Tuesday, January 20, 2009

Airlines threaten to move flights from Atlanta

Airlines that do business at the world's busiest airport are playing hardball in talks over new lease agreements, threatening to move some flights to other airports if they can't maintain competitive costs on fees they pay.

The master lease agreements that apply to airlines at Hartsfield-Jackson Atlanta International Airport do not expire until September 2010, but talks between the sides have already heated up.

Atlanta-based Delta Air Lines Inc., the world's biggest carrier, and discount carrier AirTran Airways, a unit of Orlando, Fla.-based AirTran Holdings Inc., say that if their costs are too high they may be forced to move some connecting flights to other airports.

Neither Delta nor AirTran is considering pulling out of Atlanta altogether.

The two carriers represent roughly 93 percent of the traffic at Hartsfield-Jackson. The other 7 percent of traffic there is split between other carriers including AMR Corp.'s American Airlines, US Airways Group Inc., Continental Airlines Inc., UAL Corp.'s United Airlines and several foreign carriers.

Airport General Manager Ben DeCosta did not return calls to his home and cell phone Monday seeking comment. An airport spokesman declined to comment.

According to the airport, all the airlines that do business at the facility are expected to generate about $160 million in airport revenue in 2009, including property leases and landing fees.

Intertwined with the talks over new lease agreements is consternation over the status of the airport's $1.6 billion international terminal project, which is in jeopardy of being halted because of the airport's inability to secure $600 million in municipal bond financing.

On Nov. 13, DeCosta told The Associated Press that tight credit markets were to blame for the airport's inability to get the bond financing.

However, according to documents obtained Monday by AP, John Boatright, Delta's vice president of corporate real estate, sent a Sept. 10 letter to prospective underwriters of the airport's bond financing stating that Delta opposed the airport's capital improvement program, which includes the terminal project.

Delta's stance could factor into the underwriters' decision because the airline is the majority tenant of Hartsfield-Jackson.

The airport, which has a good credit rating, believes that because of tight credit markets it would not have been able to go to market for the bonds regardless of Delta's position.

DeCosta said in November that the airport was seeking federal financial assistance through a stimulus package that would benefit municipal governments, and by extension the airport, which is run by the city of Atlanta. But with banks, automakers, states and even cities looking to the government for help amid the worst economic downturn in decades, it could be a tough sell for the airport, he said.

Construction work on the international terminal project at the airport began last summer and is scheduled to be completed by 2012, airport officials have said. More than $300 million has already been spent, according to DeCosta.

The plan for the Maynard H. Jackson International Terminal was part of a broader expansion project at the airport that included a fifth runway. The runway was completed in May 2006.

One of Delta's concerns has been the price of the terminal project and how that might factor into the amount of the airline's future costs for using the airport.

Boatright said in a Jan. 13 letter to DeCosta that the airline must understand its long-term financial future at the airport before it can commit to major capital investments. He cautioned that roughly two-thirds of Atlanta's traffic is able to be connected over other Delta hubs, including Memphis, Tenn.; Cincinnati; and Detroit. Delta picked up Memphis and Detroit as hubs after acquiring Northwest Airlines.

"Our position is that Delta's success in Atlanta, which translates not only to the airport's success but also the city's, is based on a foundation of a collaborative relationship that we have had with the city for more than 30 years," Delta spokeswoman Betsy Talton said.

Tad Hutcheson, a spokesman for AirTran Airways, said the carrier moved flights from Fort Walton Beach, Fla., to Pensacola, Fla., in 2001 after Fort Walton Beach raised rents. He said AirTran is working with the airport, but would consider moving some flights out of Atlanta if suitable new lease agreements can't be reached at Hartsfield-Jackson.

"We look at each flight on a flight-by-flight basis and airport costs are huge components of the cost to operate a flight," Hutcheson said. "And if those costs become uncompetitive, we will take actions up to and including canceling a flight or moving it to another city."