Airline Merger Will GRFI Lose Flights

April 24, 2008
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GRAND RAPIDS — The $17.7 billion merger of Northwest and Delta airlines will create the world’s largest airline, but it’s not exactly clear what affect the merger might have on Ford International Airport. It could go a couple of different ways, according to one local aviation expert.

“I can see where Ford International might get more of the larger carriers coming in and flying more direct flights. Or I can see the ball bouncing the other way, so maybe we get fewer of the bigger planes and fewer direct flights, and more of the Delta Connection smaller regional jets that fly to other airports to connect with the bigger jets,” said Attorney Cliff Maine, an aviation lawyer and partner in the Grand Rapids office of Barnes & Thornburg.  

The combined carrier will be named Delta and will remain headquartered in Atlanta under the leadership of current Delta CEO Richard Anderson. Nothing will happen for the next six to eight months because that’s how long it’s estimated the merger will take, given all the details, approvals, Congressional hearings and the Justice Department inquiry, Maine explained. The airlines also have to plan how they will coordinate their pilots and equipment.

Maine thinks the combined carrier will likely consider reducing capacity in some areas and increasing it in others, particularly in areas where it can charge higher fares. Grand Rapids, he said, is a growing part of the state, and the consensus is that Ford International will continue to gain passengers, which is the reason why the airport is constructing a 4,800-space parking ramp.  

“On one hand, I can see the new Delta trying to cut back on capacity and increase fares,” Maine remarked. “On the other hand, with the infrastructure improvements going on at the Gerald R. Ford International Airport, they might see an opportunity there to turn that into almost a mini-regional hub and increase the number of flights. It’s possible that under the new Open Skies Act, Delta could look at staging international flights out of Grand Rapids.

“All those things are possible, but it’s tough to say how it will work out.”

Another scenario could play out, as well. Lower cost carriers such as JetBlue and Southwest airlines are always looking to expand, Maine pointed out. Lower cost carriers usually don’t fly internationally: They just focus on certain areas where they think they can be most efficient.

“If the new Delta were to cut back on flights and raise fares, there might be more capacity available at Ford International Airport, and a Southwest or JetBlue might come in to pick up the slack, and they would have the financial wherewithal to go toe-to-toe even with the new Delta,” Maine said.

However, if jet fuel prices keep increasing and the economy keeps softening, it’s not going to matter much what the merged carrier does because it’s going to be back in financial trouble almost immediately, Maine added.

Ted Bolema, assistant professor of finance and law at Central Michigan University, thinks the merger will have relatively little effect on Ford International, particularly because Delta and Northwest direct flights from here don’t overlap. But he said with the direction the airline industry is going, any airport is at risk for losing flights. 

“Some airlines failed just in the last two weeks due to high fuel costs,” Bolema noted. “With people changing their spending habits, we’re going to see more changes and cutbacks by the airlines.”

Bolema is a former trial attorney with the Department of Justice, where he handled airline antitrust matters.

A few years ago all the talk was about how most of the airports in the country didn’t have enough capacity to meet demand, Bolema recalled. From his perspective, the infrastructure work taking place at Ford International bodes well for the airport’s future.

“The airport will be well positioned a few years from now when the market is stronger,” Bolema predicted. “When other airports will be looking to expand, Ford International will have already done that.”

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