Cincinnati hub is shrinking

[Evergrey]

http://www.ajc.com/business/cincinnati-hub-is-105747.html

Cincinnati hub is shrinking

Delta is cutting flights in Cincinnati by 17 percent in the fall

By Kelly Yamanouchi

The Atlanta Journal-Constitution
12:00 p.m. Sunday, August 2, 2009

While Atlanta-based Delta has grown into the largest airline in the world through its merger with Northwest, its presence at one of its longtime hubs has been rapidly shrinking.

Delta’s Cincinnati hub is less than half the size it was four years ago, one of the company’s most dramatic areas of cuts. A major question in the merger was whether it would cut a hub from its combined network, which now includes Delta’s hubs in Atlanta, New York, Salt Lake City and Cincinnati and Northwest’s hubs in Minneapolis-St. Paul, Detroit and Memphis.

With its larger presence, Atlanta-based Delta is now a key economic force in more cities around the country. That means that the strategic decisions Delta’s executives make at their headquarters near Hartsfield-Jackson International Airport are being scrutinized by more civic leaders, travelers and companies all over, who depend on Delta flights for business trips and vacations, to boost tourism and to attract corporate headquarters.

And Cincinnati is not going quietly. The Cincinnati USA Regional Chamber launched an effort to keep its Delta flights to London and Frankfurt, which Delta plans to cut this fall.

Delta worked hard to gain support for the merger by pledging not to eliminate hubs or lay off front-line employees as a result of the deal. Now as the company cuts flights amid the recession, that amounts to growing pressure to balance maintaining its service while cutting costs.

For a city, major flight cuts “can be devastating,” said Darryl Jenkins, an airline consultant. But at an airline, “sometimes you just put on the shades and make real tough decisions.”

Delta is cutting its fall schedule in Cincinnati by 17 percent, after a 22 percent capacity cut last fall. Including Delta Connection flights, it will be down to about 215 flights a day there, down from more than 600 in 2005, before Delta’s bankruptcy, according to Northern Kentucky Tri-County Economic Development Corp. President Daniel Tobergte. Last year, Delta moved out of one of the three concourses it operated out of the Cincinnati airport.

Cincinnati boosters say the discontinuation of the London and Frankfurt routes will be detrimental for local companies such as Procter & Gamble and GE Aviation and for efforts to attract more businesses to the city.

A hub brings air service “that the community itself could never warrant,” acting as a catalyst for economic growth, said Cincinnati airport executive director John Mok.

The Cincinnati area has attracted companies because of the international flights it has had for more than 20 years, Tobergte said. “Hub status sets a community apart.”

In a memo, Cincinnati civic leaders implored Delta chief executive Richard Anderson to at least maintain three to four flights a week to London and Frankfurt. Delta now flies each route six times a week.

In response, Anderson wrote, “We cannot afford to continue to operate at the same level as prior years when both demand and revenue do not support the routes,” he added. Officials from Cincinnati and Delta plan to meet this month.

“In this economy, you have to be very careful,” Jenkins said. Delta is “probably losing a lot of money in Cincinnati, and you just can’t afford to do that right now.”

Some are already questioning whether Cincinnati is still a full-fledged hub.

“I’m pretty sure that it’s not a hub right now,” said Jenkins, who is also founder of Theairlinezone.com.

Delta is “way over-hubbed. They don’t need that many places to transfer traffic,” Jenkins said. “I think over time Cincinnati will become a nice focus city for them, and I think that’s pretty much it.”

Mok said, “It comes down to the definition of what constitutes a hub,” but the Cincinnati hub will still be larger than Continental’s hub in Cleveland.

At the Cincinnati USA Regional Chamber, President Ellen van der Horst said, “I have no idea how to define the term ‘hub,’ nor do I have a crystal ball. ... It is certainly my hope that we will continue to see strong service from Delta out of this airport.”

Regardless of the merger, Cincinnati is not big enough to support as many flights as it once had, said aviation consultant Mike Boyd. Delta uses mostly regional jets operated by Delta Connection carriers for its flights out of Cincinnati. Those aircraft “are very hard to make money with” when oil costs $60 a barrel, Boyd said. “When Cincinnati was built up as a hub, oil was $18 a barrel.

