Delta Air Lines is adding business-class seats that recline almost flat on all flights from New York to Los Angeles and San Francisco to compete with United Airlines and Virgin America.

Those new seats recline 150 degrees, Delta said Tuesday in a statement. The Atlanta-based carrier also said it added fully flat bed seats in business class on all New York-London flights.

Delta, the world’s largest airline, is making the investment as part of its effort to win passengers in New York, the biggest U.S. market in which no single carrier dominates. The so-called lie-flat seats are prized by business travelers, who generally pay the highest fares and fly more often.

UAL’s United offers lie-flat seats on its first-class service called p.s. connecting New York with Los Angeles and San Francisco, and on many international flights, said Robin Urbanski, a spokeswoman for the Chicago-based carrier. Virgin America, the low-fare carrier partly owned by U.K. billionaire Richard Branson, has seats in business class that recline similarly to Delta’s.

The offering, called Gogo, will eventually be rolled out to 300 domestic aircraft.

Initially the Internet service will only be offered on five MD-88 aircraft flying Delta Shuttle routes between New York’s LaGuardia Airport and Boston’s Logan and Washington’s Reagan airports. One Boeing 757, which flies throughout Delta’s domestic system, will also be included in the system.

By the end of the year, Delta hopes to have the service available on 10 aircraft.

The Internet capabilities were made possible thanks to a partnership with Aircell, an Itasca, Ill.-based provider of Internet solutions. Any Wi-Fi enabled device, such as laptops or smartphones, will be able to connect to the service.

To gain access, passengers can pay a flat fee of $9.95 on flights of three hours or less, and $12.95 on flights of more than three hours.

Passengers on participating flights will have free access to the service between Dec. 16-31.

The US major will initially offer Gogo on five Boeing MD-88s that operate shuttle service between New York LaGuardia, Boston Logon and Washington National as well as on a single Boeing 757 flying throughout its domestic system.

It expects 10 aircraft to offer Gogo by the end of this year.

Throughout 2009, Delta will continue to add Gogo across its domestic fleet, first on MD-88s, MD-90s, 757s and Boeing 737 aircraft, and expanding to the remaining domestic fleet of Boeing 767-300 aircraft by late 2009.

Additionally, Delta and Aircell will begin the certification process for the mainline domestic fleet of the airline’s Northwest subsidiary in early 2009 with Gogo installations scheduled to begin in late 2009.

“The full fleet agreement between Aircell and Delta will ultimately ensure a consistent, convenient onboard experience for customers traveling throughout the continental United States on Delta- or Northwest-operated flights who wish to use the Internet service,” says Delta in a statement.

Although Delta will charge the same rate for Gogo as on American and Virgin America – $9.95 for flights less than three hours and $12.95 for flights longer than three hours – the SkyTeam member is offering complementary access to Gogo as a holiday promotion during the initial weeks of service, from 16-31 December.

“In-flight Internet access is one of the most popular requests we receive from our customers,” says Delta senior VP of marketing Tim Mapes.

“Next year when Gogo is available on our entire domestic mainline fleet, our customers will have access to the most extensive Wi-Fi network in the sky, making the time they spend with us on board even more productive and entertaining.”

To date Aircell has secured five customers – Air Canada, American, Delta, Virgin America and an undisclosed operator.

Atlanta-based Delta plans to launch the service on six planes next week, and gradually add service to more aircraft. The first flights to have the Wi-Fi service will be Delta flights on MD-88 and Boeing 757 aircraft flying out of New York. The service will be on flights out of Atlanta by early 2009.

The Wi-Fi will cost $9.95 for flights three hours or shorter and $12.95 for flights over three hours.

The broadband Wi-Fi service, called Gogo and provided by Itasca, Ill.-based Aircell, will allow passengers with Wi-Fi-enabled laptops and other devices to access the Internet and send and receive e-mail, texts and instant messages.

“The last few years we’ve really focused on a differentiated product on board,” said Chris Babb, Delta’s product manager for in-flight entertainment and media.

Delta has been testing the service and operated a flight Thursday to officially accept the Aircell system and test it on a flight from Atlanta to Buffalo, N.Y. About 10 planes are expected to be outfitted with the service by the end of the year.

