Airline merger could mean changes here

November 3, 2008
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It’s finally official. Delta Air Lines purchased rival Northwest Airlines in a $2.6 billion merger, effectively creating the world’s largest airline. The all-stock transaction closed Wednesday after the merger passed a U.S. Justice Department antitrust review.

There is some debate as to whether the merger will positively or negatively affect Gerald R. Ford International Airport. Airport spokesman Bruce Schedlbauer said both Delta and Northwest have told the aeronautics department not to expect any changes in the near term. He thinks it’s reasonable to assume that the combined entity will have a very similar level of interest in and commitment to this market.

“Longer term, it’s anybody’s guess as to what will happen to markets served, frequency of service and aircraft type,” Schedlbauer said. “There’s no reason to be pessimistic about it. On the other hand, there’s the reality that the new Delta may view this market differently than Northwest. Northwest has considered us to be one of the gems in their system.”

Cliff Maine, an aviation attorney in the Grand Rapids office of Barnes & Thornburg, said gradually it will stop being “business as usual” and will just be Delta. If there are going to be reductions of flights at Ford International, he said, they’re likely to be in the next six to 18 months.

Peter Tolley, an aviation attorney with Foster, Swift, Collins & Smith, said a reduction in the combined airlines’ work force, a reduction in air service, and an increase in fares are all fairly predictable in the wake of the merger. Service reductions at Ford International are possible, he said: There have already been reductions in flights and availability at airports all over the country, including here, he pointed out.

An interesting dynamic in the merger is that Northwest has been the 800-pound gorilla at Ford International because it has always offered the most flights, Maine pointed out.  Now it has become the 900-pound gorilla.

Ford International, with help from the Grand Rapids Area Chamber of Commerce, The Right Place Inc. and area business leaders, has been trying to attract a low-cost carrier, and it has become an increasingly collaborative community effort over time, Schedlbauer said. He doesn’t think the “new” larger Delta will necessarily dissuade low-cost carriers from coming to this market. It will all depend on what the mix of service looks like here once any changes have been made that Delta opts to make in this market, he said.

“The fact that there is going to be a ‘new’ Delta — I can’t really see that as having much of an affect on the decision a low-cost carrier may make to enter the Grand Rapids market,” Schedlbauer remarked.

As Tolley sees it, Northwest kept the low-cost carriers out of this market quite effectively on its own.

“No matter what platitudes the pro-merger folks utter, reduction in competition is generally not going to benefit the consumer,” Tolley said. “What happens is, you get a low-cost carrier in here, and the behemoth airline just knocks its fares down by using its leverage from other markets where it’s bigger. They deliberately reduce fares below their cost to drive out the low-cost carriers.”

If a low-cost carrier came into this market and Delta decided to match its lower fares, it could do it more easily now than in the past, Maine said. Maine hasn’t seen any indications that Delta will have any less of a commitment to this market. It’s possible that a different scenario could evolve.

“The whole idea was to better use the bigger airplanes, so if Delta starts focusing more on the longer flights and the direct international flights, it might decide it doesn’t really want to be the 900-pound gorilla,” Maine said

If that’s the case, a low-cost carrier might want to come in and do some regional carrier work.

“Market conditions will dictate it, but I think it probably makes it slightly more likely that a low-cost carrier will come in,” Maine remarked.

Schedlbauer said the aeronautics department is making sure the Ford International name is in front of the Delta folks so the airline knows the airport stands ready to do whatever it can to ensure the community has the level of service it needs.

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