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Shuttle service hit by downdraft

Wall St. troubles affecting Boston to New York route

(Daniel Acker/Bloomberg News/File 2004)
By Nicole C. Wong
Globe Staff / October 10, 2008
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Wall Street turmoil threatens to erode the critical New York-to-Boston shuttle service, which had a 17 percent drop in passengers in the first half of this year as companies scaled back travel budgets and road warriors increasingly chose trains and buses over planes.

Now, demand could slip further for the hourly shuttle flights operated by Delta Air Lines Inc. and US Airways, and force the airlines to make cuts on the route that draws many business travelers from Wall Street.

"The airlines, of course, don't have a whole lot of choice," said Dan Kasper, managing director of LECG, a Cambridge consulting firm that has studied the shuttle service.

New York-to-Boston is an important route for airlines because it carries the most business travelers in the country. Capturing a larger chunk of that market has consumed US Airways and Delta - which fly between Logan International Airport and LaGuardia Airport. They face competition from American Airlines Inc. and JetBlue Airways Corp., which also fly the route, though less frequently.

"New York and Boston are battleground cities," said David Beckerman, a vice president with OAG, a Chicago-based company that provides aviation data and analytical services.

But the shuttle service is a shell of its glory days in the 1980s, when demand was so high airlines had extra planes waiting for passengers who spilled over from sold-out flights. The current economic slowdown coupled with the popularity of low-fare buses, such as Megabus and BoltBus, and Amtrak's high-speed Acela trains have hurt the shuttle business.

During the first six months of this year, US Airways and Delta carried 90,663 fewer passengers - a 17 percent decline - along the route than they did during the same period last year, according to OAG. That left planes along the route only 36 to 54 percent full each month between January and June, compared with 40 to 62 percent during the same period in 2007. In total, the volume of passengers flying between Logan and LaGuardia has dropped 44 percent since 2000.

"That's pretty bad," said Beckerman, who used to be a strategy analyst in Delta's international revenue management. "I'd be very surprised if they're breaking even, even in 2007."

So far, US Airways hasn't cut any of its 16 round-trip flights. Citing emptier planes and higher fuel costs, Delta this month cut one of its 16 daily round-trips. And American - which offers eight daily round-trips - had planned to eliminate that route as part of its companywide seating-capacity cuts; but a few weeks ago the company said it would reinstate most of that service, leaving six daily round-trips starting Nov. 2.

US Airways, Delta, American, and JetBlue declined to comment on current demand along the shuttle route, but said they are not planning further capacity cuts or pricing changes.

Even if demand plunges further, that won't cause carriers to abandon the route, airlines and industry observers say. First, business travelers depend so much on the route that offering even a handful of daily flights can help an airline win corporate contracts, said Charlie Schewe, American Airlines' Northeast regional sales director.

"It's extremely important for us to make sure we offer the best product and stay ahead of the competition," he said.

Additionally, the shuttle carriers don't save much money by axing a flight, said Bob Harrell, president of Harrell Associates LLC, a New York-based travel and aviation consulting firm. "You're only going to save the direct operating expenses of the flight - fuel," Harrell said. "But then you get a hole in your schedule and you can't say 'every hour on the hour.' And then you've got a marketing problem."

Besides, airlines had already started making seat-capacity cuts - ramping up to more than 11 percent industrywide in the fourth quarter this year - to combat record fuel costs and the economic downturn. The reductions included Delta eliminating direct flights from Boston to Los Angeles and at least six other cities, American discontinuing its daily flight between Boston and San Diego, and US Airways trimming Logan's seat capacity by 10 percent in October.

"We still feel very comfortable with the capacity reductions that we made," said US Airways spokesman James Olson. "Obviously no one was able to foresee the banking crisis the country is seeing, but in terms of the general softening of the economy, that was something factored into the capacity reductions."

Already, the cuts are being felt. Neil Bergquist, a director at Observant LLC, a Waltham market research and consulting firm, said the loss of Delta's 8:30 p.m. shuttle "can be really inconvenient," because his work in New York sometimes runs late.

"My colleagues and I on several occasions have had to rent a car and drive, getting home at 1 or 2 in the morning," he said.

Instead of more flight reductions between Boston and New York, industry analysts say it's more likely US Airways or Delta will shift away from using aircraft that carry 124 to 150 shuttle passengers. Smaller aircraft would cramp passengers with less overhead bin space and narrower seats, but would be a cost-efficient way to maintain the frequency of daily shuttles.

"I expect traffic will decline and believe that one, if not both, shuttle operators will begin to use regional jets that seat between 70 and 100 passengers on at least some shuttle flights," said Henry H. Harteveldt, principal airline analyst for Cambridge-based market research firm Forrester Research Inc.

Smaller planes might push some customers away, though. For Cameron Purdy, vice president of engineering for a Burlington software company, comfort is as important as convenience when he travels to New York about twice a month. Half of the time he travels by plane and the other half by train.

"If I have to stay late and I want to still be back at a reasonable time, I'll fly," Purdy said, adding he doesn't have to deal with security, can talk on his cellphone, and stretch out on the train. "One is slightly faster, and the other is a lot more pleasant."

Nicole C. Wong can be reached at nwong@globe.com.

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