Babb said perhaps half of Delta’s passengers have a Wi-Fi enabled device.

Delta isn’t the first airline to offer in-flight Wi-Fi. American Airlines and Virgin America also have limited roll-outs of Aircell’s service. John Happ, executive vice president for airlines at Aircell, said Aircell has been “very pleased” with the rates of passengers buying the service so far. JetBlue launched a test of in-flight connectivity with e-mail and instant messaging using a different system.

Delta’s launch of Wi-Fi has taken longer than it expected.

The airline had originally hoped to launch service in the fall and had earlier expected to get the system installed in 75 planes by the end of this year and the entire domestic fleet by next summer.

Delta still plans to put the service on its domestic fleet of more than 330 aircraft, including Boeing 737, 757 and 767-300 planes, by sometime next year. It also plans to test the service next year on merger partner Northwest Airlines’ planes. The service will not be available on Delta Connection flights and will be limited to North America because Aircell relies on ground towers.

Chief Executive Richard Anderson and President Ed Bastian said in a memo to employees that the program is similar to one earlier this year that Delta used to trim about 4,000 jobs. Northwest previously trimmed jobs of its own before being acquired by Delta on Oct. 29.

The executives said the cuts are necessary because Delta will be reducing systemwide capacity in 2009 by 6 percent to 8 percent because the weak economy has eroded demand for seats on airplanes.

“These capacity reductions will reduce the number of people needed to operate the airline,” the executives said. “Consistent with how we have managed headcount reductions in the past, we again will offer voluntary programs to Delta employees including those who have joined from Northwest.”

While the company did not say how many jobs it is seeking to cut, it said its goal is to achieve all necessary reductions through attrition, limited hiring and the introduction of the voluntary severance programs. Spokeswoman Betsy Talton said the majority of mainline employees are eligible to apply for the severance payouts, though she could not provide a specific number.

Delta and Northwest’s mainline operations include 75,000 employees. The entire company, including regional subsidiaries Comair, Mesaba and Compass, has about 85,000 employees. The 12,000 pilots of Delta and Northwest and certain management and administrative employees are not eligible for the voluntary severance programs.

The voluntary severance programs, to be offered in January, include one for employees with 10 or more completed years of service, whose completed years of age and service add up to at least 55. The second program is an early-out program that will be offered to those employees who do not qualify for the first program but who are frontline/contract ground and flight attendant employees with five or more years of service and merit/salaried employees hired before the first of next year.

Delta hinted Dec. 2 at an investor conference that more job cuts could be on the way as it disclosed its capacity reduction plans for 2009. Domestic capacity in 2009 will be reduced 8 percent to 10 percent compared to 2008, while international capacity will be reduced 3 percent to 5 percent next year compared to this year.

The agreement between Delta and American Express is a multiyear extension of their existing partnership. The companies have offered a portfolio of card products since 1996.

Delta will receive an immediate $1 billion boost to its liquidity from a purchase of SkyMiles that American Express will use in part for its membership rewards program. Delta said it expects to receive an additional $1 billion from contract improvements through 2010. American Express cardmembers will be offered expanded options for booking travel on Delta, and American Express will have the opportunity to increase merchant acceptance in more places in the Midwest.

Delta expects to end 2009 with roughly $7.5 billion in unrestricted liquidity. Like other airlines, Delta has been trying to raise cash and preserve it as long as possible, as lower demand for seats has eroded industry revenue amid the global economic downturn.

“We’re pretty confident where our cash position is,” Chief Executive Richard Anderson said.

The news about the credit card deal came ahead of an investor conference the Atlanta-based airline hosted.

At the conference, Delta President Ed Bastian said the carrier expects to be “solidly profitable” in 2009. He declined to provide specific figures. He made the projection even as he predicted that overall industry revenue will fall 8 percent to 12 percent in 2009. He also said Delta faces higher pension costs due to the decline in the value of its employee pension trusts, which have been affected by the market meltdown.

Late Monday, meanwhile, an arbitration panel ruled that the pilot seniority lists at Delta and Northwest Airlines will be integrated based on pilots’ status and aircraft category, though pilots from one carrier will not be able to fly for a period of time certain planes that the other carrier brought to the combination.

