Updated from 2:18 p.m. EDT
Delta Air Lines
( DALRQ)plans to shut down its low-cost Song airline next May, but said it will blend elements of the carrier into its normal operations.
Song, which operated with only coach seats, was launched in 2003 as a rival to discount upstarts like
. Delta, the nation's No. 3 airline measured by traffic, will repaint Song's 48 narrow-body Boeing 757 jets with Delta colors and add 26 first-class seats to each one.
However, the planes' all-leather seats and seat-back digital television and video -- touches matching JetBlue's service -- will be retained. Although Song will disappear as a separate airline, Delta will continue to use the brand to describe service on long domestic flights.
Song service has won some converts among travelers, and Delta will add the leather seats and in-flight entertainment to another 50 or more of its regular planes.
After Song stops flying separately in May, Delta will deploy the planes on high-demand routes throughout its network. As it converts more planes into the two-class form it will put them on transcontinental routes. Eventually, Delta expects to have Song service on all domestic flights over 1,750 miles.
By adding first-class seats to the old Song planes, Delta will likely help the industry as a whole by reducing supply of cheap coach seats. A glut of seats last year and early this year kept pressure on fares.
At the same time, the airline could challenge rivals by putting Song amenities on more of its planes, and that potential prompted J.P. Morgan analyst Jamie Baker to downgrade JetBlue shares Friday.
"While Song aircraft will no longer be externally identifiable, Delta intends to gradually raise the in-flight entertainment bar throughout its domestic network," writes Baker, whose company does and seeks to do business with companies covered in its research reports. "Contrary to proclamations of Song's underperformance, its expansion appears to validate the product."
The narrow-body planes will replace wide-body aircraft Delta will redeploy as it expands its service internationally. Like other U.S. legacy carriers, Delta is controlling its domestic capacity and increasing its overseas routes, which tend to be more lucrative because they have yet to attract the amount of low-cost competition that has pressured domestic fares.
"As Delta continues its transformation to become a more customer-focused airline, we are incorporating the best of Song into the best of Delta," says Gerald Grinstein, Delta's CEO. "Our new Song service will set the standard in transcontinental travel."
Overwhelmed by high fuel costs, Delta filed for Chapter 11 bankruptcy protection last month. The company, which had already embarked on an ambitious transformation plan designed to boost efficiency and cut costs, hopes to use the bankruptcy process to further lower labor expenses and restructure its fleet.
Delta shares, which continue to trade but will likely be rendered worthless if and when the airline emerges from bankruptcy, traded at 70 cents Friday.