“The chamber can write all the letters they want. It’s not going to change economics,” Boyd added. “Call our friends in Pittsburgh, who lost their hub entirely.”

Another challenge in Cincinnati is high fares and competition with airports in Dayton and Columbus. To address that issue, Delta lowered its fare structure in Cincinnati earlier this year.

Now, the airport is urging travelers to “take another look at our airport,” van der Horst said. “A lot of people had stopped even looking.”

Meanwhile, other Delta hubs, including Memphis and Detroit, have also suffered cuts but still held onto most of their flights. Delta has also maintained the heft of its Atlanta hub, the largest operation in its network, though it is eliminating flights to Shanghai, Seoul and Mumbai.

Delta subsidiary Comair, based in the Cincinnati area, has also been cutting its work force.

[Lexy]

Yeah and I think you can expect some more cuts later on next year. I hate to say that too as I really like CVG. Unfortunatly, it's proximity to DTW is eating away at it's viability as a major hub. We'll see what becomes of this as Delta shrinks the hub down to basically a Focus City operation. The good thing, if you consider this good, is that DHL has moved back into their hub on the southside of the airport. Closing their Wilmington hub and moving everything over to CVG.

[nomarandlee]

Delta is dropping its Atlanta-Shanghai? That is a surprise considering what a premium I thought that American airlines on getting and retaining Chinese routes.

[Crawford]

How on earth can Delta maintain all these hubs?

In addition in Cincy, are there any reasons for Minneapolis and Memphis hubs? These don't seem to make any sense.

[MNMike]

Well MSP is a hub because it was Home to Northwest Airlines HQ(still is for a bit longer, the subsidiary version), and one of its most profitable airports...but you are right, even though they say MSP will stay a major hub, I seriously doubt it will sadly. A lot of experts say it will because of all the money it made NWA, but once their requirements are done(they owed the state a lot of money, so they have to maintain a hub for a certain amount of time that was negotiated) I am sure we will see big cuts. Also, MSP is a pretty large airport if you didn't know, with over 120 gates.


Here is a clip from an article last month about whats going on here so far, and why MSP is a big hub:
http://wcco.com/local/delta.cuts.msp.2.1041369.html

Delta Announces Flight Cuts, MSP Spared

On Thursday, Delta CEO Richard Anderson said the Atlanta based carrier will trim system capacity by 10 percent this year. In addition Anderson expects Delta to reduce international capacity by 15 percent.

In last fall's merger with the Eagan-based Northwest, Delta promised the Metropolitan Airports Commission it would maintain 10,000 jobs in Minnesota and at least 400 daily flights. The pledge is tied to the $270 million in state bonds Minnesota issued to Northwest Airlines back in 1991 to help rescue it from economic collapse.

Delta said not to worry. It's combined international, domestic and regional carriers currently average 650 flights out of MSP International each weekday.

"I don't think we'll lose service to any cities, but we may see a cutback in frequency," said air travel expert, Terry Trippler.

He says the Twin Cities is Delta's most profitable Northwest hub.

"Detroit is the largest, but MSP is the most profitable," added Trippler.

Delta's planned 10 percent reduction in flight capacity targets largely International flights. The greatest effects will be felt in Atlanta, Cincinnati and Detroit.

"The number will not impact the MAC agreement," said Delta spokesman, Anthony Black.

But holding up Delta's employment promise to MAC will be tougher. Already, hundreds of Northwest jobs have been vacated or transferred from Northwest's former Eagan headquarters to Delta's in Atlanta.

CEO Anderson said the company will have trimmed about 8,000 jobs from 2008 to the end of this year.

Many expect the Eagan headquarters building will be sold and the remaining jobs transferred to Delta's building "C" just south of the Humphrey terminal. That building, once home to the former Republic Airlines, is undergoing remodeling.

[jmecklenborg]

CVG's future is unclear. They finished the new $250 million third north/south runway just as this all hit the fan, so the taxpayers got hosed. CVG has so much excess capacity it's obscene -- this helped motivate DHL to return (congestion was part of its motivation to leave a few years ago), but the volume of DHL's business is miniscule. Only 100 or 200 workers, nothing compared to the 10,000 working up in Wilimington until just recently. The failure of that Wilmington venture ranks as one of the greatest business failures of the this decade.

