No. 2 hub braced for showdown
Atlanta Business Chronicle - April 14, 2006
by Lucy May
Special to Atlanta Business Chronicle
A strike by Delta pilots would be felt almost as hard in Cincinnati, Delta's second-largest hub, as it would be in its hometown of Atlanta.
Together with its subsidiary Comair, Delta operates more than 90 percent of the flights at Cincinnati/Northern Kentucky International Airport.
Delta CEO Gerald Grinstein has said even a brief strike would kill Delta. And a Delta shutdown would take Comair with it, wiping out Delta's stronghold on flights to CVG, the Cincinnati airport.
That would mean Cincinnatians would lose 122 direct flights a day to their airport.
"For Cincinnati, it would be like Dayton," said Michael Boyd, an aviation consultant based in Colorado. "Dayton was a hub at one time; it won't be a hub again."
Boyd doubts anyone would rush to replace the hub in Cincinnati, and he said it would hit the area's economy hard.
The Delta hub is a critical strength for the region, and businesses large and small count on the direct air service to get to clients and plants nationwide.
"There would be a ripple effect," said Darryl Laddin, chairman of the bankruptcy practice at law firm Arnall Golden Gregory LLP in Atlanta, where Delta operates its largest hub.
"That ripple effect is not only on the employees but also all those businesses who do business with the airlines and all the employees."
Such a large departure from a market creates other opportunities. Experts figure a region Cincinnati's size -- a metro area with about 2 million people -- should expect to have 41 direct flights daily without being an airline hub.
Airport insiders expect that the other airlines currently serving the airport would add flights from their hubs, although there would be fewer direct flights serving Cincinnati.
It's unclear, though, how interested other airlines would be in having as large a presence in Cincinnati as Delta.
"We carry a lot of Cincinnati passengers now from Dayton through our Atlanta, Baltimore-Washington and Orlando service," said AirTran Airways (NYSE: AAI) spokeswoman Judy Graham-Weaver. "We are certainly keeping an eye on the CVG market and while we do have interest in it, we do not have current plans to add the market to our route map."
Southwest Airlines has hinted that it, too, is interested in Cincinnati but isn't ready to start service.
And observers don't necessarily think Delta's absence, if the airline shuts down, would make the market any more appealing.
"Cincinnati could attract some of the low-cost guys," said Richard Gritta, a business professor and aviation expert at the University of Portland. "But if Cincinnati were that attractive to Southwest, they'd already be there."
The local airport has positioned itself to be alluring no matter what happens with Delta, stressed William Robinson, the airport board's chairman.
"Cincinnati is one of only six airports in the United States having three parallel runways, for example," he said. "And such a competitive advantage can only enhance the attractiveness of the CVG location should changes in service providers turn out to be needed or beneficial."
There are still other aviation opportunities if Delta were to shut down.
For one, Delta's assets could be sold for pennies on the dollar in a liquidation.
Atlanta-based business consultant Harry Nolan, who wrote about Delta's financial decline in "Airline Without a Pilot," thinks some of Delta's routes and the brand itself could be worth something to other airlines.
He argues that low-cost carrier AirTran, which competes head-to-head with Delta in Atlanta, might be a good candidate to acquire the Delta name and some of its infrastructure if Delta doesn't survive bankruptcy.
Other industry observers think Delta is more likely to merge with another major carrier, such as Continental or Northwest Airlines.
Of course, Delta is still trying to get its financial house in order.
The dire scenarios hinge on whether an arbitration panel decides April 15 to grant Delta management's request to reject the pilots' contract. The airline's pilots have authorized a strike anytime after April 17 if they lose their contract agreement.
The pilots have said they don't want to strike -- they want Delta to back off its efforts to void the contract. And while many experts doubt the pilots would shut down the airline with a strike, others think they might just be fed up enough to do it. Still, with the fragile economic situation of the airline industry, the pilots won't find much comfort if they turn away from Delta.
"If the pilots walk off, it's a shutdown," Boyd said. "You swagger, you bluster and all that. But when it comes to, 'If we walk, we know for sure we won't have a job to come back to,' that's different. There aren't any pilots jobs to go to."