What will Delta do with Memphis?

[highriser]

Tennessee cannot afford to lose Memphis as a major hub. The tax dollars we would lose would be tremendous. Has anyone heard anything about our state government stepping in and trying to prevent this form happening if it goes that far?

[monsoon]

Is this related to the fact that Delta and NWA might merge?

[111wall]

Tennessee cannot afford to lose Memphis as a major hub. The tax dollars we would lose would be tremendous. Has anyone heard anything about our state government stepping in and trying to prevent this form happening if it goes that far?

[highriser]

Is this related to the fact that Delta and NWA might merge?

[sleepy]

I don't think anyone knows with any certainty what will happen at all. Perhaps the CEO's of Delta and NWA, but that's about it.

While it makes sense that Delta would move the Memphis NWA operations to Atlanta, it makes as much sense that Delta would keep some NWA presence in Memphis if for no other reason than the congestion at Atlanta.

In any case, Memphis has been a hub of some sort for 35 years, probably among the longest running hubs in the US, so it's had a good run.

[Rural King]

Tennessee cannot afford to lose Memphis as a major hub. The tax dollars we would lose would be tremendous. Has anyone heard anything about our state government stepping in and trying to prevent this form happening if it goes that far?

[Memphis77]

If this happens it could be the nail in the coffin for Memphis' economy that is already in bad shape as it is. What's scary is that it could kill any major redevelopment plans (except for Graceland) in the Whitehaven/Airprot area along Brooks.

[Clobber]

This is mainly a federal issue. Congressman Steve Cohen (D-Memphis) has called for a joint House Transportation and Judiciary Committee meeting to look at any anti-trust issues in regards a potential merger of Delta and Northwest. The House Chair of Transportation is from Minnesota and the House Chair of Judiciary is from Detroit, so right out of the gate you have Congressmen in key positions to have an interest in looking at saving jobs and economic impact for their districts if there is even a hint of anti-trust.

I don't think the state, county, or city could do much to prevent the de-hubbing Memphis if the a new company owning NW's assets chose to do so.

I agree. Whatever happens Memphis has benefitted from the hub for a long time, and as 111wall stated airlines apparently are moving away from multi-hub operations. I also concur with sleepy that it is a likely that Memphis would retain a lot of service due to the congestion of Atlanta.

[Clobber]

If this happens it could be the nail in the coffin for Memphis' economy that is already in bad shape as it is. What's scary is that it could kill any major redevelopment plans (except for Graceland) in the Whitehaven/Airprot area along Brooks.

[James Owen]

The hyperbolic fear of doom and gloom in your post is premature, irrational, and unfounded. The development of Whitehaven is not driven by the hub. There are other major corporations that have it in their best interests to make sure it succeeds. Furthermore, it's arguable that the shape of the local economy is not the product of some contrived inferiority of our region, but a reflection of the national economy. Simply put, there is no coffin for a nail to be put in. Memphis will rebound. I'm tired of the fact that locals of all people fall for the doom and gloom myth, hook, line, and sinker. If Memphis regresses, it's because the locals don't support it, don't contribute to the solutions. I love this community, and it will continue to thrive and improve. And I will help it. And I will fight the infection of local malcontented self-doubt and doomsaying. Because our community deserves optimism, ideas, and vision more than it deserves artificial glass ceilings and self-imposed limits.

[jmduke]

I'll slightly edit my post #209 made in the Memphis International Airport thread almost exactly a year ago but think it still mostly covers the possibilities:

1) NWA stays a stand-alone carrier. They will eventually phase out the DC9s and replace that flying with a combination of CRJ900s and ERJ175s (76 seats) flown by a combination of Pinnacle, Mesaba, and Compass. This means some regional markets will get larger equipment (SF340 to CRJ200, or CRJ200 to CRJ900/ERJ175) and this regional flying will funnel more passengers into the hubs and larger markets can be upgraded from DC9s to Airbuses. If NWA finds they have sufficient business in the Southeast, they can add one or more banks of flights at MEM. With more aircraft and more frequencies, then NWA might add a MEM-CDG flight or the recently mentioned MEM-NRT flight. MEM is still small potatoes compared with the MSP and DTW hubs, but the potential for growth here is greater.

(One year on, this scenario is looking less likely by the day, but it's possible that Delta's due diligence combined with the tremendous labor strife that will happen with cause Delta to call it off or make an attempt at United)

2) NWA and Delta merge and MEM is downraded to a focus city. With ATL a fortress hub, it would make little sense for the combined airline, which will be in a cost-cutting mode, to retain a large MEM hub. The new airline will want to reduce capacity and sell un-needed assets, the latter being gate space in MEM for a tidy sum of cash. The $64 question then is would the new airline reduce MEM completely to a regular outstation or to a focus city. Considering the large assets NWA has here, they could downsize from 50+ to 10-15 gates (focus city), make good money in the asset sale, and still run a decent schedule out of here to most of the large markets to which the Mid-South needs connectivity. If MEM were to be a focus city, most markets the new airline were to serve from here would be connected by regional jets with larger aircraft going to MSP, DTW, and ATL.

3) NWA and Delta merge and MEM is downgraded completely to a regular outstation. If MEM were downgraded completely to a regular outstation, there would be enough traffic from MEM connecting through those hubs above to justify 757s or maybe even 767s. For example, United runs 757s between DSM-ORD and Delta runs 767s between JAX-ATL because those airlines have significant market share in those outstations. Considering the large market share the new airline would have in MEM, larger aircraft are possible, even likely.

