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VOL. 128 | NO. 121 | Friday, June 21, 2013

Cox: Airport Could See More Competition

By Jennifer Johnson Backer

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Airports that once served as major hubs won’t likely regain their previous level of flight service, and if they do, it could take decades, Larry Cox, president and CEO of the Memphis-Shelby County Airport Authority told members of the board and airport officials.

COX

“If you had a hub, you aren’t going to get back to that size,” Cox said Thursday, June 20, at the Memphis-Shelby County Airport Authority’s monthly board of commissioners meeting. “What happens is that it is a very different mix of air service. Instead of the dominant single carrier with high fares but a lot of great air service, you end up getting more competition and lower air fares.”

Still, Cox cautioned that replacing the amount of flight traffic at Memphis International generated by Delta Air Lines Inc. and Northwest Airlines before that might take decades. He pointed to other cities like St. Louis and Pittsburgh that also have lost hub status in recent years. Those cities have not regained their prior levels of flight service, he said.

Delta on June 4 announced the air carrier will cut service to Memphis International by 34 flights and eliminate the city’s hub status Sept. 3. The Atlanta-based company said it would drop Memphis from 94 flights a day to 60 a day as the airline moves more air traffic to hubs like Atlanta and retires smaller, fuel-guzzling aircraft in favor of larger, more fuel-efficient planes.

A day after Delta’s announcement, Moody’s Investors Service lowered the credit rating for Memphis International one notch to A3, from A2 and also revised the investor outlook to stable from negative. While the downgrade means the airport will pay slightly more to borrow in the future, there is no impact on the airport’s current debt, explained Scott Brockman, chief operating officer of the Memphis-Shelby County Airport Authority.

The Airport Authority expects ratings from Fitch Ratings and Standard & Poor’s Ratings Services by next week, he said.

Moody’s analysts attributed the downgrade to two factors: the Delta cuts and the airport’s reliance on FedEx Corp., the world’s largest cargo airline. FedEx Express, the company’s largest unit, has been hurt by a slowdown in international trade and fewer customers willing to pay a premium to ship overnight. Brockman said Moody’s analysts also fear a slowdown in China could have a negative impact on FedEx and all global shippers.

Total passenger activity slumped 32 percent to 440,835 passengers in May, compared with 648,374 passengers a year earlier. Scheduled flights also declined 28 percent to 131, compared with 182 last year.

Total flights from Delta and its airline partners fell to 92 scheduled flights in May, compared with 147 scheduled during the same year-earlier period. As Delta began paring flights, total origination and destination traffic exceeded connecting flights for the first time in September 2012.

United Express, AirTran Airways and U.S. Airways all slightly increased scheduled flights in May, but those increases did not offset large Delta cuts.

For the fiscal year to date, the 11 months ended May 31, total passenger traffic dropped 28.9 percent to 5.1 million passengers, compared with 7.2 million passengers during the airport’s previous fiscal year to date. The airport’s fiscal year runs July 1 through June 30.

Cargo continued to buoy revenue for Memphis International, the world’s second-busiest for cargo behind Hong Kong.

Memphis handled 761.3 million pounds in May, up 1.1 percent from 753.3 million pounds a year earlier.

For the 11-month period ended May 31, Memphis International handled 8.2 billion pounds of cargo. That’s up 2.3 percent compared with 8 billion pounds of handled cargo during the same period a year earlier.

In other business, commissioners:

• Approved the purchase of two dump trucks with snow plows and snow brooms from Tri-State Truck Center Inc.

• Awarded a contract to trade-in two street sweepers in exchange for a dustless street sweeper to Stringfellow Inc.

•Approved a one-year contract with University of Tennessee to continue to provide health care services at the Dorothy L. Bobbitt Health Station at Memphis International Airport.

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