[Lexy]

How on earth can Delta maintain all these hubs?

In addition in Cincy, are there any reasons for Minneapolis and Memphis hubs? These don't seem to make any sense.

Both are hubs that are profitable. They do just fine with what they have, albeit Memphis may be next after CVG.

this helped motivate DHL to return (congestion was part of its motivation to leave a few years ago), but the volume of DHL's business is miniscule. Only 100 or 200 workers, nothing compared to the 10,000 working up in Wilimington until just recently. The failure of that Wilmington venture ranks as one of the greatest business failures of the this decade.

Yeah. Techincally, they moved because the DHL domestic deals all fell through. Now, they use second hand transportation of packages domestically and don't need an ENTIRE AIRPORT all to themselves. CVG made much better sense because the facility there is smaller and more suited for their volume. Wilmington is a ghost town now....

[Evergrey]

http://news.cincinnati.com/article/20090827/BIZ01/908280347/1076/BIZ/Local+execs+to+Delta++Don+t+cut+intl.+flights

Local execs to Delta: Don't cut intl. flights

By James Pilcher
jpilcher@enquirer.com

Top Delta Air Lines brass met Thursday afternoon with representatives from Greater Cincinnati's biggest companies and corporate travel customers, with the locals pleading their case to bring back international service soon to be cut at the airline's Cincinnati/Northern Kentucky International Airport hub.

No promises were made, but local business officials said that the possibility of revenue or seat guarantees - a promise to fill a certain number of seats or pay the difference to the airline - was raised.

"We did surface the notion during the conversation of what it would take to bring some of this service back," said Cincinnati USA Regional Chamber vice president of economic development Doug Moormann. "That model is out there. Pittsburgh has done it ... they basically bought a flight to Paris. So it is something we will explore."

The closed door meeting at chamber offices included representatives from some of CVG's biggest corporate users, including Procter & Gamble, dunnhumby USA, Toyota and Fidelity, as well as other local businesses. CVG executive director John Mok also was there, but was not available for comment late Thursday.

Also in attendance was Delta's executive vice president and chief operating officer Stephen E. Gorman - who told the group that the recent fare reductions have indeed spurred local traffic at the airport, but not to Delta's initial projections, according to Moormann.

In a statement, Delta officials said the meeting "was a productive conversation about Delta's continued commitment to preserve air service in Cincinnati in the face of very challenging economic conditions. We are all working toward the same goal and are committed to this partnership to address the concerns of the community."

Delta has cut its local operation by half in the last three years, and plans to reduce flying by another 17 percent next week in light of the ongoing recession and rising fuel prices.

Part of next week's reduction will include the elimination of direct flights to London-Gatwick and Frankfurt, Germany, which prompted the chamber and other local businesses to complain to Delta directly. That in turn led to the meeting Thursday.

"We stressed to them that the Ohio economy is different from our regional economy and that we are doing somewhat better," Moormann said. "It was a good start to what I would hope is an ongoing dialogue about how we can improve service at the hub, and it is incumbent upon us here in Cincinnati to prove our case now."

[Rail Claimore]

The MSP hub isn't going anywhere. MSP is a large-enough O&D market, and it's far enough away from DTW that it will serve nicely as Delta's hub to Western Canada. Either MEM or CVG will be gone in a few years: Delta will probably keep one of them around to serve as a back-up hub similar to the role that STL plays for American. And I'd expect SLC to be scaled back if Delta ever decides to outright buy out Alaska Airlines: They'd love to get SEA as a true west-coast/transpacific hub.

I also wouldn't be surprised in the future if they get a large amount of capital to start building up a hub in Texas: Austin and San Antonio are good candidates for that. They used to have a hub at DFW, but completely pulled out this decade, and I don't know if it'd be easy for them to get back into that market.

[Buckeye Native 001]

Sucks for businesses, but CVG is too goddamn expensive.

[202_Cyclist]

Rail Claimore- do you expect that Delta would purchase Alaska? In the past few years, Alaska has been one of the best performing carriers, financially and for customer-service. I was just out west earlier this month, however, and there is a great amount of overlap between the Delta's SkyWest affiliate and Alaska's Horizon commuter carrier.

