Delta in June received approval for a joint venture with Virgin Atlantic Airways that is to open up a bevy of coveted landing slots at Heathrow, paving the way for expansion of its trans-Atlantic service from all over the U.S.
With only two runways, Heathrow has made coordinating takeoffs and landings into an art form. The airport – loved by some and hated by others – has overcome capacity constraints to emerge as London’s only true hub for long-haul global business travel, a status it leans on in when presenting its case to U.K. legislators.
The Conservative-led U.K. government set up an airports commission last year to field proposals to deal with aviation capacity constraints in England’s southeast before they stifle growth. Deadlines for plans were July 19, and the commission will make its recommendations after the 2015 elections.
Heathrow presented three options for a third runway, doubling down on its “one hub or none” strategy. The argument goes that building two hubs amounts to gutting the first, because neither will have the critical mass of transit passengers essential to feeding long-haul routes. Heathrow currently serves 75 destinations not served by any other U.K. airport.
But even the quickest option would take until 2025 and cost £14 billion (about $21.5 billion), which compares favorably with plans to build a costly new airport east of London but looks expensive compared to Gatwick Airport’s solution.
Gatwick, London’s second largest airport, says Heathrow’s reliance on transfer passengers is overstated and that global cities like London can support a “constellation” of large airports, which would be good for consumers because airlines would have to compete. Its leaders asked for a second runway that could be built by 2019 at a cost of £9 billion (about $13.8 billion).
In its proposal, Heathrow smugly attempts to shoot down this argument by blending historical lessons with a soccer metaphor:
“Attempts to create a dual hub between Heathrow and Gatwick were tried in the 1970s and 1990s but both ended in failure because airlines could only achieve transfer benefits at the Heathrow hub. Gatwick’s proposal for three competing two-runway airports in the southeast would not deliver a U.K. hub with the size and scale to compete internationally or provide the long-haul connectivity on which future jobs and growth depend. The U.K. needs one Premier League airport to compete, not three second-tier airports.”
Delta’s moves seem to validate Heathrow’s point of view. With its home base at the archetypal hub airport in Atlanta, the carrier understands the model well. The fact that lucrative business travelers also demand it explains why Delta has chosen to put all its eggs in Heathrow’s basket. Its last Gatwick flight was moved in 2012.
After visiting the Skyteam hub at Heathrow’s Terminal 4 and learning how Delta takes care of its VIPs, Global Atlanta talked with Nadia Clinton, a sales manager in London, to understand the mindset of Delta’s business customers.
Global Atlanta: Give us the basic rationale for switching all of Delta’s London routes to Heathrow. The conventional wisdom is that it’s all about business travelers and their hub demands, but you have SkyTeam partners operating there already. Gatwick folks argue that they have convenient ground access to London and that only a small proportion of the Heathrow traffic is actually transferring on to other destinations, which would undermine the hub argument. Please help us find some clarity on this. Do you buy into the “one hub or none” argument?
Nadia Clinton: Our customers, particularly from those flying for business, consistently tell us that they prefer flying to Heathrow, which is more conveniently located with easy access to central London and the financial district. In addition, Heathrow allows our customers opportunities to connect to flights across the globe on Delta’s joint venture partners Air France KLM and Alitalia.
Global Atlanta: What does the typical Delta traveler to London from the U.S. want? Or, perhaps a better way to ask it: what drives the ticket-buying behavior of a Delta passenger between the U.S. and London?
Ms. Clinton: The typical Delta traveler relies on schedule, connectivity, good product and value.
Global Atlanta: How dependent is the route on business travelers demanding connectivity via the hub?
Ms. Clinton: Delta’s services from London Heathrow provide a range of nonstop flights to key business destinations such as New York, Minneapolis, Detroit and Atlanta – as well as providing the option of over 200 convenient onward connections within the United States, Canada, Latin America and the Caribbean.
Global Atlanta: Can you give us an idea of how the Atlanta-Manchester flight is doing? Why does Delta feel the need to continue offering the nonstop from Atlanta to an airport two hours away from Heathrow, where it operates nine services and will add more with the Virgin JV? Seems that these two airports have different imperatives, but please explain.
Ms. Clinton: The service from Manchester is an important part of our U.K. network. We have carried nearly 100,000 customers between Manchester and Atlanta over the last five years, with load factors [percentage of seats filled] at nearly 90% every year.
Global Atlanta: Where does cargo fit into all this? We’re told that belly cargo it is a key element for sustaining long-haul routes, along with business and economy passengers.
Ms. Clinton: Absolutely – Delta Cargo is a key part of the business and is a significant contributor to Delta’s profitability. We transport tons of cargo from the (Europe, Middle East and Africa) region to the USA annually – with a wide range of products including cars, flowers, food, car and aircraft parts as well as pharmaceuticals.
Global Atlanta: What would be Delta’s ideal outcome to the Davies Commission’s report? In other words, I know Delta President Ed Bastian has come out and said that prospects for expansion at Heathrow are dim, which drove the Virgin consolidation. But what practical effect would it have if the commission said, “We are allotting new runway capacity at Gatwick immediately”?
Ms. Clinton: Delta considers that Heathrow is critical and pre-eminent position as the leading hub to the United States. There is no effective substitute and Delta believes new capacity should be focused at LHR. Heathrow supports 100,000 jobs directly or indirectly and is the main gateway to the global economy.
Global Atlanta: What else should we know about Delta’s operations in the U.K.?
Delta has gone from four flights in April 2008 (2xJFK, ATL, MSP) to nine flights today, an increase of 130 percent in terms of weekly seats. We launched a third daily service from London Heathrow to Atlanta on March 31.
Note: Global Atlanta traveled to London and Manchester in April to learn more about the U.K. airport capacity debates and what lessons Atlanta can learn as it builds out its aerotropolis.