Airline Mergers Leave Airports Off the Radar
By Mike Ramsey, The Wall Street Journal | Sep. 28, 2011
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Consolidation among airlines, and a subsequent reduction in flights nationally, has put the squeeze on some of America's metro areas while giving strength to markets that have kept their hold on airline hubs.
Cities such as Cleveland, Pittsburgh and St. Louis are dealing with a deep retrenchment in flights, as airlines have cut costs in the wake of consolidation. Since 2005, the number of flights from Cleveland's Hopkins International airport are off 23%; Pittsburgh's are down 49% and St. Louis's are 36% lower.
Pittsburgh continues to pay a US$62 million annual debt service on its airport, where large sections are blocked off and unused, although the arrival of Southwest Airlines Co. -- now pulling back a bit -- has helped fill the void left by US Airways Group Inc.'s reductions there.
The latest city to feel the effects is Cincinnati, where a deep cut in flights offered by Delta Air Lines Inc., following its merger with Northwest Airlines Corp., has one of its notable businesses, Chiquita Brands International Inc., consider relocating its headquarters.
"The airport has consistently been a problem" for Chiquita, said company spokesman Ed Loyd. "We are a mobile organization, so when something significant changes in our ability to reach our customers or get to our operations quickly or cost-effectively, it's a problem."
Just a few years ago, Cincinnati had 600 flights a day, including nonstops to Rome, London, Frankfurt and Paris, as well as to Cancun and other Latin American destinations. That global access made it an ideal location for Procter & Gamble Co., grocer Kroger Inc. and retailer Macy's Inc., as well as the manufacturing operations of Toyota Motor Corp. and some of its suppliers.
Now Cincinnati is down to 190 daily flights, including just one trans-Atlantic flight, to Paris. Delta scaled back after gaining a new hub in Detroit following the Northwest merger.
Chiquita, whose small headquarters (330 employees) oversees a network of plantations in Latin America and Asia, is expected to decide in the coming months whether to leave Cincinnati for a better-connected location. Among the suitors is Charlotte, N.C., home of a major hub for US Airways.
Other businesses with headquarters or operations in Cincinnati also find themselves hemmed in by the shortage of flights and the resulting increase in prices. Average airfares out of Cincinnati/Northern Kentucky International Airport -- which is in Kentucky, about 14 miles from downtown Cincinnati -- are the fourth-highest in the country.
Flights are so expensive and inconvenient that engineers and executives at Toyota's Erlanger, Ky., manufacturing headquarters now almost always make the frequent, 520-mile round trip to visit their engineering base in Ann Arbor, Mich., by car, said Mike Goss, a Toyota spokesman.
In St. Louis, the decline has been steady since last decade. American Airlines bought Trans World Airlines and began to reduce flights there and now Lambert-St. Louis International Airport has fewer than half as many daily flights as a decade ago and has large unused sections.
The Missouri legislature is trying to attract more cargo traffic to the airport. A bill that includes US$60 million in tax credits for freight forwarders has passed the Missouri Senate and is awaiting action in the House.
Midsized and small airports in the U.S. have been losing flights as airlines concentrate on more lucrative flights with large planes. Meanwhile, air travel is booming in international outposts such as New Delhi, which has a new airport and Dubai, which has expanded.
"The airport and our community are fighting for air service that a lot of communities are fighting for," said Barb Schempf, director of public and government affairs for the Cincinnati airport. "We have to work to show these airlines that there is a strong demand for those services."
"There's no question, most definitely for the work that I am doing, it has impacted us," said David DiVito, an information-technology consultant who traveled frequently before Delta's hub moved. Without the direct flight to Springfield, Mo., his travel time to a client there has doubled, and there's no longer a flight to London, where his company is based. "We've essentially lost our regional hub," he said. To save on airfare, Mr. DiVito and others now drive to airports in Dayton, Ohio; Louisville, Ky.; or Indianapolis.
Delta, of Atlanta, said it remained committed to Cincinnati. "We're serving most of Cincinnati customers' top 40 destinations nonstop and have responded to customers' requests to adjust our schedule to offer earlier departures to key East Coast business destinations," said spokeswoman Kristin Baur.
Cincinnati's USA Regional Chamber of Commerce, along with other business groups,has created a task force and plans to hire a consultant to research underserved routes, to lobby airlines to add them. "I wouldn't say the current situation has had a definitive and marked impact," said Ellen van der Horst, the president of the USA Regional Chamber.Without more flights, economic-development efforts could suffer, said George Vredeveld, an economist at the Economics Center at the University of Cincinnati, which is preparing a revised study of the airport's importance to the region.
"The effect it has on location decisions is not insignificant," Mr. Vredeveld said. "I keep hearing the same thing over and over, that it seems most important in respect to international flights."Sensing an opportunity, economic-development officials in Charlotte are courting Chiquita with as much as US$4 million in incentives. Charlotte offers four times as many flights as Cincinnati and has more than 30 international flights a day, serving as a gateway to Western Europe and the Caribbean.
Meanwhile, Cincinnati is luring low-cost airlines to help fill space in its terminals. It is renovating one concourse in its busiest terminal. The other two terminals will remain closed.
The shutdown has opened up new opportunities at Lunken Field, a smaller airport close to downtown. There, Ultimate Air Shuttle, a charter operator, has launched daily shuttles to business centers with 30-passenger Dornier 328s with all-first-class cabins.
Ultimate Air charges a flat rate, with no cancellation fees, and offers free parking and luggage check-in, without TSA screening. Round-trip fares are US$495 to Chicago and US$695 to New York and Washington. Nearly all the flights run full, said Rick Pawlak, managing director of the airline.
"We've changed the way aviation does business in Cincinnati," Mr. Pawlak said. Right now, he said, Chiquita executives are some of his best customers.