Delta says the next big battle between airlines will take place on the ground

Author: Eric Rosenbaum

IMAGE: Interior photos of the Terminal B Delta Sky Club at Hartsfield-Jackson International airport on Thursday, September 22, 2016.

​Chris Rank / Rank Studios for Delta News Hub 
[CC BY 2.0 (https://creativecommons.org/licenses/by/2.0)]

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• Recent profits and a strong U.S. economy are giving airlines the opportunity to invest more in the airport experience.

• Many airports are setting new monthly passenger records.

 

• Delta thinks it can get a leg up on the competition as edge on fares and in-cabin services becomes more limited.

The airline industry is experiencing strong financial performance — Delta Air Lines recently hit a record stock price and United Airline Holdings grew profits in its latest earnings, and the U.S. economy continues its decade-long run. Airline industry conditions are so good, long-time airline-stock hater Warren Buffett of Berkshire Hathaway became one of the sector’s biggest investors in recent years after a wave of consolidation brought the fleets closer to the almost-monopoly conditions he looks for in businesses. But other recent highs in air travel are not so positive: Airports all over the country setting new records in monthly passenger levels.

As the airport experience remains one of the worst “legs” in a traveler’s journey, major airlines flush with money for reinvestment are making the on-the-ground experience a greater focus of their efforts to out-compete rival carriers.

“I think the next area of competition in air travel is in the airport,” Paul Jacobson, executive v.p. and CFO of Delta said at the CNBC @Work Human Capital + Finance conference in Chicago last Tuesday. “How do you continue to streamline that the on-the-ground experience. It is a big part of how passengers rate the experience.”

In major metro areas, the two biggest issues in airport satisfaction are access to the airport (with so many major airports far from city centers) and the terminal itself, at No. 1, according to J.D. Power.

“The most common PR headline from any airport any month is ‘X airport sets new monthly passenger record,’” said Mike Taylor, J.D. Power’s travel practice leader.

But that does not necessarily mean it is good PR with so many airports so dated.

There are some aspects of the airport experience that airlines can’t do anything about. Only 6% more airports have been built in the U.S. since 1980, despite 181% more domestic passengers.

“They can’t build another four-line highway to the airport,” Taylor said. “Most of the airports are shoehorned into areas never meant to handle this much traffic.”

Those problems don’t end once at the airport, either: Many parking lots closest to terminals at some of the busiest U.S. airports are now completely full and closed on multiple days per week. This is the type of on-the-ground frustration that leads to missed flights, and missed flights lead to the blame being placed all around.

“People are more stressed on the airport and airlines side of things, and they blame both,” Taylor said. 
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For the airlines like Delta, it does not matter that some of the terminal experience is beyond their control. Taylor said that when an aircraft closes and sits on the ground because the FAA is holding them there, passengers do not complain about the FAA. “They paid the airline, and they pick up the cocktail napkin and swear at it.”

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