Atlanta Airport Has Many Reasons to Hope for Strong Recovery by Delta

Sep. 15--Hartsfield-Jackson International Airport has plenty riding on Delta Air Lines' ability to fly smoothly through its bankruptcy case and emerge intact.

Delta and its Delta Connection affiliates handle 78 percent of the passengers who use the airport. The airline pumps $51 million a year into Hartsfield-Jackson's coffers, or 19 percent of revenue, mostly in landing fees and gate rental. Its customers generate millions more in parking and concessions revenue.

A steady revenue stream from Delta is an important element in the airport's ability to pay off as much as $4 billion in bonds to pay for the airport's $6.2 billion expansion, which includes a fifth runway opening next year and a new international terminal that has been delayed by design problems.

All of the bonds for the runway and international terminal have been issued, but there may be additional bonds for such things as finishing touches for tenants in the international terminal, airport spokeswoman Charisma Cannon said.

The financial health of an airport's biggest airlines can affect its bond ratings, and a lower rating means the airport may pay higher interest rates.

In July, Standard & Poor's reaffirmed its "A+" and "A" ratings on bonds sold to pay for airport work. The firm based that on "no material service reductions by Delta" and prudent management of the expansion.

But the firm added a caveat: "Despite the airport's favorable operational performance over the last 12 months, Standard & Poor's believes that the airport faces heightened credit risk in the medium and long term, particularly given the difficult and uncertain long-term prospects of Delta."

Near term, airport officials and industry experts doubt Hartsfield-Jackson will feel any pain from Delta's new status.

"Certainly, in bankruptcy, everything is open to change, but it's very likely that most of Delta's savings will come from areas other than the airport," said David Beckerman, director of consulting for BACK Aviation Solutions in Washington.

Delta is current on all payments to Hartsfield-Jackson, according to airport General Manager Ben DeCosta. The airline rents 75 gates out of 176, not including those used by Atlantic Southeast Airlines, which Delta just sold to SkyWest.

Delta could try to renegotiate various property leases during bankruptcy proceedings. But airport officials say Hartsfield-Jackson's landing fees are already low, which would diminish the chances of those fees being cut in bankruptcy proceedings.

DeCosta didn't have an immediate comment Wednesday, but he has said he believes a bankruptcy judge has no power to change the airport leases. A bankrupt airline can either assume its leases or reject them, he said. DeCosta previously worked for the New York and New Jersey Ports Authority, he was on the creditors' committee during the PanAm bankruptcy.

The airport likely will have legal representation in the bankruptcy case, but DeCosta said he isn't worried the city-owned airport will lose money.

Delta may prune unprofitable domestic routes, but experts doubt it will make significant cutbacks at its Atlanta hub. Indeed, Delta's pre-bankruptcy turnaround plan, launched last winter, included adding nearly 100 flights to Atlanta.

The biggest risk for Hartsfield-Jackson is that Delta's turnaround efforts fail, industry conditions worsen and the carrier is forced into major cutbacks or even liquidation.

When that happened to Eastern Airlines in 1991, Hartsfield-Jackson traffic dropped by about one-third and Concourse C was empty for more than a year. But the airport remained in the black and traffic rebounded strongly by the mid-'90s. Delta took over some of Eastern's space and other carriers such as ValuJet -- now AirTran -- took the rest.

Delta's failure would be a bigger blow, but few experts think the space would remain vacant.

On Wednesday, Atlanta Mayor Shirley Franklin said the city was "confident that Delta's bankruptcy filing will not impact the high quality of service that Delta provides at Hartsfield-Jackson."

"We understand the concern that the Delta bankruptcy filing may affect airport operations and the progress of airport improvements," Franklin's statement said. "In particular, we are encouraged by Delta's recent announcement that it intends to expand service at the airport by adding more nonstop flights to regional business destinations, Hawaii and international locations this fall and winter."

Staff writer Ty Tagami contributed to this article.