Troubled Delta Seeks Logan Tenant

Feb. 6, 2006
Delta Air Lines and Logan Int'l Airport officials are wrangling over what to do with Delta's badly underutilized new $500 million terminal.

Feb. 3--As bankrupt Delta Air Lines Inc. and Logan International Airport officials continue to wrangle over what to do with Delta's badly underutilized new $500 million Logan terminal, a top airline official said Delta is eager to bring in some other airlines to pay for the space.

But while fast-growing discount carrier AirTran Airways Inc. is hungry for expansion space, Delta's first choice for tenants at its Terminal A would be Continental Airlines Inc. and Northwest Airlines Corp., Delta chief operating officer James M. Whitehurst said in an interview. Delta, Continental, and Northwest are partners in SkyTeam Alliance, which lets members of each airline's frequent-flyer airport club get access to the other airlines' clubs and book connecting flights on two of the airlines on one ticket.

"We do need to, frankly, get someone else in here to amortize the costs," Whitehurst said. "It's too expensive. Obviously a preference would be to have SkyTeam Alliance partners in here. It just makes the most sense," Whitehurst said.

Instead of having to operate their own passenger clubs, Continental and Northwest could use Delta's Terminal A Crown Room. Passengers flying on "code-share" flights jointly offered by Continental, Delta, and Northwest from Boston would have the simplicity of knowing those flights always left from Terminal A, Whitehurst said.

Neither Continental nor Northwest is interested, however. Northwest spokeswoman Tracy Carlson said the airline considered moving over from Terminal E but "decided that it wasn't economically or operationally feasible." Dave Messing, a spokesman for Continental, which operates in Terminal C, said: "Moving to Terminal A isn't viable for us because of the increased costs we would incur. The rent would be substantially higher, and the relocation costs are not insignificant. Given the difficult conditions we face in this industry, we are averse to making moves like this because they put profitability further from our reach."

After 10Æ months operating in the new terminal, which was designed before the Sept. 11, 2001, terrorist attacks sharply depressed travel demand, Whitehurst said it's roughly twice as big as what Delta now needs. Terminal A has 22 gates, including 18 for big jets and four that can serve passengers walking out to as many as seven "regional jets" parked on the tarmac. "We need 12 gates, or something in that neighborhood," to accommodate the currently daily average of 92 flights from Boston, Whitehurst said.

The Massachusetts Port Authority, which runs Logan, issued $497 million worth of bonds to fund the terminal construction, but legally Delta has the sole obligation to pay them back. Last month, Delta agreed to pay interest due since it sought bankruptcy protection in September, but defaulted on $3.7 million owed prior to the Chapter 11 filing.

Another wrinkle is that bond terms prevent Massport -- which normally can seize unused gates -- from taking back any Delta Terminal A gates before March 2010. But Whitehurst said, "We have to think about what's best for the airport, and what's best for Delta. It's not just about short-term leverage in a negotiation environment. The relationship between an airport and an airline is more like a roommate relationship, and we are going to be a very long-term roommate," Whitehurst said. "We're working with Massport to bring in other tenants."

AirTran uses the three Terminal D gates, recently added a fourth in Terminal C, and wants more space this year. The only other airline growing fast enough to need more Logan gate space is JetBlue Airways Corp. But JetBlue and Massport already have a deal reserving 11 gates in Terminal C, formerly used by Delta, for JetBlue to expand into by November 2008.