[seaskyfan]

Rail Claimore- do you expect that Delta would purchase Alaska? In the past few years, Alaska has been one of the best performing carriers, financially and for customer-service. I was just out west earlier this month, however, and there is a great amount of overlap between the Delta's SkyWest affiliate and Alaska's Horizon commuter carrier.

I wonder if overlap is the right word? I know both serve a lot of the same places in WA, OR, ID, CA, and MT but it seems more complementary to me - with SkyWest having a hub in SLC and and Horizon having hubs in SEA and PDX. I know a lot of Horizon's business in SEA is folks headed to/from there rather than connecting to somewhere else - not sure if SkyWest has a similar role in SLC.

[jaxg8r1]

I have no hardcore opinion on this, but my one time flying there (transfered from Delta to Comair) and in what appeared to be a new/nice terminal, they didn't have jetways. We had to walk out onto the tarmac to board the plane.

Now I'm sure this was probably a function of the plane size or something, but I found it strange. (And undoubtedly colored my perception of CVG negatively, although I remain openminded)

[ColDayMan]

^That terminal is gone.

[Lexy]

I also wouldn't be surprised in the future if they get a large amount of capital to start building up a hub in Texas: Austin and San Antonio are good candidates for that. They used to have a hub at DFW, but completely pulled out this decade, and I don't know if it'd be easy for them to get back into that market.

I would be VERY surprised to see them try to open a NEW hub. There isn't a need for one. The reason they closed the Dallas hub was the redundancy with Atlanta, cost, and lack of profit capabilities. No other city in Texas could support a hub in any form or fashion. Houston and Dallas are the only cities that are able to support hubs in Texas and I don't see that changing anytime soon or later.

[BG918]

I would be VERY surprised to see them try to open a NEW hub. There isn't a need for one. The reason they closed the Dallas hub was the redundancy with Atlanta, cost, and lack of profit capabilities. No other city in Texas could support a hub in any form or fashion. Houston and Dallas are the only cities that are able to support hubs in Texas and I don't see that changing anytime soon or later.

I could see Austin supporting a smaller hub for an airline like JetBlue. Southwest has Texas cities fairly well-covered though, including many non-stop flights across the country from Austin and San Antonio, in addition to their many flights from Houston Hobby and Dallas Love.

[Wheelingman04]

Holy shit.:rolleyes: It sounds just like what happed to Pittsburgh. Isn't that just amazing.:slob: I guess Cincy is getting screwed just like US Airways did to Pittsburgh.:hell:

[hudkina]

Delta is dropping its Atlanta-Shanghai? That is a surprise considering what a premium I thought that American airlines on getting and retaining Chinese routes.

Delta is positioning Detroit as its primary hub for flights to Asia. It's probably dropping the Atlanta-Shanghai flight because it is beginning the Detroit-Shanghai flight. I think eventually Detroit will sort of be the "Asian" hub while Atlanta will be the "European" hub.

[WonderlandPark]

SEA has really never been that great a trans-pac hub.

YVR to the north has huge international volume for a city its size. Probably, population to connections, one of the best on the planet. Only AMS (pop/#connections) is probably better connected.

LAX & SFO have monster O/D traffic, plus feeders from large southwestern US states (like TX & AZ). I just don't think SEA, with its limited runways and poor weather will ever make it a great hub airport. Which is great, because I love Alaska/Horizon as-is. Would hate to see DL ruin West Coast service.

[202_Cyclist]

hudkina--
Delta is positioning Detroit as its primary hub for flights to Asia. It's probably dropping the Atlanta-Shanghai flight because it is beginning the Detroit-Shanghai flight. I think eventually Detroit will sort of be the "Asian" hub while Atlanta will be the "European" hub.

Delta is retaining the PDX-Narita flight (at least for now) and the SEA-Narita flight.

[Lexy]

SEA has really never been that great a trans-pac hub.

YVR to the north has huge international volume for a city its size. Probably, population to connections, one of the best on the planet. Only AMS (pop/#connections) is probably better connected.

LAX & SFO have monster O/D traffic, plus feeders from large southwestern US states (like TX & AZ). I just don't think SEA, with its limited runways and poor weather will ever make it a great hub airport. Which is great, because I love Alaska/Horizon as-is. Would hate to see DL ruin West Coast service.

