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Internet Travel Monitor - Industry News
February 6, 2008
A Delta-Northwest Merger Would Shift Strength of Hubs
ATLANTA, GA – More international flights from Atlanta. A smaller role for the Memphis airport and a bigger one for airports in Detroit, Salt Lake City and possibly Minneapolis.
Those are just some of the implications if Atlanta-based Delta Air Lines merges with Minnesota-based Northwest Airlines, a marriage many analysts think is likely to happen soon, even as some politicians have vowed to vigorously oppose it.
A Delta-Northwest merger would create the nation's largest airline — possibly the biggest in the world — and could have long-range consequences for many existing hubs as well as routes now controlled by the two carriers.
"It would truly, truly be 'THE' U.S. global carrier," said Minnesota-based airline consultant Terry Tripper. "It would be No. 1 to Europe. It would be very close to No. 1 to Asia. And it would be very big in Latin America, Mexico and the Caribbean."
The merger would combine Delta's extensive domestic and Latin American route system with Northwest's vast presence in Asia — it currently operates 200 nonstop flights a week between the U.S. and Asia. And those routes would be complemented by both carriers' operations in Europe.
Delta currently has hubs in Atlanta, Cincinnati, Salt Lake City, and New York's JFK. Northwest has hubs in Minneapolis, Detroit, Memphis, Tokyo and Amsterdam.
Rumors have swirled around a possible Delta-Northwest combination in recent weeks, although both carriers have publicly declined comment. Delta also is reported to be in talks with United Airlines, though many analysts believe it would be easier for a Delta-Northwest merger to pass regulatory scrutiny.
Airline mergers are fraught with pitfalls as carriers try to combine fleets, routes and computer systems. An attempted hostile takeover of Delta by U.S. Airways fell apart last year amid widespread opposition by employees, political leaders and Delta executives.
However, a Delta-Northwest merger would be a different animal than the proposed combination of U.S. Airways and Delta. That failed union would have produced what airline officials call an "overlap" merger. The two carriers had numerous overlapping routes and hubs that would be been trimmed to reduce capacity and create a much leaner airline.
Airline officials refer to a possible Delta-Northwest combination as an "end-to-end" merger, or one that would use the synergies of the two carriers to grow the resulting airline, especially its international footprint. It's also doubtful that a proposed merger would envision closing too many hubs because of the regulatory and political fires that could be ignited.
When it emerged from bankruptcy last spring, Delta mapped out a path to increase its profits by expanding its lucrative international routes, especially those to high-growth areas in Asia. Combining with Northwest could fast-forward that plan by decades.
Some airline officials estimate it would take Delta 20 to 25 years to build the same Asian route system the new carrier would get in a Delta-Northwest combination. Delta, which is headquartered at Hartsfield-Jackson International Airport, will begin its first non-stop flight to China this year from its Atlanta hub.
A merger could vastly increase the number of Asia-bound flights from Hartsfield-Jackson in just a few years. It could also expand international flights out of Detroit, which Northwest uses as its main U.S. point of departure. The new airline would not only have a major hub in Tokyo, but it would have a major gateway to Europe, Africa and the Mideast through an Amsterdam hub.
Atlanta, Detroit, Salt Lake City, JFK and Minneapolis would likely remain hubs. And Cincinnati, a profitable Delta gateway, would likely remain a large operation, even though some regional flights could be redirected to either Detroit or Atlanta.
One big unknown is what would happen Memphis International Airport, which, in airline realities, is very close to Atlanta.
"We're concerned, but we're cautiously optimistic we'll be okay," said Larry Cox, president and CEO of the Memphis-Shelby County Airport Authority. "But if the hub goes away, our world will not come to an end."
Cox said that if a newly merged airline decides to abandon Memphis as a hub, some other carrier will likely move in to fill much of the void.
Memphis is the smallest U.S. market with a hub, Cox said, and the smallest hub that Northwest operates.
"But this hub is making money for Northwest, and it works well from an operational standpoint," he said. It also doesn't have the delays and overcrowding of Hartsfield-Jackson, the world's busiest airport, Cox said.
Trippler agreed with Cox that smaller could be better when a combined mega-airline begins trying to decide what to do with Memphis.
"Atlanta is so big. It is so busy," Trippler said. "It may be a situation were they want to keep the Memphis hub going because it siphons off some of the Hartsfield traffic."
Copyright 2008 The Atlanta Journal-Constitution. All rights
reserved. From http://www.ajc.com.
By Jim Tharpe.
To view the Internet Travel Monitor Archive, click http://www.tripinfo.com/ITM/index.html.
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