The three-member panel’s decision, which affects roughly 12,000 pilots, is binding and effective immediately.

Delta, which acquired Northwest on Oct. 29, wants to smoothly integrate the two work forces as part of its effort to achieve significant cost savings from the deal. A joint pilot contract was reached previously, but seniority had remained unresolved until Monday.

Pilots value their seniority. Those at the top of the list get first choice on vacations, the best routes and the bigger planes that they get paid more for flying.

In late 2009, Delta plans to merge Northwest’s WorldPerks reward program with Delta’s SkyMiles reward program.

Delta said it plans to continue its long-standing partnership with U.S. Bank through their existing corporate relationships including merchant acquiring, an expanded debit card program and corporate lending.

Last month, Alaska Air Group inked an expanded marketing alliance with Delta. The move will help feed passengers to support new international routes Delta plans to launch next year. Delta’s chief said at the time that the two carriers have not had any discussions about a combination.

At Tuesday’s investor conference, Anderson offered a quick “no comment” when he was asked why Delta hasn’t sought to acquire Seattle-based Alaska Air, which operates Alaska Airlines and Horizon Air.

Asked if he sees the possibility of further consolidation in the industry, Anderson said, “There don’t appear to be any indications, but I have no better evidence than you.”

Lawrenceville-based Wings Air is one. It’s been carrying passengers between the cities since November 1st.

So In an effort to increase traffic and get its name out, Wings Air is offering 99-cent fares. No catches. No fees. No blackouts. A round trip on its eight-seaters costs less than two bucks.

Robert Rupard is Wing’s president.

“The cost of marketing and advertising is pretty high. The cost of operating our aircraft in a relative sense is pretty low. So this was a worthwhile investment in marketing.”

To get a cheap seat, passengers must reserve by week’s end for travel through January 15th. After that,the regular one-way fare is between $50 and $100.

The Northwest ground workers union sued Delta Monday in U.S. District Court in Washington, D.C., contending that Delta is violating federal law through its efforts to integrate the seniority lists of the unionized Northwest workers and nonunion Delta employees.

Meanwhile, a three-person arbitration panel was expected to release a decision Monday night that integrates the seniority lists of the Delta and Northwest pilots. Both pilot groups are represented by the Air Line Pilots Association, but they were unable to reach a negotiated agreement on the thorny seniority issue.

Employees involved in the merger are deeply concerned about their seniority designations, because the blended lists will affect workers’ pay and career paths.

The International Association of Machinists and Aerospace Workers (IAM), which represents Northwest ground workers, recently rejected Delta’s offer to meet with Delta workers to discuss a process for blending their seniority lists.

The IAM said in its lawsuit that Delta must wait until the National Mediation Board has declared that a “single carrier” exists and a union representational election is held. The lawsuit is aimed at preventing Delta from bypassing “proper procedures” under federal law “in order to derail a free and fair election to determine who will represent the employees of both Northwest and Delta,” said Stephen Gordon, a top IAM official, in a Monday bulletin to his 12,500 Northwest members.

The IAM lawsuit was filed several days after the Association of Flight Attendants (AFA) sued Delta over similar complaints involving the Northwest flight attendants. The Delta ground workers and attendants are nonunion employees and their work groups are much larger than Northwest’s.

Voluntary retirement and early-out packages will go to U.S. hourly and salaried workers, Chief Executive Officer Richard Anderson said in a message to employees. Atlanta-based Delta hasn’t said how many jobs it needs to shed as it pares seating capacity as much as 8 percent more in 2009.

“To leave the capacity in the marketplace when there’s not demand is not in anybody’s best interest in the long run at Delta,” Anderson said in a message recorded on Dec. 5. “The economy is in tough shape. There’s no dispute.”

His comments expanded on Delta’s disclosure of the planned seating cuts on Dec. 2, when the Atlanta-based airline also said it would have “voluntary programs” to trim the payroll without specifying when they might start or what form they might take.

Enrollment will begin in January, and “we hope to get as many volunteers as we need,” Anderson said.

