Sunday, July 11, 2004

Airport's challenges continue to mount

Analysis: Delta's problems, DHL's withdrawal make things tough

By James Pilcher
Enquirer staff writer

HEBRON - Bob Holscher is used to getting blamed for everything that may go wrong or just anger people at the Cincinnati/Northern Kentucky International Airport.

But even Holscher, an eternal optimist who is the airport's director of aviation, acknowledges that this summer is making it much tougher on him.

What was already a difficult period for aviation in general has been made even tougher for the local airport. Some of its problems:

• The looming prospect that its main tenant, Delta Air Lines, could declare bankruptcy, which could put the status of its second-largest hub in Cincinnati in limbo.

• The announcement that another major tenant, DHL, is leaving next year and all but deserting a new $220 million facility on the airport property.

• The decision by the airport's only major foreign carrier, Air France, last week to suspend its daily flight to Paris in September.

These problems come on top of the regular litany of complaints over things from high air fares to aircraft noise to long security lines to the lack of a low-cost carrier.

"Every airport in the country has been dealing with these sorts of problems since 9-11, and we have been fortunate to have been one of the least impacted, at least until now," says Holscher, 63, who started as a fireman at CVG in 1961 and has been director of aviation since 1975. "But I remain optimistic that this airport will survive and thrive again."

To do that, however, Holscher says the airport may have to adjust as the major airlines such as Delta "find another way of doing business."

The airlines' problems, especially at hub-and-spoke carriers such as Delta, aren't just another low in the historical peaks and valleys that have marked the industry throughout the years, Holscher believes.

He thinks that airlines may have to do everything from streamlining their pricing policies to redoing their cost structures.

"But the frightening thing in aviation is that we need a nationalaviation system," Holscher says.

"The hub-and-spoke system opened up access to smaller markets, and without that, those cities lose their access.

"And another frightening thing is that you don't see those low-cost carriers in those smaller markets."

Seeking a new airline

Yet he says the possibility of Atlanta-based Delta seeking Chapter 11 protection hasn't added any urgency to the airport's efforts to lure new airlines to the Cincinnati market.

"We already try as hard as we can, as difficult that is for people to believe," Holscher says. "And I still believe we'll have a low-cost carrier in here some day.

"It's just that in this environment, a new entry into a market is going in there to make money immediately; and that is very difficult on any route, much less one where there is direct competition from a carrier like Delta."

Michael Boyd, a Colorado-based aviation consultant who works with airports around the country, agrees that Holscher is doing everything he can.

"When Bob Holscher wants to get a meeting with an airline, he usually gets it," Boyd says. "What happens from there is out of his hands. Low-cost carriers such as Southwest take one look at the Cincinnati market and say, 'No way.' Yet he and other airport managers in his position get blamed for it."

When it comes to Delta possibly declaring bankruptcy, Holscher is concerned, but not overly so, over any potential effect on the airport, which is home to more than 8,000 Delta and Comair employees. The airport is home to more than 14,000 aviation-related employees total.

Fees and fares that the airport charges the airline could be renegotiated, he acknowledges, but he points out that the airport has some of the lowest operational charges to airlines in the country. He adds that Delta committed to the hub recently with the addition of more international flights, and that Cincinnati is perfectly located for a hub.

"I really don't think that the hub here will be greatly impacted," he says. "We might see some flights cut, but not too many. And (Erlanger-based regional subsidiary) Comair will still be here."

DHL loss a blow

Perhaps the biggest blow so far this early in the summer was the news that DHL was consolidating its domestic hub in Wilmington, Ohio, about 50 miles northeast of Cincinnati.

Holscher says that while he wishes the Brussels-based air cargo company had stayed in Cincinnati, he understood that DHL had to "make a business decision."

"Look, it was costing them an additional $160 million a year to run the hub here and there, and they would have had to have tripled the capacity here to make it work," he says.

The decision will leave the new hub building on the southeastern part of the airfield all but vacant, with 300 full-time operations employees staying put but another 800 DHL jobs and 600 other airline jobs either being cut or moved north.

The airport will lose about $2.2 million annually in landing fees (or 2.6 percent of its total operating budget). But DHL has pledged to continue paying its nearly $800,000 annual lease payment on the land and on its $230 million bond taken out to pay for the sort building.

Changing aviation

Holscher won't comment on what the airport will do about the loss, refusing to answer questions about courting another air cargo company to take DHL's place.

"I need to take it to my board and let them be involved in what would be a policy decision," he says, referring to the politically appointed Kenton County Airport Board that oversees airport operations and staff.

But as more bad news hits aviation in general and the airport locally, Holscher says he is actually enthused about "watching the change in aviation happen before our eyes."

"I still am excited to get out of bed in the morning and get to work," he says. "A friend of mine ... once told me that I would know when it was time to go, and I certainly haven't felt that yet."


Queen City Rewind
Airport's challenges continue to mount
Look Who's Talking: George Fraundorfer
Lights, Camera, Company
Tristate Business Notes
Women execs can prosper by teeing up
Golf can be both business, pleasure
Bear market ate up fund managers, too
Building a better car - one atom at a time
Business agenda
Warning: iPods pose business security risk