Delta Airlines to Close Song

Delta Airlines is struggling to get itself out of bankruptcy, and as part of the effort, it is closing down Song, its attempt at a low-cost, no-frills airline. Launched in early 2003, Song was to compete with Jet Blue. It couldn’t. After May 2006, part of its service will become Delta. It was pretty obvious two and a half years ago that this wasn’t going to work.

While “I told you so” isn’t a particularly constructive exercise, as a bankrupt entity, Delta deserves to have its mistakes reviewed as a lesson to others. As noted here in February 2003, Delta was opting for a model that had already failed for United and US Airways. United was in the process of dropping its Shuttle by United in California, and US Air had closed down MetroJet. Delta itself had decided to get rid of Delta Express. Yet management went ahead anyway.

And they did it badly. They failed to reduce the pilots’ pay, which many analysts said was a key advantage that Jet Blue had. Moreover, Song flies Boeing 757s while Jet Blue uses Airbus 320s. The bigger Boeing planes offer 43 more seats, but the running costs don’t justify the extra size unless the planes are almost always right at capacity – or so say airline analysts. Calyon Securities analyst Ray Neidl said the 757s “didn't give them [Song] the flexibility of JetBlue.”

In a backside-covering press release, Delta announced, “that it will tap the best features of its highly acclaimed Song product to launch a new and unique long-haul domestic Song service for Delta customers.” Also, “We’ve learned a lot from Song and have already incorporated many of its positives into Delta. Features like new leather interiors, new uniforms, a simplified fare structure and faster turn times have resulted in 11 consecutive months of year-over-year improvement in customer service ratings at Delta.”

Customer service ratings are good, but shareholders want profits. Mr. Neidl summed it up nicely, “Operating two products under the same name has never worked” in the airline business. Had Delta opted for all of these upgrades and improvements for Delta rather than create Song, there is no evidence that it would be any better off than it is now. But trying a new strategy might have been better than opting for a thrice failed one. All eyes now are on United’s Ted, while Jet Blue’s stock rose 4.4% after Delta’s announcement. And Southwest is still turning a profit.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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