Delta used buyouts earlier this year to cut 4,000 jobs, or about 7.3 percent of the workforce before buying Northwest in October to become the world’s largest airline. Delta has said its fourth-quarter U.S. capacity will shrink by 13 percent. Northwest eliminated 2,500 jobs, or 8.1 percent of its payroll.

As recently as 2005, the Hebron, Ky., airport – Delta Air Lines’ second biggest hub – handled about 22 million passengers. Officials said they’ll be lucky if 10 million people move through the airport this year, largely because of Delta’s service cuts.

Even before Delta bought Northwest Airlines in October, the Atlanta-based airline had begun downsizing its Cincinnati hub, which had direct flights to nearly 100 cities. The airline reduced U.S. flights in favor of more lucrative international flights after it emerged from Chapter 11 bankruptcy last year.

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The reduced number of destinations and flights has caused frustration among area executives, and many are no longer willing to pay fares that have been ranked the nation’s highest.

Executives at three-fourths of more than 30 Cincinnati-area companies said they are using airports in Indianapolis, Lexington and Louisville, Ky., and Dayton and Columbus, Ohio, because of Cincinnati’s expensive fares.

“Unless you’re suffering from delusion, you realize that the Cincinnati airport is now really in Dayton,” aviation expert Darryl Jenkins said.

Airport officials and the Cincinnati USA Regional Chamber have commissioned a survey to determine whether the airport’s high costs are making it difficult to attract and keep jobs in the Cincinnati area.

“For a long time, the community recognized that for a high level of service you need to pay a premium,” said Doug Moormann, the chamber’s vice president of economic development. “But the tolerance for that premium is eroding.”

Area business and government leaders must work with Delta to get lower fares or a competing airline, Hamilton County Commissioner David Pepper said.

“It is a shame that we have this asset that most of our residents are driving an hour away to avoid,” he said.

Delta on Tuesday said it would cut up to 10 percent of domestic flights next year.

Richard Anderson, Delta’s chairman and chief executive officer, has said the airline would continue operating its Cincinnati hub.

“We are committed to making it work there,” he said.

The newly merged company, now Detroit Metro Airport’s largest carrier, cleared a big hurdle before the merger, reaching a collective bargaining agreement with the pilots union that represents Delta and Northwest employees.

However, for flight attendants, ground handlers, ticket agents, skycaps and other employees, the merger is more complicated. Those jobs are unionized at Northwest, but nonunion at Delta. Delta’s pilots are the company’s only major group of union-represented employees.

The Association of Flight Attendants and the International Association of Machinists are working to get their message out to Delta employees. Both unions plan to hold elections, once the National Mediation Board determines that Delta and Northwest are a single carrier.

Ed Bastian, president of Delta and chief executive for Northwest, said Tuesday that the carrier hopes to resolve labor issues by the end of 2009. In a federal filing, Delta said a decision on the pilot seniority list is expected this month.

Delta also announced it will cut flight operations by 8% in 2009, which likely would result in job cuts as well.

That will likely work in the unions’ favor in terms of organizing workers, said Gary Chaison, professor of labor relations at Clark University in Worcester, Mass.

“There’s nothing like announcements of reductions to heighten interest,” he said. “The unions can say we can offer you a voice in the process.”

Chaison said he believes the unions will win their elections. If they don’t, integrating operations could be difficult.

“It could create an incredible mess. … No one wants to be part of a group where some are represented and the others are not,” he said.

But the airline industry has a history of messy labor issues. Pilots for America West and US Airways have been disputing their seniority list for more than three years after the merger of those airlines.

American Airlines and Trans World Airlines flight attendants had a rocky battle when TWA was acquired in 2001.
Not wanting to drag it out

But Chaison says Delta has an interest in solving labor issues quickly and quietly.

“Delta is very much intent on creating the impression that with this merger, it’s business as usual. … Wall Street doesn’t like uncertainty,” he said.

Delta officials could not be reached Wednesday.

Stephen Gordon, a machinists union official, said he is certain the union will be successful when it asks Delta workers to organize.

The union represents about 12,500 Northwest employees including ground handlers, ticket agents, customer service representatives, skycaps and reservation agents. Delta has about 18,000 employees in those classifications.

About 2,900 employees are based in Detroit, said Gordon, president of the machinists union’s District 143.

