By insisting his airline will remain the number one transatlantic carrier and the leading US carrier in Germany, Delta Air Lines' chairman Ron Allen is trying to put a positive spin on the winding down of the Frankfurt hub.
The decision, which is expected to boost operating profits by $62 million a year, has the support of analysts, but ends Delta's intra-Europe service. Flights from Frankfurt to Athens, Bucharest, Istanbul, Warsaw, Moscow and St Petersburg will be discontinued. At the same time, the carrier will focus its international services on New York/JFK, by stopping services to Frankfurt from Los Angeles, Orlando and Washington.
The projected boost to operating profits should quickly recoup the $60 million one-off provision the carrier is making in its third quarter to 31 March for the restructuring, which includes the loss of up to 800 jobs in Europe; most of them will come at Frankfurt.
Allen denies competition from the United Airlines-Lufthansa alliance had anything to do with the decision to curtail Frankfurt operations. He says the intra-European routes have been doing 'quite well' and the decision is based purely on making better use of assets. The B727s currently used within Europe will be redeployed to more profitable routes in the US, where their utilisation rate can be more than doubled.
To strengthen its JFK presence, Delta will add new nonstop flights to Istanbul, Madrid and Manchester, serve Warsaw via Berlin, make the existing seasonal service to Athens a year-round one, and add a second seasonal daily flight to Rome. US domestic services to JFK will also be increased, with new daily flights from Houston, Philadelphia and Seattle, and a third daily from Los Angeles.
Bucharest and St Petersburg will be served via a codeshare with partner Austrian Airlines as part of the Atlantic Excellence operation (see page 14). Delta already flies nonstop from JFK to Moscow.
From its Atlanta hub, Delta will introduce a daily flight to Stuttgart and add a second daily service to Zürich. Overall, Delta expects the Atlantic's share of its revenues to rise from 15 to 20 per cent.
Wall Street analyst Vivian Lee agrees that the changes should improve profits by addressing the long-standing 'beyond Frankfurt' problem. 'Frankfurt is not one of Delta's key strengths. Importantly, nor is it a key strength of any of its European alliance partners,' says Lee. 'Consistent with the route entrenchment undertaken in its domestic system, Delta is essentially dehubbing Frankfurt.' Further support for the move comes from PaineWebber's Samuel Buttrick, who agrees that Delta is doing 'the right thing.'
At the same time, Delta is moving its Paris operations from Orly to Charles de Gaulle. This will allow the carrier to develop transfer traffic with its new partner, Air France.
On the fleet planning side, Delta is understood to be in the final decision-making stages for its new long-haul fleet order. Unlike American Airlines, which is understood to have talked almost exclusively to Boeing before sealing its tentative 20-year exclusive deal, the Atlanta-based carrier is still keeping its options open on either Boeing or Airbus products.
In an attempt to tip the balance in its favour, the Seattle-based manufacturer is understood to have offered its proposed stretched B767. Boeing would like Delta to be the launch customer for the 245-seater B767-400ERX.
Source: Airline Business