Delta Air Lines Inc. yesterday announced plans to eliminate its Song discount airline and merge the operation into Delta's long-distance domestic routes.
As part of its Chapter 11 bankruptcy restructuring, Delta is seeking to eliminate unprofitable routes and expand to more lucrative markets.
Delta plans to eliminate Song in May and merge much of its operations -- including its 48 Boeing 757-200 aircraft with satellite TV -- into Delta's transcontinental routes beginning next fall.
"By merging the brands, we will also benefit from a more simplified operation, reduced overhead costs and more focused marketing resources," said Delta chief executive Gerald Grinstein.
Grinstein's predecessor, Leo F. Mullin, launched Song in 2003 to compete with growing low-cost carriers such as Southwest, JetBlue and Air Tran. Industry observers warned at the time that airlines often encountered difficulties operating low-cost subsidiaries. Other airlines, including Continental and US Airways, had launched their own offshoot airlines and eventually folded them.
With its in-flight entertainment, including on-demand video channels, Song was aimed at leisure travelers flying to destinations such as Orlando, Boston, and Fort Lauderdale, Fla.
United Airlines, which is also in Chapter 11 bankruptcy, created its own low-cost subsidiary last year, called Ted. Sean Donohue, vice president of Ted, said there were no plans to dismantle Ted, which had been "profitable." The airline was adding nine Airbus 320 jets to its fleet of 47. "We're growing Ted, and we're very happy with its performance," he said.
Song has struggled since its launch partly because of the already crowded low-cost-carrier landscape. In April 2004, Song began cutting several of its destinations, including Dulles International Airport.
Analyst Ray Neidl of Calyon Securities Inc. said merging Song into Delta "strengthens" Delta's operations and is a "minor positive" for the entire airline industry -- especially along the East Coast -- because it reduces the number of airline seats, giving the airlines more pricing power.
The future of many of Song's 1,200 workers remains in question. Delta spokeswoman Benet Wilson said there would be "some layoffs," but it was unclear how many of the workers would be affected. Joanne Smith, Song's president, will become vice president of Delta's consumer marketing department.
When Grinstein took over Delta last year, many speculated that Song's future was in question. But Grinstein said Delta used Song to test out new operations that it eventually phased into the mainline such as new leather seats, designer employee uniforms and snack service.