Gordon said Delta has engaged in antiunion efforts, including an announcement last month that noncontract employees would receive raises of 3% or 4% effective Jan. 1.

The announcement pointed out that union workers would only get the negotiated contract raises of 1% to 1.5%.

“It’s an attempt to divide and conquer,” he said.

Northwest’s flight attendants union, the Association of Flight Attendants-CWA, has sued Delta to stop it from integrating the two carriers’ seniority lists until the group votes on union representation.

Northwest has about 8,000 flight attendants and Delta has about 13,000. About 2,500 Northwest flight attendants are based in Detroit.

The AFA has already tried to organize at Delta, most recently this spring, said union spokesperson Corey Caldwell.

In that vote, 99% of those participating voted in favor, but the vote didn’t pass because not enough employees participated in the election.

The AFA filed interference allegations against Delta in that election with the National Mediation Board, which rejected its claims in October.

Caldwell said the union is campaigning among the flight attendants. She said the announcement of job cutbacks only heightens awareness of the benefits of union membership, like rules governing layoffs and notifications.

“We’re getting people energized and feeling that this decision really does impact them,” she said. “Now it’s more apparent than ever that these are insecure times.”

Caldwell said once the three-member National Mediation Board makes a single-carrier determination, all union leaders have 14 days to file for an election.

Caldwell and Gordon said the Obama administration would likely bring new, more labor-friendly appointees to the National Mediation Board, which governs union organization for airline employees.

“For Delta and Northwest flight attendants, it would be beneficial if it happens after a new administration took office,” Caldwell said. “But that’s not to say we’re not ready now.”

Lee Moak, the chairman of the Delta unit of the Air Line Pilots Association, called the plan by the Federal Aviation Administration poorly conceived and unfair to domestic carriers who stand to lose up to 10 percent of their takeoff and landing slots over the next five years at Newark Liberty International, LaGuardia and John F. Kennedy International airports.

Federal officials plan to confiscate up to 10 percent of slots held by major domestic carriers, such as Atlanta-based Delta (NYSE: DAL), and auction them off Jan. 12 to the highest bidders.

The U.S. Department of Transportation and FAA say the move will alleviate air congestion in the Big Apple, by effectively instituting market-driven pricing. Basically, the airlines will pay more to fly during peak times and to fly smaller planes.

“Our plan will reduce congestion, keep air fares competitive and increase travel options in the New York aviation market,” DOT spokeswoman Sarah Echols said. “Our proposal introduces a limited number of auctions while also protecting the vast majority of flights by incumbent carriers. This balanced approach will ensure robust competition and high quality service while continuing to provide strong incentives for carriers to invest in existing operations at these capacity constrained airports.”

But the airlines say the government is overstepping its bounds. The airlines point out that the General Accounting Office has issued a ruling stating that the FAA lacks the authority to confiscate the slots.

The Air Transport Association of America (ATA) and the Port Authority of New York and New Jersey, which operate the affected airports, have filed suit to halt the auctions.

Moak said in light of the economy and with carriers cutting their capacity, “the actions of the FAA are clearly not in best interests of passengers, employees and the airlines.”

The airlines say the auctions could cost small cities air service and front line airline employees—such as pilots, flight attendants and gate agents—their jobs.

Slots will only be confiscated from domestic carriers that meet a certain threshold. Foreign carriers can’t have their slots taken away, even if they buy more slots than their domestic rivals.

Facilities, personnel and aircraft schedules are already in place for some of the slots that could be affected. Tickets for many of the flights already scheduled have been sold, which could lead to cancellations.

“The bottom line is this is wholly inappropriate in light of the economy,” said Moak, who attended an FAA demonstration of the auction process Thursday long with 30 other Delta pilots. “We’re going to do everything we can do as we go forward to address this activity.”

Airline officials say improved scheduling and upgrades to next generation air traffic control technology can solve the congestion problem.

The airlines are hopeful that a legislative remedy might occur prior to the auctions.

The Association of Flight Attendants union representing some 7,000 Northwest employees told Delta executives they won’t be attending a mid-December meeting with non-union Delta counterparts to discuss working toward a unified seniority list.

