The battle for New York is heating up. America's two largest airlines, United Continental (NASDAQ:UAL) and Delta Air Lines (NYSE:DAL) are waging a running battle for the hearts and minds of New Yorkers, in an effort to win market share in the country's largest aviation market. More than 100 million people move through New York airports each year, and there is a heavy concentration of high-fare business travelers, making this a critical market for the legacy carriers.
While no carrier is likely to win supremacy in this highly competitive market, Delta is well-positioned to pick up market share over time. Delta's slot swap with US Airways (UNKNOWN:LCC.DL), which was completed last year, gives it the largest market share at LaGuardia Airport, which is the most convenient airport for many New Yorkers. The airline is also expanding at JFK, the region's largest airport. Most importantly, Delta has the best reputation for customer service among the legacy carriers, which gives high-paying business travelers a good reason to choose Delta.
A war of words
Two weeks ago, United Continental celebrated the 25th anniversary of its Terminal C hub at Newark Airport, which is just outside New York City. The company highlighted upcoming improvements to its Newark facilities and its position as the largest airline in the New York area. United offers more than 400 flights per day from Newark Airport to more than 150 destinations worldwide. United also boasted that it offers more flat-bed seats, premium economy seats, and live TV-equipped aircraft than any other airline.
On May 24 -- later that same week -- Delta took center stage with the grand opening of its new Terminal 4 international hub at JFK Airport. The new facility offers modern amenities and is a big improvement over the outdated Terminal 3 that it replaces. When the project is fully completed in 2015, all Delta flights at JFK will depart from Terminal 4, allowing faster connections for passengers.
On the same day, United attempted to steal Delta's thunder by announcing that from now on, all United long-haul international flights from the New York area would have flat-bed seats and personal on-demand audio-video systems at every seat in the premium cabins.
Delta struck back last week with the beginning of nonstop service between Newark Airport -- United's home turf -- and Paris. The service takes advantage of Delta's joint venture with Air France, which offers a large connecting network in Paris. Delta now serves Paris from both JFK and Newark, allowing it to serve customers regardless of which airport they prefer.
Delta has an edge
United's major asset in the battle for New York is its large hub operation at Newark Airport. Due to slot restrictions at all three major New York airports, it's very difficult for airlines to grow in New York. United can therefore offer more destinations from New York and more connecting opportunities for customers traveling between the rest of the U.S. and international destinations.
However, the large local population in New York means that airlines are not as heavily reliant upon connecting traffic there as in most hub cities. As a result, Delta can serve the market very well even though most of its capacity is divided between LaGuardia and JFK. Delta also offers popular hourly "Shuttle" services from LaGuardia Airport to Boston, Washington, and Chicago, which United does not provide.
However, Delta's biggest edge in the battle for New York is its superior customer service. Whereas United came in dead last in the most recent Airline Quality Rating survey, Delta came in fourth (out of 14). For business travelers, who are not very sensitive to price, superior customer service metrics are a major factor in travel decisions.
Foolish bottom line
Delta is quickly catching up to United in the New York area, although United is making a valiant effort to reinforce its strengths, particularly its large hub operation at Newark. In the next year or two, American Airlines will also become a major player in the New York market, thanks to its merger with US Airways. The merger will combine US Airways' strength on the Boston and Washington shuttle routes with American's international gateway at JFK Airport.
However, Delta has one killer advantage over American and United: superior customer service. United is still recovering from turbulence caused by its recent merger with Continental, while American hit some minor bumps during its bankruptcy proceedings, and is about to engage in a complicated merger with US Airways. Delta's stability and track record of strong customer service performance will probably make it the airline of choice for New Yorkers, especially business travelers.
Adam Levine-Weinberg is short shares of United Continental Holdings and is long Sep 2013 $33 Puts on United Continental Holdings. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.