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Friday, August 10, 2001

Delta seeks more flights to Europe


Air team would need antitrust exemption

By James Pilcher
The Cincinnati Enquirer

        If Delta Air Lines succeeds in an effort to expand its transatlantic business, local residents likely can expect more flights to cities such as Paris, Rome, Milan and Prague.

        This month, Delta is expected to petition the U.S. Department of Transportation for antitrust immunity for itself and its European SkyTeam flying partners Air France, Alitalia and CSA Czech Airlines.

        That would allow all four airlines to view each other's fare schedules and other information instead of just using marketing and reservations programs as is now the case. They would act more like one airline, leading to more flight options for passengers.

        In addition, Delta and Air France are jointly asking regulators from both countries to reach an “open skies” agreement, with both sides due to meet on the issue next month.

        Such agreements allow airlines from each country to add as many flights as they wish to whatever cities they wish, as long as those airports do not limit the number of flights.

Profitable flights
        If such efforts are successful, industry experts and airline officials say Cincinnati/Northern Kentucky International Airport would be a natural choice for further links to Europe.

        “The power of adding Air France and Alitalia's hubs to the already powerful Cincinnati hub could take a previously uneconomical flight and make it profitable,” said Glenn Engel, airline analyst for the Wall Street firm Goldman Sachs. “In fact, if everything goes through, it would only make sense to expand out of that airport.”

        The United States already has open skies agreements with Italy and the Czech Republic. The European Union is expected to rule by January that it has authority over such agreements and not member states. Existing agreements would probably be kept intact, however.

        Delta, the nation's third-largest carrier, operates its second-largest hub in Cincinnati, which is not too far inland to make international flights uneconomical. Helping is the fact that the airport draws from several other population centers such as Indianapolis, Dayton and Lexington.

        And the local airport has routinely ranked as one of the most efficient in the nation. It would probably compete with New York-JFK, where Delta is revamping its international concourse, and Delta's main hub at its headquarters in Atlanta — but both are experiencing capacity problems.

        “There definitely is a good potential between Delta and its SkyTeam partners that Cincinnati could see new services and products between those hub cities in the other countries,” said Scott Yohe, Delta's vice president for government affairs. “With this, the past is prologue. Look what happened in Cincinnati the last time we had an agreement like this. There was more service than ever.”

        As recently as two years ago, Delta had such antitrust immunity agreements with Swissair and Belgian airline Sabena, and the local airport had direct flights to Zurich and Brussels, while Delta served three other European cities. Those agreements were phased out as Delta initiated its code-share agreement with Air France in June 1999.

        Mr. Yohe also pointed out that nonstop traffic between countries that had airlines with antitrust immunity agreements grew 9 percent in the last three years, compared with 6 percent for other countries.

What does it cost?
        Some local travelers and travel agents said new service would be welcome, but worried about how much it would cost. Local passengers already pay some of the highest fares in the nation because of Delta's dominance of the hub. Many worry about the impact if the airline were able to cooperate with Air France or other international carriers to set prices.

        “It would be great in terms of convenience; but call me skeptical, I can't imagine how, if the airlines can act as one, the lack of competition would benefit a client price-wise,” said Vicki Mary, owner of Victoria Travel in Hyde Park.

        Officials from both Air France and Delta say that prices would remain competitive, because SkyTeam would be competing against other alliances that feature such carriers as British Airways, United and American.

        They did say that ordinarily, the local traffic between the two cities would not be enough to start new service, but the increased traffic created by the hubs in both countries would make it worthwhile.

        Air France spokesman Jim Faulkner acknowledged that there might be a small premium for flying direct.

        “But it's not like we'd be the only game in town when it came to getting across the ocean, even from Cincinnati,” Mr. Faulkner said. “There are a lot of choices out there, and we'd have to be competitive.”

        Delta now flies direct flights from Cincinnati to London-Gatwick, Frankfurt and Paris, while Air France has suspended its daily flight to Paris until at least April.

The Detroit example
        Mr. Faulkner pointed to Detroit as an example of what could happen under such an antitrust agreement. He said that because of the arrangement between Northwest Airlines and the Dutch airline KLM, there are five flights daily between Detroit and Amsterdam even though there is nowhere near the local traffic needed to sustain the route.

        “With this, cities that could never support international service now would have it,” Mr. Faulkner said. “You put the large French or Italian market together with two strong hubs, and there would be a lot of flow traffic. And Cincinnati has a large area to draw upon to help support the route even more.”

        Such expanded service would be welcomed by Matt Schwan of Northside, who travels abroad at least 10 times a year as global business director for the Dutch industrial chemical company Cognis.

        “I'm not even talking about adding 15 cities, just three or four more,” Mr. Schwan said. “But how much it would cost me? That would be the question.”

       



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