Even as airlines cut back on routes in response to declining demand, many are bulking up their services on the ground, appealing to first-class passengers with newer, more luxurious airport lounges. "Ground is where you can really differentiate yourself," says an executive with Germany's Lufthansa, which is spending $190 million to upgrade its airport facilities around the world, including a new three-story lounge at JFK. "It's not about luxury, it's about the business traveler being productive," says American Airlines' Nancy Knipp, who is overseeing a push to revamp more than 75% of the carrier's worldwide airport lounges by the end of the year.

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