NWA and Delta's Chapter 11 Filings Impacting Albany Int'l Airport

Oct. 31--There are fewer seats these days on Northwest and Delta airlines flights out of Albany International Airport in Colonie.

It's the first sign of the impact the two carriers' Chapter 11 filings are having in the Capital Region.

Northwest this month discontinued one of its two daily flights to Minneapolis, while Delta has actually increased flights but is using planes on some flights that are less than half the size of aircraft used previously.

As recently as August, Northwest had three daily flights to Minneapolis.

"The schedule change was due to high fuel costs, industry overcapacity and the growth of low-cost carriers and the fares they offer," said Northwest spokeswoman Tracy Carlson.

The two carriers filed for Chapter 11 reorganization on the afternoon of Sept. 14, following US Airways and United Airlines into bankruptcy court. US Airways has since successfully completed its reorganization and was acquired by America West. United says it plans to emerge from Chapter 11 early next year.

On Thursday, Northwest Airlines Corp. posted a $475 million net loss for the third quarter, compared to a $46 million loss a year earlier.

Northwest and Delta say fuel costs, plus hefty pension and debt obligations, led to the filings. Because of competition from low-fare carriers, they're also unable to raise fares enough to cover those costs.

So they're going where the low-fare carriers don't.

"They're all focusing on the international market, where the yields are a little better," said J. Dwight Hadley, chief financial officer at Albany International Airport. He added that Northwest has been talking about reducing the number of planes it flies.

Delta, meanwhile, has a fleet of Boeing 767s that it can switch to international from domestic routes, said spokeswoman Chris Kelly.

From Albany, Northwest flies to Detroit four times a day and Minneapolis once a day. Delta flies to Atlanta five times a day and to Cincinnati three times daily.

But Cincinnati is shrinking in importance as a Delta hub, much as Pittsburgh did for US Airways.

"Delta's scaling back in a big way at Cincinnati, which used to be one of their major hubs," said Tim Winship, a travel consultant whose Web site, http://www.frequentflier.com, focuses on the ins and outs of airline loyalty programs. "Northwest and Delta are also increasing operations overseas, which is not much consolation for their U.S. customers.

"This is kind of the theme of major airlines' survival right now: to get out of the way of the discount carriers, the Southwests, JetBlues and AirTrans of the world," he added.

So far, travel agents aren't reporting any problems with the cutbacks. Jean Gagnon of Plaza Travel in Latham said customers going to Minneapolis can still get a connecting flight if the one daily nonstop isn't convenient. But she said she has noticed frequent time changes on Delta's schedule.

And the move to smaller jets isn't popular with every customer.

Here, it's low-fare carrier Southwest that has the advantage, with a fleet consisting only of Boeing 737s. Couple that with its daily nonstop service to Orlando and Las Vegas, and it's a combination that's hard to beat, Gagnon said.

"These are huge destinations for our clients," she said.

Both Delta and Northwest actually saw their market share in Albany increase slightly over the past year. Delta carried 15.4 percent of all passengers boarding planes in Albany through September, compared to 15.3 percent for the same nine-month period a year earlier. Northwest saw its market share grow to 9.8 percent from 9.3 percent a year earlier, according to figures from the Albany County Airport Authority.

The result: Planes are getting fuller, said airport spokesman Doug Myers.

It's not clear whether that will also push up fares.

But Northwest said earlier this month that it plans to shrink overall capacity by 7 percent to 8 percent in the fourth quarter from year-earlier levels, and another 11 percent to 13 percent in the first quarter of 2006, versus the first quarter this year.

Much of the impact of the Chapter 11 filings may occur behind the scenes. The Wall Street Journal reported that Northwest will try to outsource many of the ground support jobs now performed by Northwest employees at non-hub airports. US Airways outsourced its ground support jobs last spring at Albany International Airport during its own reorganization.

Northwest has shrunk its payroll at Albany to 20 people, from 23 when it filed for reorganization.

Delta's employees in Albany, meanwhile, already are outsourced, although to a wholly owned subsidiary, Delta Global Services, said Kelly. She said the arrangement saves the airline money on such expenses as health care costs.

Delta had 56 employees at Albany when it filed for reorganization Sept. 14.

The filings may also slow expansion at Albany International Airport, which is drawing up plans for a larger terminal and a fourth concourse.

"With three of the majors in bankruptcy, we have to proceed very cautiously with any of our expansion programs or major initiatives," said John O'Donnell, the airport's chief executive officer. "We'll continue with our smaller initiatives," which include an expanded security checkpoint and more parking. "But we'll have to take a conservative approach on airport growth."

The two airlines also owe a combined $300,000 in bills that date from before the Chapter 11 filing, Hadley said.

"It affects our cash flow a little bit," he said last week. US Airways had about $150,000 in payments due to the airport when it filed, a sum it will start to repay in November, Hadley said. United's debt to the airport is about $60,000.

What the long-term impact on service will be from the latest Chapter 11 filings isn't clear. After US Airways filed, it switched more of its flights to smaller, 50-seat regional jets. US Air also eliminated flights and lost its role as the airport's largest carrier to Southwest Airlines.

United kept approximately the same number of flights.

Through the first nine months, both saw their market share decline from year-earlier levels, US Air to 20.0 percent from 21.7 percent, and United to 12.3 percent from 12.4 percent.

Southwest, meanwhile, saw its share expand to 25.8 percent from 22.9 percent.

"Southwest is doing very well," O'Donnell said. "They've made a soft commitment to additional flights in 2006. We're optimistic."


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