In June, Eastern Air Lines began offering shuttle passengers discount coupon books entitling fliers to 10 flights for the price of eight. In July, Pan American World Airways began offering its shuttle customers a similar "shuttle saver" coupon book.
Eastern added legroom. Pan Am added a high-speed water taxi from New York's La Guardia Airport to Wall Street. Eastern boosted frequent flier awards to 2,000 miles' credit for each flight on the shuttle. Pan Am began offering shuttle customers who take 10 flights before Sept. 30 a free economy class ticket to any European destination that Pan Am serves.
In the nearly one year since Pan Am began head-to-head competition in the lucrative shuttle market, both airlines have thrown out new lures to win or retain customers.
The contender, Pan Am, says it has been able pick up more than 30 percent of the market -- the market share New York Air controlled when it offered competing service from La Guardia. But profitability on the shuttle routes, so far, has eluded Pan Am.
In the meantime, although some shuttle passengers complain about the lost cattle-car aura, others have benefited from the ruffles and flourishes that competition has produced.
Pan Am began its shuttle service last October, the indirect consequence of the merger that merged Continental Airlines and Eastern into Texas Air Corp. Texas Air agreed to sell Pan Am slots and gates owned by Texas Air subsidiary New York Air (which is now part of Continental) in order to help eliminate concerns that the merger would reduce competition. New York Air moved its operations to Newark.
Eastern officials think that Pan Am has about the same market share that New York Air had, but Pan Am says it is doing even better. "We're comfortably in excess of a third of the market," said spokeswoman Pamela Hanlon. Hanlon said that shuttle flights during September have been about 45 percent full, the highest load factor since the shuttle started service and near the airline's break-even point for the shuttle. Last month, American Airlines and Pan Am announced that they were ending a joint frequent flier program as of Sept. 30. Hanlon said that Pan Am did not expect to lose customers because of the end of the accord that gave AAdvantage members mileage credits for Pan Am flights. Hanlon said that Pan Am is promoting its own WorldPass program and waiving a membership fee through the end of the year to attract more members.
"It takes something like a year or a year and a half" to make an operation like the Pan Am shuttle successful, said airline industry analyst Louis A. Marckesano of Janney Montgomery Scott Inc. "Penetrating a market and establishing a product takes time. I think they're probably making as good progress as they could hope for," he said.
Pan Am is seeking $180 million in concessions from its unions, an accomplishment that would help the shuttle and other operations. So far, however, the unions have resisted, and the airline has not reached a settlement with its unions. In the meantime, the summer has been filled with rumors about a possible acquisition of Pan Am. Most recently, financier Kirk Kerkorian is said to have expressed an interest in Pan Am. Before Pan Am's fate is settled, Chairman C. Edward Acker may be replaced, according to observers.
Short of an acquisition of the whole company, however, the shuttle is not for sale, according to Pan Am.
Eastern will not say what percentage of seats are filled on its shuttle flights. However, the airline said that it operates from 12 to 16 extra sections a day.
On Aug. 17, Eastern made the shuttle a separate division within the airline and put John Seifert, formerly a senior vice president of marketing at Pacific Southwest Airlines, in charge of it. Eastern also recently started a "shuttle fever" program designed to motivate employes to improve service on the commuter flights with awards for outstanding service that range from travel alarm clocks to a red Corvette.
The company also added supervisors on the shuttle and increased surveys of passengers from quarterly to monthly. "All of those things are concentrating on service. The consumer is benefiting from this competition," said Scott. "Each airline is trying to provide the customer with better service."
In addition to being a high yield market, the shuttle is an enormously visible market at a time when the traveling public is increasingly critical of airline service.
"The shuttle is kind of a storefront window for us," said Scott.