Intresting points!

I think SEA serves a niche purpose. And for the most part, it serves it well. Granted the SAS Airlines flight is no more and they have seen some other reductions on other airlines, Southwest included, they do well. I think we will continue to see them serve destinations from there that are in demand from there and in demand in large numbers. As for it being a real true "hub" like Dallas, Chicago, or Toronto...no I don't think that will ever happen. It will continue to soldier on in the same fashion that LAX has. Serving high O&D markets with some fascinating point-to-point services.

[mhays]

Sea-Tac added a third runway recently. For the first time, we can now use two runways at the same time in bad weather. (As soon as they finish repaving the old runway...I'm out of date on that one.) This will make a huge difference in Sea-Tac's reliability, and I suspect it's related to our addition of some new overseas routes lately, and planned.

[Crawford]

Delta is positioning Detroit as its primary hub for flights to Asia. It's probably dropping the Atlanta-Shanghai flight because it is beginning the Detroit-Shanghai flight. I think eventually Detroit will sort of be the "Asian" hub while Atlanta will be the "European" hub.

I'm not sure if I agree with any of this.

Delta's strong Detroit-to-Asia presence is a legacy of the old Northwest Orient days. It has little to do with Northwest, and really nothing to do with Delta.

Detroit has always had good connections to Asia (well, China and Japan). This has been true for many years. The automotive industry obviously plays a large role in this too. But Detroit isn't really a giant Asian hub compared to the top int'l airports. Probably not quite enough O&D.

As for Europe, JFK is the largest Delta hub, and they have been growing European/Middle Eastern/African flights fairly significantly in recent years. They are also planning a major replacement international terminal (demolishing T2 and T3, and replacing with a single, large terminal).

Delta also just bought a ton of slots at LGA, so I assume they will separate domestic and international between the two airports.

[202_Cyclist]

Crawford--

Delta also just bought a ton of slots at LGA, so I assume they will separate domestic and international between the two airports.

US Air and Delta traded the slots, with Delta acquiring additional slots at LGA and US Air getting some of Delta's slots at DCA. I don't know if Delta is separating the domestic and international traffic because they need the feeder domestic service at JFK to make many of the international routes possible. Here's an article from the WSJ: http://online.wsj.com/article/BT-CO-20090812-712280.html

[atlantaguy]

As for Europe, JFK is the largest Delta hub, and they have been growing European/Middle Eastern/African flights fairly significantly in recent years. They are also planning a major replacement international terminal (demolishing T2 and T3, and replacing with a single, large terminal).

You may want to check that claim. Atlanta is still the largest European hub for Delta, but they have been beefing up JFK.

[Lexy]

You may want to check that claim. Atlanta is still the largest European hub for Delta, but they have been beefing up JFK.

I was just about to post this. ATL still maintains more flights between the two continents than JFK does on DL, or codeshare, metal.

[hudkina]

I know that the Asian flights are a remnant of Northwest, but as Delta looks at its future strategies, Detroit will likely be positioned as its largest hub for Asian flights, while Atlanta maintains a major connection to Europe. For the most part if you live in the eastern half of North America and you want to fly to Asia on Delta Airlines, there's a fairly decent chance that you'll be flying through Detroit. On the flipside, if you're wanting to fly to Europe, there's a fairly decent chance that you'll be flying through Atlanta.

[atlantaguy]

I know that the Asian flights are a remnant of Northwest, but as Delta looks at its future strategies, Detroit will likely be positioned as its largest hub for Asian flights, while Atlanta maintains a major connection to Europe. For the most part if you live in the eastern half of North America and you want to fly to Asia on Delta Airlines, there's a fairly decent chance that you'll be flying through Detroit. On the flipside, if you're wanting to fly to Europe, there's a fairly decent chance that you'll be flying through Atlanta.

I think this is pretty spot-on, hudkina. Metro is positioned well for Asian flights, and the facility is fantastic.

Of course, the Atlanta-Tokyo flights, as well as the Atlanta-Seoul flights (flown as a code-share on Korean metal) aren't going anywhere. Atlanta is also the main hub for Caribbean/Central/South American flights too.

