Delta's swanky JFK lounge is part of a bigger strategy for the air carrier
By Claudia Assis
Delta is angling to be 'the premium domestic carrier'
An art-deco inspired bar and ceiling fixtures meant to evoke the Brooklyn Bridge. Pillows by Italian fashion giant Missoni. A wellness area with relaxation pods with full-body massage chairs and nap chairs.
A luxury spa somewhere in Manhattan? A venture capitalist's California mansion somewhere near Los Altos Hills? The correct answer is Delta Air Lines' new lounge at New York's John F. Kennedy International Airport.
Delta (DAL) opened the lounge this week, saying it has spared no detail to cater to the "premium traveler."
Delta One, as the lounge is called, will be followed by Delta One luxury airport lounges at Boston's Logan International and Los Angeles International Airport later this year, the airline has said.
The new lounges are part of Delta's plan to position itself as the premier U.S. airline for luxury travel.
Delta "intends to distance itself from the pack" with a large chunk of its sales coming from premium seats, Sheila Kahyaoglu with Jefferies said in a note Wednesday.
"Despite concerns of a softening consumer, premium-cabin yields have been relatively insulated," she said.
Delta shares dropped 2% on Wednesday on a mixed day for airline stocks and following Southwest Airlines Co. (LUV) downward guidance revision.
Southwest earlier Wednesday said it expects operating revenue per available seat mile to be down 4% to 4.5% for the quarter, from prior guidance of down 1.5% to 3.5%, due mostly to "complexities in adapting its revenue management to current booking patterns in this dynamic environment," the company said.
Southwest is also taking a hard look at the mostly egalitarian way it boards its planes and is considering other tweaks as its profit has fallen in recent quarters. The airline is expected to reveal at least some of the results of ongoing studies on seat-arrangement, onboarding and other changes around September.
Eliminating open seating would be a sea change for Southwest, as the airline does not offer assigned or premium seats on their fleet of all-Boeing (BA) jets. For other U.S. airlines, however, premium and business seats are a big part of their profit, as they are hardly discounted and usually booked farther in advance.
"We see the lounge as a new standard of premium travel as [Delta] looks to be the premium domestic carrier," Kahyaoglu said.
The lounge at JFK is nearly 40,000 square feet, enough to seat 515 customers, offer eight shower suites, eight soundproof booths, nine relaxation pods and a 140-seat brasserie-style restaurant, plus a year-round terrace and a dedicated TSA lane for those paying for the premium seats and amenities.
Delta's long-term plan is for its premium fares to account for around 37% of its revenue mix, versus some 32% in 2019, Kahyaoglu said.
Delta made a $1.5 billion investment at JFK, consolidating its flights in one terminal and expanding its gates. The air carrier also invested heavily in La Guardia Airport, where it invested about $4 billion.
Delta offers the most flights and seats of any carrier at JFK, with about 200 total peak-day departures to some 90 destinations, and nonstop flights from JFK to all of New York City's 50 most popular domestic markets, the analyst said.
Shares of Delta are up 12% so far this year, compared with an advance of around 15% for the S&P 500 index SPX and of about 2.4% for the U.S. Global JETS ETF JETS.
-Claudia Assis
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06-26-24 1642ET
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