist attacks and Delta's 2005 bankruptcy. But Delta and the Port Authority are expected to unwrap a new plan before the end of the summer. Best bet: an extension of the nine-year-old Terminal 4. More than half of the 95 destinations Delta serves from Kennedy are international, and Terminal 4 was specifically designed for overseas flights. Moving Delta into an expanded Terminal 4 seems like the fastest and most cost-effective option.

At LaGuardia, New York's real-estate-challenged domestic-flight nexus, American Airlines is the largest player with 18 percent of the market. Delta trails with about 15 percent, and it has made a bold attempt to bulk up. In a complicated "trade" that has run into stiff resistance from the Department of Transportation, Delta essentially wants to take over US Airways' LaGuardia terminal and assume most of its precious takeoff and landing positions. In return, US Airways would get most of Delta's facilities at Washington's Reagan National Airport.

The multifaceted war for New York is being fought on any number of other fronts too. Delta recently launched frequent daily flights between LaGuardia and Chicago's O'Hare Airport, one of American's primary hubs. Continental has continued to expand its international flights out of Newark, where it is largely protected by the peculiar traffic patterns of the metropolitan area. Continental also switched to the Star Alliance last year, which means it is now partners with Lufthansa, the German carrier that is a big player in the New York market and also owns a minority interest in JetBlue. American is trying to arrange antitrust immunity with British Airways and expanding its domestic and international service into Kennedy Airport. After decades of restricting itself to a few flights from Islip, even Southwest Airlines jumped directly into the heart of the New York fray last year when it launched flights from LaGuardia.

"It's the richest aviation market in the world," says American's Torno, who was born and raised in New Jersey. "A large number of carriers have invested a lot of money to be here."

The Fine Print…
New York is less of a transit market than you'd think. Most of its passenger traffic is what the airline industry calls "point-to-point" or O&D, which means flyers originate in New York or make New York their final destination. JetBlue's Hayes says as much as 85 percent of his airline's New York traffic is point-to-point. American estimates 65 percent of its New York passengers are O&D. "New York," adds Delta's Grimmett, "is different than any other airline hub."
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.

THE FINE PRINT This column is Copyright © 2010 American City Business Journals. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2010 by Joe Brancatelli. All rights reserved.