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Delta Moves Again to Grow in New York, Boosts London Access

"This announcement is primarily about New York, and about helping Delta to increase its utility to the business traveler," said Henry Harteveldt, analyst for New York-based travel consultant Hudson Crossing. "But it's not all about New York. Once Delta and Virgin get everything put together, Delta can put its brand on Virgin Atlantic flights out of Boston, Miami, Los Angeles and the other cities, all strategically important markets for Delta, either because they are hubs for Skyteam, as LAX is, or because they are dominated by other alliances like Oneworld in Miami and Star in San Francisco."

At Miami International, for instance, it is tough for Delta to establish a presence, Harteveldt said, because it already serves every major Florida city through Atlanta. But having Virgin Atlantic fill much of its airplane at its London hub means Delta would be able to provide a non-stop London flight to its passengers who originate in South Florida. In Los Angeles, meanwhile, Delta already has a presence, but it has lacked non-stop London service. "This will make Delta that much more competitive," Harteveldt said.

In December, Delta announced it had purchased 49% of Virgin Atlantic from Singapore Airlines. On a conference call with reporters on Monday, Bastian said Delta has long had an interest in Virgin Atlantic. Asked why it took years to put a deal together, he responded, "As between us and Singapore, (negotiations over) the value of the shares is what led to the length of the negotiations."

Speaking at the March investor conference, Bastian said Delta's New York buildup is feeding revenue gains. He said Delta has gained over seven points of corporate market share in New York over the past three years, leading to a margin gain of more than 300 basis points in New York. "We're still in the building phase," he said.

The carrier has boosted its capacity at LaGuardia Airport by 45% over the past year, a result of an asset trade with US Airways. (LCC). But access to Heathrow remained "our single biggest challenge in corporate customer negotiations" in New York, Bastian said. According to statistics compiled by Delta, Kennedy/Heathrow is the No. 1 U.S. international route, accounting for 2.7 million passengers a year. It dwarfs every other international route. No. 2 is Los Angeles/Heathrow, accounting for 1.4 million passengers. The next three routes, with 1.2 million passengers annually, are Chicago/Heathrow, New York/Paris and Newark/Heathrow. The Virgin deal adds capacity in three of those four.

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