VOL. 123 | NO. 223 | Thursday, November 13, 2008
Delta to Launch New Memphis Flights
By HARRY R. WEBER | AP Airlines Writer
ATLANTA (AP) - Fresh off its acquisition of Northwest Airlines, Delta Air Lines Inc., the world's biggest carrier, said Wednesday it plans to add 15 new international routes starting next spring, though it's unclear whether that will mean another year of big capacity growth outside the U.S. as the carrier will cut frequencies on other routes.
Many of the new Delta routes will be between the U.S. and Africa, Asia and Europe.
Several major carriers, including Delta, have raised ticket prices, added new or higher fees and made large cuts to domestic capacity this year. They've also said that due to the U.S. financial crisis that has hit many Americans hard, they will make or are prepared to make further domestic capacity cuts next year.
While the international field had been seen for years as a place for airlines to grow because of the premium they can charge for tickets, even Delta, which has seen a double-digit increase in international capacity in 2008, has started to slow down.
"They're selectively picking the winners and losers for international routes," Calyon Securities airline analyst Ray Neidl said. "It's not the time to be in expansion mode."
He said Delta and other carriers are scaling back frequencies on routes they can't develop quickly and are looking for new routes they can develop in a short amount of time.
In a memo to employees Wednesday, Glen Hauenstein, Delta's executive vice president of network planning and revenue management, said Delta's "smart international growth" has positioned the company well during tough economic times.
"This strategy is advanced by new opportunities created by our recent merger with Northwest, including the ability to deploy a more flexible fleet to take advantage of market dynamics around the world," he said.
Investors paid little attention, sending Delta shares down $1.47, or 16.6 percent, to close at $7.37 as the broader stock market plunged on worries about the economy.
Last month, a Delta executive said fourth-quarter international capacity growth would be about 2 percentage points less than previously expected, UAL Corp.'s United Airlines said 2009 international capacity would shrink 7 percent to 8 percent and the chief of AMR Corp.'s American Airlines said his carrier's international capacity would decline nearly 1 percent next year.
On Wednesday, Delta did not provide specific international capacity expectations for 2009. Hauenstein told reporters at a news conference that overall international capacity in 2009 will be slightly larger than in 2008, while overall domestic capacity will be slightly smaller. He did not elaborate. Spokeswoman Betsy Talton said Delta will be acquiring new long-haul aircraft next year. She also said Delta is trimming international frequencies on certain routes at off-peak times and off-peak days throughout the winter.
"We'll still maintain our broad international scope," Talton said.
To that end, Atlanta-based Delta plans to use its $2.8 billion acquisition of Northwest, which it completed Oct. 29, to expand its reach around the world.
Delta, in its announcement Wednesday, said its international plans starting next year include adding three new nonstop trans-Pacific flights between the U.S. and Tokyo-Narita, Japan, including new nonstop flights from Salt Lake City and New York-JFK; new flights between Atlanta and Nairobi, Kenya, and Cape Town, South Africa, via Dakar, Senegal; and new flights from New York-JFK to Prague, Czech Republic, and Zurich, Switzerland. Among other additions, Delta said that it plans to add a second nonstop flight between New York-JFK and Tel Aviv, Israel.
Many of the new routes and frequencies, which are to be phased in starting in May, are subject to government approval.
Delta said it will improve connections to the world from its domestic hubs with 14.5 percent more total capacity between Atlanta, Detroit, Minneapolis, Cincinnati, Salt Lake City, New York and Memphis in January, compared with the prior year. Delta did not say how the additions would impact overall domestic capacity in 2009. It did say that hub-to-hub changes will mean replacing select regional jets with mainline equipment.
Asked whether Delta is confident it can make its new international routes work considering the economic downturn, Robert Cortelyou, a Delta network planning executive, told reporters that the airline has seen strong growth numbers in some of the new markets it is heading to. He said Delta believes it can tap into that.
Standard & Poor's analyst Philip Baggaley said some of the markets Delta is adding new routes to have not been hit as hard by the global slowdown, though he acknowledged it appears inevitable those areas will feel some pain in the future.
"To the extent that they are starting up new routes that they think make sense within a merged Delta and Northwest that wouldn't have made sense for a Delta standalone, that's understandable," Baggaley said.
Calyon analyst Neidl was largely positive.
"You're always taking a risk by developing new markets," Neidl said. "But I've got a feeling they're looking for quicker payoffs."
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