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Delta Air Lines to Expand Los Angeles Hub with New Flights

Zacks Equity Research

Delta Air Line Inc.’s (DAL) is set to further enhance its presence in Los Angeles with the expected launch of twice daily flights to San Antonio, TX on Apr 7, 2015, in addition to its Dallas service slated to start this fall.

There will be four Dallas-bound flights per day connecting Fort Worth International Airport and Los Angeles International Airport (:LAX) from Nov 2, 2014. Further, a third daily Delta service between Los Angeles and Austin is scheduled to start from the same date.

According to the company, the new routes will enhance passenger access to Delta’s trans-Pacific routes through Los Angeles. All flights will be operated by Delta’s affiliate carrier Compass Airlines and will use Embraer SA’s (ERJ) E-175 aircraft.

Los Angeles is a key market for Delta which has significantly expanded its network from LAX by adding services to Boise, Idaho, El Salvador apart from expanding its year-round service in Boston.

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The Atlanta-based company is also expected to start service between LAX and Monterrey, Mexico from November. The premier carrier is slated to expand its trans-Atlantic network in Oct 2014 by adding a service between LAX and London’s Heathrow airport as part of its joint venture partnership with Virgin Atlantic Airways.

Delta presently operates 140 peak day departures from LAX and connects 47 different destinations. However, the carrier faces stiff competition from traditional rivals like American Airlines Group Inc. (AAL) and United Continental Holdings Inc. (UAL), who are building Los Angeles as a hub expanding operations therein. Virgin America and Southwest Airlines are also scheduled to launch a service between Dallas and LAX from Oct 2014.

To combat rivalry, the carrier has invested $229 million in expansion and enhancement of Terminal 5 at LAX. The third largest passenger airline in the U.S. also plans to double the size of screening checkpoints and ticketing lobby to augment customer experience.

We believe although the new routes will boost traffic for Delta between these two important markets, operating a smaller aircraft as compared to its peers who offer service on larger mainline jets, can act as a potential impediment to growth.

Delta currently carries a Zacks Rank #3 (Hold).

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Read the Full Research Report on AAL


Zacks Investment Research