Special Report: Heathrow foothold helping Delta 'become a force in the UK'

Special Report: Heathrow foothold helping Delta 'become a force in the UK'

Mike Medeiros, Delta’s vice-president – Seattle, spoke to Lee Hayhurst about the success of the airline's new direct service from Heathrow to the west coast city and its determination to make an impact on the UK market

Delta Air Lines hailed the success of its daily service to Seattle in the 15 months since it broke British Airways’ monopoly on the route.

The US carrier began flying in conjunction with its partner Virgin Atlantic to the west coast US city from Heathrow Terminal 4 in March 2014, and the airline claims it was profitable from the off.

Delta is keen to promote Seattle not just as a destination for UK leisure travellers but also as a hub to its other 34 destinations to other parts of the US and beyond.

Mike Medeiros (pictured), Delta’s vice-president – Seattle, spoke to Travel Weekly on a recent trade mission to the UK during which he met key industry partners.

“The route’s gone exceptionally well,” he said. “We could not be more pleased with sales both here and in the US.

“It serves as a great example of how competition is a great thing. It was probably one of the most under-served markets from an international perspective.

“We are pleased with it and bullish about the market itself.

“From day one it’s been profitable. Often, international carriers do not find it unusual if a route takes time to mature and develop.”

Reaping the rewards

Medeiros said the carrier was particularly pleased with demand for its Delta One business-class cabin, which was higher than forecast.

“What that tells us is that our product is working exceptionally well,” he said. “It has really set us apart and we are getting nice rewards for the investment we have made.”

Seattle is regarded as a potential mass-market leisure destination by Delta, albeit one that lacks awareness in potential source markets such the UK.

“I don’t know that Seattle has marketed itself in Europe well,” said Medeiros. “If you are downtown, in an hour you can be on the slopes skiing – that’s a great winter option.

“In the summer, there are the beautiful islands, the waterfront, hiking, cycling, ocean fishing and the wine country. And then there’s the music scene. It’s a beautiful area.”

As well as the attractions of the Seattle region, a key plank of Delta’s strategy is to get people to use it a stopover on their way elsewhere – and to return subsequently for a full holiday.

Only 10 of the 125 daily flights from Seattle are long-haul international; its comprehensive network of domestic routes includes San Diego, Palm Springs, Phoenix, San Francisco, Los Angeles and Hawaii.

Medeiros said Delta was working with the Port of Seattle, which also operates the airport, on marketing the city, and the UK trade can expect investment in marketing and fam trips.

Heathrow consolidation 

Having switched its London presence from Gatwick in 2008, Delta is in talks with Heathrow about bringing all its operations into Terminal 3, where Virgin Atlantic is based.

Its services are currently split between Terminals 3 and 4, which Medeiros called “an unacceptable situation in the long-term”.

He said: “We believe Heathrow can make a Virgin-Delta co‑location in Terminal 3 work.”

The airline has increased its presence at Heathrow, picking up ‘remedy’ slots as a result of the joint venture between British Airways and American Airlines, and through its partnership with Virgin Atlantic.

But Medeiros described entering the Heathrow market as “extremely challenging”.

“We believe if it’s truly open skies, it should be truly open and access to be granted,” he said. “We will become a force in the UK, finally providing some competition to what has been a dominant position by one carrier.

“That’s good for the UK customer. We are going to work hard to earn their trust, because if we do that, they will select us another time.

“We believe our onboard service is better. Everything we offer is hands-down better than what has been offered from Heathrow for many years.”

Mutual benefits

Delta’s partnership approach, which also led to a tie-up with Air France/KLM, is enabling it to benefit from the experience of brands such as Virgin.

Medeiros stressed the benefits were felt on both sides. “Delta purchased 49% of Virgin Atlantic and we share all profits and losses at the 49% level,” he added.

“We have the power of that iconic brand and they have the network breadth of Delta. Virgin did not have that before and that was one of the challenges. It was more of a point‑to-point carrier.

“What we are trying to do is solidify this concept of selling the two carriers in a metal-neutral fashion.

“If a customer wants to go from the UK to Las Vegas, they can do that on Virgin non-stop or fly Delta to Seattle, stay two days and come over on a connection.”

Optimistic outlook

Medeiros is optimistic the aviation sector is poised to enjoy a period of relative prosperity following consolidation in the US and a period of high fuel prices.

“We have a more stable airline industry that allows carriers such as Delta to actually make a profit and reinvest,” he said. “Since industry consolidation started in earnest in 2009, we have invested $3 billion in our product.

“With fewer players, it’s rationalised capacity, but that does not mean there has been less competition. Carriers have found places to put some of their aircraft to make more money.

“It’s not as if air fares have gone up with consolidation; flying is still probably one of the biggest bargains out there.

“Obviously, oil prices dropping have been good for the industry, and many airlines have participated in that.

“Delta, with our fuel-hedging strategy, has not participated fully, but if prices remain low, we will work our way into a better position by the latter half of the year.

“We have had high fuel prices for the past 10 years, and we have benefited from this lower fuel price situation only for the past eight months or so.

“It’s pretty early to be making dramatic changes to your business model.”

Delta facts and figures

• Atlanta-based Delta has been operating for 86 years and is a founding member of the SkyTeam alliance. It started transatlantic flights to Gatwick in 1978.
• The carrier has 722 mainline aircraft, 80,000 staff and carries 170m passengers annually. In 2014, Delta posted a profit of $4.5bn.

• This summer, Delta will operate 22 non-stop daily flights from Heathrow and one  from Manchester.

• The Virgin Atlantic joint venture started on January 1, 2014, for all flights between the UK and North America. Combined, the airlines operate 39 transatlantic flights a day.

• Delta offers three types of cabin: Delta One, which features lie-flat bed seats with direct aisle access; Delta Comfort+, with an extra four inches of legroom than economy seats; and Main Cabin.


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