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BEDDING DOWN ON THE TRANSCONS
By Joe Brancatelli
August 7, 2013 --Business travelers who live and work in flyover country get steamed whenever business-travel talking heads start babbling about the Transcontinental Triangle, the rarified nonstop routes that link New York with Los Angeles and San Francisco.

But as hard as it is to hear for those who toil in less-sexy business-travel vineyards, the transcons simply matter more. They're busier. The people who fly them pay more, especially in the premium classes. Transcon routes are more profitable for airlines. Carriers court Transcon Triangle travelers with a passion unknown elsewhere in the nation. And, eventually, product and service innovations that debut on the transcons trickle down to routes that serve the flyover skies.

Need a little proof of those assertions? Consider:

The route between Los Angeles International and New York's John F. Kennedy International is the nation's single busiest. With about 3.2 million passengers a year, government statistics show that LAX-JFK fliers generate about $1.4 billion in annual sales. JFK-San Francisco is not far behind with about 2 million passengers a year.

As competition on other routes shrivel, transcons still attract five energized competitors. Besides three of the four "legacy" airlines—American (OTC: AAMRQ), United (NYSE: UAL) and Delta (NYSE: DAL)—there's also New York-based JetBlue Airways (NASDAQ: JBLU) and San Francisco-based Virgin America.

Transcon Triangle routes command astounding premiums. For a JFK-LAX roundtrip starting Wednesday and returning Friday, American's fare is $3,829 in business class and $4,069 in first class. By comparison, American's LAX-Miami nonstops on the same days are priced at $1,752 in business and $2,808 in first. Similarly, United is quoting $5,583 roundtrip in business this week on LAX-JFK. It charges "just" $3,338 in first class on nonstops between Los Angeles and Washington's Dulles Airport and less ($3,289) for a roundtrip between LAX and its hub at Newark, 36 driving miles from JFK.

While few fliers pay the inflated walk-up transcon fares—most book far enough in advance to get a better deal or use heavily-discounted corporate rates—the two routes disproportionately cater to high-paying customers. On JFK-LAX, for example, government statistics recently quoted by The Wall Street Journal show that American generated 45 percent of its revenue from the 9 percent of fliers who paid north of $1,000 for a ticket. Nearly 60 percent of United's JFK-LAX revenue comes from the 14 percent of customers who paid $1,000 or more.

Those transcon product innovations that eventually trickle down to flyover markets? They are coming fast and furious now, some from startling sources.

On Monday, all-coach JetBlue announced not just one, but two, types of business-class seats for the transcon routes. After 14 years of one-class flying, JetBlue's new Airbus A321 aircraft will feature 12 chairs that convert to lie-flat beds and four seat-beds in private suites with closing doors.

"On the longer hauls, our own customers were telling us that we were deficient in two areas--premium seating and WiFi," chief executive Dave Barger told me by phone from San Diego, where JetBlue did its "seat reveal" at a travel-industry trade show. "These new aircraft will have both."

As usual for JetBlue, which has built a consistently profitable niche as a disruptive innovator, transcon business class won't be airline-industry standard. The lie-flat beds will be configured 2x2 in Rows 1,3 and 5 and the suites will be positioned 1x1 in Rows 2 and 4. There'll also be 15-inch wide monitors with 100 channels of DirecTV programming, at-seat USB and power ports and satellite WiFi provided by a JetBlue subsidiary.

And while he wouldn't give specifics, Barger promised "revolutionary" pricing for the 16 seats. "There's absolutely no reason to rip off the customer in a premium class. It's not necessary to charge what our competitors do. We'll have premium fares that appeal to small corporations, independent business travelers and even upscale leisure customers."

Other details about JetBlue's new business-class cabin are sketchy, too, no surprise considering the first of nearly a dozen Airbus A321s dedicated to the transcon runs won't appear until next year's second quarter. Barger did say that the premium cabin could expand to other routes if JetBlue's customers respond well.

American Airlines, traditionally the leader in the transcon markets, is also banking on a new fleet of A321s to reinvigorate its product. Starting in November, it will remove aging Boeing 767s for the new aircraft with a new configuration: ten seat beds in first class positioned 1x1 and 20 business-class lie-flat beds arranged 2x2.

"The 1x1 configuration will surprise people, even with the width of the aisle," says Stephen Moo-Young, American's director of onboard planning and design. "The distance between you and other passengers is amazing. First class will be a very private experience."

American's decision to keep first class on its new transcon aircraft shocked some observers since both United and Delta have already dropped it. The moves were made after a new contract between film studios and the actors unions in 2010 no longer required studios to fly actors in first class when a business-class cabin is available.

But Brady Bynes, American's manager of aircraft design, insists "there's still a strong demand for first class," especially from bankers. Besides, he adds, "many executives fly to Europe via JFK in first class and they expect and will pay for first class" on flights to JFK from SFO and LAX.

The Europe connection is what led Delta earlier this year to move some of its internationally configured Boeing 767s with its BusinessElite cabin onto its transcon runs. Delta has made a furious effort in recent years to capture a commanding share of the New York Metro market and offering the same product on the transcon as its international runs from JFK makes sense. Delta is even remaking Boeing 757s it also uses on transcons in the same mold.

"The transcon market is incredibly important because it helps you become the preferred carrier across the board," Delta senior vice president for New York recently explained to Bloomberg News. Delta also is bulking up at the Los Angeles end of the transcon route and last week announced it would launch an hourly shuttle between LAX and SFO.

United Airlines isn't standing pat in the transcon market, either. Although the pace has been glacial, the airline is upgrading the so-called p.s. service it offers only on Transcon Triangle routes. The airline's Boeing 757s are being retrofitted with lie-flat beds and United's business class product. Seats in United's Economy Plus premium-economy section are being tweaked with extra legroom.

Ironically, this emphasis on premium service on the transcon is mirroring what's happening on flyover-country routes. And not in a good way.

JetBlue's business seats on its new Airbus 321 means legroom in coach will be reduced by one inch. And American's move to A321s from widebody Boeing 767s will mean sharply reduced capacity. American's A321 on the transcons will accommodate only 102 passengers, down from 168 on American's 767s. That means the possibility of higher fares as capacity falls by about 40 percent.

"I'm already paying about twice as much as I used to," says New Yorker Susan Sonimal, who flies twice a month to visit a San Francisco client. "Now I'll be asked to pay a fortune to fly up front or pay more and get less back in coach."

Which, of course, is what's happening in flyover country and shows that Transcon Triangle business-travel elite aren't all that different from you and me.

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 © 2013 American City Business Journals. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2013 by Joe Brancatelli. All rights reserved.