A new twist is that Delta may invest a boatload of $$$ in Japan Air Lines, and bring them into the SkyTeam alliance. This will be very interesting to watch.

[202_Cyclist]

AMR Seeks JAL Deal in Bid to Win Asian Business


Wall Street Journal - Atlanta Bureau
9/14/09

AMR Seeks JAL Deal in Bid to Win Asian Business
Effort Acquires Urgency as Rival Delta Negotiates to Acquire a Minority Stake in the Japanese Airline

By MIKE ESTERL

ATLANTA -- American Airlines parent AMR Corp. is taking a redoubled run at Japan Airlines Corp., as the company fights for a place in Asia by keeping the hobbled but strategically important JAL far away from rival Delta Air Lines Inc.

American is in "intensive negotiations" with JAL to forge a far more expansive joint venture with the carrier, according to people familiar with the matter. American, based in Forth Worth, Texas, also would consider acquiring a minority stake in the giant Japanese carrier to seal the pact, although any such investment would likely be capped at hundreds of millions of dollars, these people added.

Those discussions are taking on urgency because Atlanta-based Delta, which became the world's largest airline by revenue when it bought Northwest Airlines last fall, is in early talks to acquire a minority stake in JAL, which is losing money but flies more passengers than any other Japanese airline.

Also hanging in the balance is access to JAL's lucrative routes in Asia, an area of near-certain growth for the airline industry even in a soft global economy.

The tug-of-war is especially critical for American because it's a distant No. 3 among U.S. carriers in Japan and Asia, behind Delta and UAL Corp.'s United Airlines. American doesn't have a hub in Japan, relying instead on JAL, with whom it has had code-sharing deals since the 1990s. JAL also is a member of the oneworld alliance of global airlines that includes American and British Airways PLC.

View Full Image

Jetliners of Japan Airlines (JAL) taxi at the Tokyo International airport.
Delta wants JAL to join its rival SkyTeam alliance, which also includes Air France-KLM Group. Delta already became the largest foreign airline in Japan and the biggest U.S. carrier in Asia following last October's acquisition of Northwest. Northwest had a 12% share of passenger seats in 2008 at Tokyo's Narita International Airport.

Foreign ownership restrictions make cross-border airline mergers extremely rare. Battered by losses and falling revenue amid an industry-wide downturn, airlines also don't have much money to spend on takeovers -- especially for a financially troubled airline like JAL, which posted a record quarterly loss of $1 billion in its fiscal first quarter ended June 30.

American instead is focusing primarily on an expanded business agreement with JAL. The proposed joint venture would step up revenue sharing and joint decision-making in many areas including routes and scheduling. The two airlines have been in serious negotiations for more than a month and have made "significant progress" toward a deal, according to a person familiar with the matter.

American's top brass approached JAL about a stepped-up alliance at a oneworld board meeting in June in Malaysia. Follow-up talks were held in Fort Worth and American executives have been in Tokyo the past week attempting to hammer out more details, according to people familiar with the matter.

Such a joint venture would require the approval of U.S. and Japanese antitrust regulators. American already has had informal discussions with authorities in Washington and the initial response has been "encouraging," one of the people said. American also is formally seeking U.S. approval for its long-proposed joint venture with British Airways.

Delta has been in talks with JAL for several weeks, and has had active discussions with the Japanese airline in the past 72 hours, according to a person familiar with the matter. But talks aren't likely to conclude in the next week or two, this person added.

Delta has floated buying a minority stake of around $300 million in JAL, or a bit more than 5% of the Japanese carrier, although that figure remains fluid, this person said Sunday. JAL has a stock market capitalization of $4.8 billion and its largest shareholder is currently Japan Trustee Services T4G, with a 4.99% stake, according to JAL's Web site.

The bidding underscores both JAL's strategic advantages and its lingering problems. This past summer it received $1.1 billion in loans partially backed by the government. Tougher competition at home and abroad and Japan's weakened economy have hit the airline hard. The global economic slowdown that began last year has intensified the difficulties. In the last fiscal year ended in March its traffic fell 9.4%, and the airline has since been cutting jobs and paring routes.

But JAL also holds a 28% market share for international flights in Japan's Narita airport, giving any potential partner significant access to lucrative Asian and trans-Pacific routes.