Delta to Improve its New York Presence

ATLANTA (TheStreet) -- Delta CEO Ed Bastian acknowledged Tuesday that the world's biggest airline is at a disadvantage in the world's biggest travel market, but he said change is coming.

Speaking at a Bank of America Merrill Lynch investor conference, Bastian said, "We have a facility issue at [Kennedy Airport]. It is the worst facility that we operate system-wide. We are working on a solution."

"We are close to a solution with the Port Authority of New York and some other players and [Delta] can move on a relatively expedited basis," he said, noting that an announcement is coming within the next 60 days.

By contrast, American (AMR) opened a new $1.3 billion terminal at Kennedy in 2007, and JetBlue (JBLU) opened a new $750 million terminal in 2008. Meanwhile, Delta operates some flights out of a terminal that was built for Pan American World Airways in 1960.

Continental (CAL), the fourth major player in the New York market, operates out of upgraded facilities in Newark and will likely get a boost in revenue per available seat mile when its planned merger with United (UAUA) pushes more passengers through Newark.

Delta is also catching up on other fronts, Bastian said. It did not offer service to London's Heathrow Airport -- a primary market from New York -- until 2008 and it did not offer service from New York to Tokyo until after its 2008 merger with Northwest. Lacking both prime destinations, Delta has paid a price in lower revenue per available seat mile from New York than its competitors have, Bastian said.

However, Delta is planning some changes to help bolster its New York presence. "We have a fairly significant set of initiatives including LaGuardia expansion that we think will close that gap and drive the appropriate revenue premium for us in this marketplace," said Bastian.

Regarding LaGuardia, Bastian said Delta still hopes to complete a planned slot swap with US Airways (LCC), in which Delta would trade slots at Washington Reagan National Airport for slots at LaGuardia.

Last month, the Transportation Department rejected a revised proposal from the carriers to offer a limited number of slots at both airports to low-cost carriers in return for regulatory approval. In the revised deal, US Airways would have gotten 37 slot pairs at National and Delta would get 110 slot pairs at LaGuardia. The Transportation Department wants US Airways to get 28 slot pairs at National and Delta to get 105 at LaGuardia.

"We haven't given up hope yet," Bastian said. "We are going to be working hard to try to get that implemented." During the next presentation, however, US Airways president Scott Kirby was somewhat less optimistic. "We'd like to make it work, but I don't know if we're going to," Kirby said.

-- Written by Ted Reed in Charlotte, N.C. .