If MEM were totally downgraded, I'd expect the other airlines to consolidate in the B-concourse and there would probably be few, if any, empty gates in B. There would be good incentive for other carriers such as Midwest, JetBlue, Frontier, and Southwest to be in MEM as the combined NWA-Delta, while larger, probably wouldn't be over 50% market share anymore and wouldn't have pricing power to dissuade market entry of those other airlines. While MEM would lose direct flights to smaller markets, we'd still be connected to most of the largest 30-40 markets within the US and there might even be enough local traffic to support an Air Canada Jazz flight to Toronto.

Other cities such as Indianapolis, Jacksonville, Raleigh, and Austin thrive despite not being hubs. A combination of low-cost carriers and regional jet point-to-point flying ensure those cities are well-connected for business. The ideal situation is NWA staying solo and retaining its hub in MEM, but losing it is not the end of the world.

[highriser]

THat's some good info JM Duke. I for one do not believe the doom and gloom, and feel that in the long run Memphis will not lose its status as a world class airport. In the end, this may actually help Memphis expand its horizons and get out from behind that NWA curtain and have more airlines with more services. Competition is a good thing, and more airlines in Memphis would make for better prices, which could bring more people through the Memphis airport. Don't forget, many people in the Memphis area choose to fly out of Little rock and Nashville because of high prices, but with NWA gone, and another possible airline moving in, those people could begin to use Memphis INt'l. THose are just my thoughts. I'm not a expert in this field by any means, but Memphis will be O.K. Who knows, maybe Pinnacle becomes a bigger player now. Maybe they start to get more of their own flights...

[Rural King]

FYI the local and state officials in Minnesota are getting involved heavily. I think it's only responsible for the governor of Tennessee and necessary economic development parties to explore relationships and incentive packages to offer to assist MEM. You know they would spare almost no taxpayer expenses for the state capital. They should do it for Memphis.

[highriser]

This is a great article and proves Memphis will do nothing but benefit from a NWA/Delta merger. If anything, what I take away from this article, Memphis could gain flights from the congested Atlanta Airport....Great article on potential merger

[Rural King]

The article makes a very compelling argument for allaying fears that any potential merger wil be detrimental to Memphis International.

I did take issue with the idea that the proximity of manufacturing in Mississippi is whats key to Memphis's ability to hold its hub status and/or importance within a merged Delta/NW firm.......last time I checked West Tennessee has a very sizable, diverse, and growing industrial base spread throughout Memphis, Jackson, Dyersburg, Union City, Humboldt, Milan, Lexington, and several other cities. Not to mention the industrial growth of Eastern Arkansas, in particular in Jonesboro and Marion. Thats not a knock on Mississippi, as they are making great strides across the state in the industrial recruitment of large manufacturing operations to areas in dire need of such investment, but merely a pointing out of the clear lack of recognition of the industrial weight and success of WTN and EARK in the equation put forth by the Boyd Group (out of Colorado) in the CA article.

[cdarr]

I'm going to go out on a limb here. I think there's a good chance that, if Delta and Northwest merge, Memphis keeps the hub. Most people are looking at this thing strictly from the viewpoint of how airlines have operated for the past 25 years. Carriers would build up hubs and try to dominate markets, then close smaller/underperforming hubs during an economic downturn and make the big hubs even bigger. But two major developments are likely to result in a paradigm shift...oil prices and air traffic congestion.

When oil was at $30 barrel, and as long as the passengers would put up with the occasional delays, the economies of scale realized at megahubs like ATL or ORD were tremendous. Plus, it made sense to locate your hub in a major market where you could capture the majority of that city's local passengers. Under those circumstances, a smallish hub in a midsized city like Memphis would be a prime candidate for elimination in a capacity-reducing merger. Today, $90-$100 oil makes it difficult for an airline to justify any situation that results in longer block times...that is, longer taxi times, more circuitous routing between cities, lengthy holding patterns, or enlongated approach corridors. Megahubs and the airspace around them (particularly on the east coast) are reaching the point of gridlock, thanks in no small part to the emergence of longer-range regional jets and (as someone mentioned earlier) the public's preference for point-to-point travel over hub-and-spoke.

The public might love being able to fly nonstop from everywhere to everywhere, but each one of those little 50-seat RJs requires the same amount of spacing in the air as a 150-seat A320 or 737. The most popular airports simply will never be able to keep up with the demand for slots. Many are landlocked, and even if that's not a problem there's the unimaginable string of bureaucratic red tape to go through to build a new runway. Even if new runways or whole new airports could be built quickly, there's still the limitation of airspace. Whether the public likes it or not, hub airports will remain a reality if for no other reason but to serve as gateways or relievers for saturated major destinations. Airlines, realizing both the cost and service benefits of avoiding congestion, may even direct connecting passengers through such reliever hubs by default in their reservation systems, or entice them with reduced fares, bonus miles and other perks.

Hub-and-spoke may not be the traveling public's perferrence, but (as FedEx has proven with packages) it is the most efficient method. Conventional wisdom says that the logic for a FedEx hub in Memphis (boxes don't care where they change planes) doesn't apply to passengers. Well, most passengers really don't care where they change planes either, so long as (1) total travel time is kept to a minimum, (2) the flights are reliably on-time, (3) the connecting airport is clean and easy to navigate with short walking distances, and (4) good barbeque is for sale (just kidding). MEM is extremely well positioned to meet those requirements...ample runway and airspace capacity during daylight hours, good weather, very low operating costs, centralized location, room for terminal or airfield expansion if necessary.

In the end, somebody at Delta will spend (or already is spending) lots of time crunching the numbers. Numerous scenarios will be presented...some with no MEM hub, others with the same or possibly a larger long-term presence here. Many factors will be included, and yes, one of them will be local (O&D) traffic where Memphis comes up way short. But I think two major variables, fuel costs and congestion, will cause a hub's efficiency as a connecting point to trump its ability to suck big O&D numbers. When that happens, Memphis could - maybe - end up a big winner.