In response, a high-ranking Delta executive told employees in a memo this week that the flight attendants union was “dragging its feet” in helping resolve issues of seniority and union representation for flight attendants of both airlines. The executive also said Delta remains committed to reaching consensus on those issues sooner rather than later.

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Michael Campbell, Delta’s executive vice president of human resources and labor relations, in early November invited leaders of the flight attendants union to join 14 of Delta’s 12,000-plus attendants to look at ways to merge seniority lists. The union, however, declined to meet and filed a federal lawsuit against Delta, saying it wants to resolve the issue of union representation before talking seniority.

“We have an established seniority integration process in place within [the union],” union spokeswoman Corey Caldwell said Wednesday. “It’s simple: date of hire.”

In her Wednesday memo to Delta and Northwest flight attendants, Joanne Smith, Delta’s senior vice president of in-flight service, said time was of the essence.

“The faster we can fully integrate … the faster we will all be able to bid and fly all trips from our bases,” Smith said. “We are making terrific progress and there is still much to do, but resolving seniority integration is perhaps the No. 1 concern I hear from all flight attendants I speak with at both airlines.”

Smith said the company will work toward a “fair and equitable” seniority list, which could end up being date of hire. But Delta wants to discuss other factors as well, including employee training on specific aircraft.

It remains unclear what effect, if any, the union’s lawsuit will have on the seniority integration for the two groups of flight attendants, though a delay in integration is likely.

Either way, the attendants from both groups will face a unionization election within the next few months.

The National Mediation Board has received a request from the Air Line Pilots Association to consider Delta and Northwest as one carrier, a request that was supported by five other Northwest unions but not the flight attendants.

Once the board makes a positive determination, the flight attendants union would have two weeks to file for an election. Once the board approves that election, a voting period lasting at least a few weeks would open up.

Previous attempts to unionize the Delta attendants have failed, including one earlier this year in which not enough Delta attendants voted to make the results official. The union filed a complaint claiming interference by Delta, but that claim was dismissed by the mediation board.

Smith, the Delta executive, said she hopes for a swift resolution.

“We want to take this worry away from all of you and work to reach a consensus on a combined list as soon as possible,” she wrote in her memo.

Domestic capacity will be down 8 to 10 percent, and international capacity will fall 3 to 5 percent, compared with 2008, the airline said in a letter to employees.

The airline offered no hint of the possible consequences to Salt Lake City International Airport, where Delta has its Westernmost hub and employs 3,900 people. Spokesman Anthony Black said that information isn’t available yet.

It’s likely, however, Salt Lake will see some impact in the months ahead. Since January, the airline has ended routes to 16 destinations from the hub and has scaled back flying to another 16 destinations. It has also launched flights to Paris and plans to start service to Tokyo next year.

Airport spokeswoman Barbara Gann wasn’t surprised that Delta announced more capacity reductions.

“I think it [was] anticipated as they continue to align the schedules of both airlines after the merger [of Delta with Northwest Airlines on Oct. 29] and in light of the economic times we are dealing with,” Gann said.

All told, domestic and international capacity will be pared as much as 8 percent, the airline said. The cuts will be atop a 13 percent capacity reduction that Delta said last June it would implement by the end of this year.

“Once again, Delta must take
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the necessary steps to adjust our business and make certain seat capacity meets customer demand,” said the letter, signed by CEO Richard Anderson and President Ed Bastian.

The airline is analyzing the impact on Delta’s 75,000 employees and will offer “voluntary programs” to reduce its payroll, according to the letter, which did not say how many workers it wants to shed.

Earlier this year, Delta shed 4,000 people from its payroll by offering optional severance packages.

At the time, Delta was grappling with record fuel prices, its biggest expense. Since then, fuel prices have plunged more than 65 percent. Today, the world’s largest carrier is coping with a worldwide economic crisis that is causing passengers to curb their travel.

“We have seen a fairly significant drop-off in demand, which started for us, [at] some point in October, Bastian said at a Credit Suisse Global Airline Conference in New York.

“If you look at history, we’ve never seen the level of demand destruction that some are forecasting for our business,” Bastian said.

Delta’s stock closed at $8.47 per share Tuesday, up 51 cents.