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Delta, JetBlue in East Coast dogfight

Delta Airlines is making some big changes as it launches another new battle against the low-cost carriers. This time the goal is to take on Jet Blue. By CNBC's Phil LeBeau.
A worker sprays a chemical deicing solution on a Delta jet before it pulled back from the terminal, prior to liftoff from Ronald Reagan National Airport in Washington Tuesday.Gregg Newton / Reuters file

Delta Airlines is making some big changes as it launches another new battle against the low-cost carriers. This time the goal is to take on Jet Blue.

Delta announced Wednesday that it was adding eight new destinations from Kennedy Airport in New York. And there's also news about US Airways, as the airline shops its shuttle around. Both of these stories show just how competitive the east coast has become for the airlines.

US Airways is in talks with four other carriers about possibly selling its shuttle, which operates between Washington, D.C., New York and Boston. US Airways needs money to stem losses that continue to mount since coming out of bankruptcy last year.

Delta, Jet Blue, American Airlines and Air Tran are all reportedly interested in buying the shuttle -- mainly because it comes with gates at Reagan National and LaGuardia -- two airports where it's tough to get the slots needed for a highly profitable shuttle operation.

"The east coast shuttle between New York, Boston and Washington is really the only significant shuttle," said Josh Marks, who follows the airline industry at The GW Aviation Institute in Washington. "It’s the only shuttle market that will support very high frequencies back and forth and the only one that still has a culture of walk-up business passengers who pay whatever fare is being charged so that they can get to N.Y. and Boston for a meeting. It’s a really unique product, and it’s not one that airlines are able to jump in and recreate very easily.”

Delta's interest in US Air's shuttle is another example that the airline is willing to spend the money to protect it's market share on the east coast as that area becomes more competitive. One of the key battlegrounds is New York’s JFK airport, where JetBlue and American are spending time and money to win over travelers. Last week, JetBlue said it filed with the U.S. Department of Transportation for 10 slots to begin service from New York's LaGuardia airport this spring.

The low-cost carrier said in October that it intends eventually to triple its service out of JFK to 250 flights a day.

So Delta is doing more in New York City. First, it's spending $300 million over the next 6 years to re-do its JFK terminal. It is also adding flights, both on existing routes and to new destinations. The airline said it will bring 10 parked planes back into service and recall about 200 flight attendants and 100 airport employees for the JFK expansion

Make no mistake, Delta is doing all of this with it's eyes on JetBlue. The discount airline based in New York has grown very rapidly on the East Coast, and is starting to branch out. Delta has started up it's own low fare competitor, called Song, but it also wants to protect business on the core Delta network.

"I fully expect that JetBlue will continue to grow," said Delta's chief marketing officer, Vicki Escarra. "When you look at the fact that (low-cost carriers) are growing 25 percent faster than mainline carriers and have cost structures that allow them to grow faster ... they are a force to be reckoned with."

Escarra said most of the airline's 9-percent capacity increase this year will be focused on New York and Atlanta.

Investors are watching Delta closely since the airline forecast a first quarter loss of between $2.40 and $2.80 a share. So can Delta afford to spend $300 million sprucing up it's JFK terminal?

Apparently, liquidity is not a concern. Delta certainly has the cash to make it through at least this year. But the bottom line is that you can expect Delta and the other airlines to spend more time and money on the East Coast, which will be a big battleground in the next year.

Ray Neidl, an analyst with Blaylock and Partners in New York, said the Delta effort at JFK could help the airline's international volume, but he doesn't expect it to do much for the airline at home. He also said the effort shouldn't affect JetBlue.