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VOL. 127 | NO. 53 | Friday, March 16, 2012

Airport Concerns

Airport Authority board discusses changing landscape

By Bill Dries

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When U.S. Airways opens its three daily nonstop flights to Reagan National Airport in Washington out of Memphis in about a week, Memphis International Airport officials will celebrate.

Delta Air Lines remains the dominant carrier at Memphis International Airport, despite continued cuts for the Atlanta-based airline.

(Photo: Lance Murphey)

And they will emphasize to passengers that the service along with Delta Air Lines Inc.’s existing Washington service now means someone from Memphis traveling to the nation’s capital can have a full day scheduled there and still be able to make it back to Memphis by the end of the day.

“From my house to the White House in one day and back,” is the way Memphis-Shelby County Airport Authority board chairman Arnold Perl put it. “If we want more air service then we’re going to have to use it.”

Memphis Mayor A C Wharton Jr. could have used it Thursday, March 15. Wharton cut short a photo op at the White House with President Barack Obama that other big city mayors made in order to catch a non-stop back to Memphs and avoid a later stop and probable delay in Atlanta.

Wharton has said numerous times he prefers to avoid going through Atlanta's airport whenever possible because of the congestion.

The attention on the new Memphis service from an airline other than Delta comes as the airport board is becoming more vocal in its reaction to concerns among Memphians about high fares and less service from Delta, which has a hub at Memphis International.

“When it is steadily decreasing,” asked board member Ruby Wharton, “where are we going?”

The airport’s February passenger counts and bottom line were better than expected in what is traditionally the slowest month of the year for air travel even without the Delta cuts at Memphis mainly to regional service.

Airport authority president and CEO Larry Cox said the airport is following a proven practice of conservative revenue projections with several cuts in Delta service in the last year.

“We’ve had to step on the brakes before,” he said, citing the Sept. 11 terrorist attacks that shut down all air traffic.

But the Delta cutbacks are a long-term phenomenon that promises to be a permanent change in the way airlines do business, at least as far as Delta is concerned.

“None of us are thrilled with the downsizing of Delta,” Perl said. “Why is it happening? One word – profitability. … The worst thing that could happen to us is to lose a hub carrier.”

Meanwhile, Delta executives presenting at a JPMorgan Chase & Co. industry conference this week said the Atlanta-based air carrier’s outlook for 2012 is cautious.

And they told investors and analysts at the gathering to expect more cuts in the global carrier’s capacity without being specific about where that capacity might be cut.

“We’re still expecting to shrink in 2012,” said Delta president Ed Bastian. “That’s why we’re going to shrink approximately 3 points of capacity in 2012 as against 2011 despite the fact that we had healthy returns with a 9 percent return on invested capital. We don’t believe this is a market to be growing into.”

Bastian touted the $1.2 billion in net profit that Delta posted in 2011 and its best fourth quarter in the company’s history as an affirmation of the company’s position that fuel price increases will continue and Delta will pass them on to passengers – “only putting supply out there where people are able to pay,” he said.

Delta’s emphasis is on markets where passengers can afford those higher ticket prices and away from markets where they can’t.

“We no longer allow the excuse of high fuel prices as the reason why we fail our investors’ expectations,” Bastian said. “We expect not only will fuel prices stay high, we expect they are going to continue to rise over time and we’re building our model accordingly. … We decided we weren’t going to fight that any more.”

An analyst asked about a PowerPoint slide in Bastian’s presentation that included the term “booking class realignment.”

“Is that something more expensive than first class?” he asked.

Delta Network Planning and Marketing vice president Glen Hauenstein said it wasn’t, and defined it as a “technical” issue that is a move from nine classes of service to 16.

Perl and airport authority board member Jack Sammons acknowledged they are fielding a lot of complaints from Memphians about the service cuts and higher fares.

Sammons, who is a frequent flyer and spends a lot of time in the Delta Crown Room Club lounges, points to flights that get to a gate early but passengers still have to wait because there is no one at the gate from Delta.

Cox said any possibility of other uses for now unused Delta gates at Memphis International will have to wait.

“Delta may not give those gates back,” he said. “We don’t know yet.”

Months after the announcement of Southwest Airlines service to come at Memphis International, Perl said he is still getting a lot of questions about a larger presence beyond the conversion of the existing AirTran flights to the Southwest brand.

“We can’t get ahead of the story,” Perl cautioned as he added there have been a lot of discussions with Southwest about what the entry into the Memphis market will mean.

“That’s the start. That’s the beginning.”

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