Delta Airlines, not unexpectedly, made a big announcement last Friday about its plans for New York City upon consummation of its slot swap deal with US Airways.  That announcement included a number of bold statements including Richard Anderson offering that Delta intended to build a hub.  So far, no surprises.

Where it gets interesting is Delta announced plans to introduce multiple daily round trip flights to other airline’s hubs.  American Airlines gets to defend against them on routes from New York La Guardia to Dallas / Fort Worth and Miami.  These are major cornerstone routes for American and its cornerstone strategy for its existing hubs.

United Airlines sees encroachment on routes to Houston and Denver.  Both cities are fortress hubs for United and both will be defended strongly.  US Airways gets to fight off Delta on routes to and from Charlotte although generally only with smaller Bombardier 70+ seat jets. 

From a personal point of view, I’m glad to see Delta enter the DFW-NYC market.  I’m glad to see American Airlines get the competition it should have on those routes because the prices on those routes are exorbitant.  Frankly, I had hoped that we would see Virgin America or JetBlue run the route but I’ll take Delta.   The timing is good for adding those routes because it will be 2 more years before Southwest can run that route non-stop and American Airlines now has to pay attention to reorganization under bankruptcy for the next 18 to 24 months.  Delta has a rare window of opportunity to exploit those vulnerabilities.

It’s also notable that Delta isn’t just investing in La Guardia but intends to transform its JFK operations into a focus on trans-continental and international long haul flights.  This, too, is an attack at the heart of American Airlines’ operations.

The greater picture is more interesting.  I’ve long felt that the SuperLegacy airlines would eventually arrive at the conclusion that to grow, they would have to start exploiting each other’s weaknesses at other hubs.  To me, it seemed inevitable but I also thought that the airline that would really get picked on would be American Airlines because of its higher cost structure.  It the lowest hanging fruit from that perspective.

I wasn’t wrong.  In a way, American Airlines isn’t just getting picked on with respect to two routes.  Those two routes represent a war cry of sorts.  However, the major expansion that Delta is about to engage in at La Guardia.  Delta makes it clear that it intends to own that market and owning a good portion of New York City is a profitable thing.

The problem for American Airlines is that, right now, it has higher labor costs, less efficient aircraft and little maneuvering room to fight off competition.  They’ll be fixing that and they are likely to come out with similar labor costs to Delta and United.  However, they are still a long way away from having the benefits of a relatively efficient fleet.

Another problem is that Delta (and other airlines) now have probably at least 18 months to attack American Airlines on its home turf secure in the knowledge that they can do so without too many consequences. 

It’s also interesting to me that Delta felt it was possible to encroach on two airlines’ (US Airways and United) mainstay routes with success.  That’s where the hub mentality comes into play.  To be a hub, one must have those mainstay routes.  Typically, New York City generally doesn’t serve as a hub in the form that we see in Atlanta, Chicago and DFW.  Delta wants to make it more like that and it’s clearly willing to invest heavily to make it happen.  It’s notable that Delta is *able* to invest heavily to do that.  It’s the only airline that can right now.

I’m pretty sure we’re seeing the dawn of a new form of competition among US airlines and I’m pretty sure it gets pretty bloody in, perhaps, 5 years or so.  I think the smaller airlines and the low cost carriers are going to be shocked at the vicious nature of the competition that is about to take place.  The cost structures are far more similar than ever before in the US airline market and the advantages are slim.  But the war chests to fight will be big among the largest airlines.

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