Delta Air Lines, whose largest hub is in Atlanta, is warning the city that it may reduce its operations out of Hartsfield-Jackson because of rising costs.
In a memo obtained by the Atlanta Journal Constitution, Delta warns that because of a reduction in connecting traffic through Atlanta, it “could jeopardize billions of dollars in annual economic benefits and could translate into higher prices and service reductions for consumers who fly locally from Hartsfield-Jackson.”
Delta is negotiating with the airport over leases and the airline is contesting the cost of the airport’s capital improvement plan, which includes a new international terminal.
Hartsfield-Jackson General Manager Ben DeCosta wrote a memo, dated January 2, saying that construction on the new terminal would be halted by January 26 if an agreement is not reached by January 16. He warns that hundreds of jobs in the local economy would be lost if the project is halted.
Regardless of the outcome, airport spokesman John Kennedy said that the project may be halted anyway due to tight credit markets.
DeCosta agreed to $300 million in budget cuts for the international terminal project. Delta is asking for more than $400 million in cuts.
The latest construction estimate, as of November, was $1.6 billion, more than twice the original estimate. The project is also three years behind schedule. The terminal is now slated to open in 2012.
Delta’s vice president of corporate real estate John Boatright, responding to DeCosta’s memo, wrote that he wants the terminal project to continue, but “our position remains that we must understand our long-term financial future at Hartsfield-Jackson before we can commit to major capital investments.”
Boatright further wrote that the new capital improvement plan that the airport is proposing would double Delta’s unit costs by 2016. This means that Delta’s costs would increase from $5 currently to $10 per passenger, especially if there is a reduction of gates from 12 to 10 in the new international terminal.
Boatright is saying that two-thirds of Atlanta’s traffic can be re-routed through other hubs such as Memphis, Cincinnati, or Detroit. With the addition of Northwest, the carrier also has hubs in Atlanta, Minneapolis, New York, and Salt Lake City.
Minneapolis-based airline analyst Terry Tippler agrees. He says that “Delta has to play hardball in this environment…They have to say, ‘Look, we have other places to go’…Memphis would be a great overflow for Atlanta…They could easily move some of their business to Memphis.”
If Delta were to leave, it would be a big blow because the airline accounts for more than 70 percent of Atlanta’s flights.
So far the two sides have not been able to reach an agreement.
