Delta Air Lines says it will robustly serve Bemidji area
Delta Air Lines, now the world's largest air carrier with service to 66 countries on six continents, says it will continue to robustly serve Bemidji.
"Your success here drives our success in feeding the hub, so we very much view this as a partnership," Tammy Lee Stanoch, Delta vice president for corporate affairs, told the Pioneer's Editorial Board on Thursday.
Northwest Airlines and Delta formally merged at the end of October, and since then has rebranded all its domestic stations, including all those in rural Minnesota, she said. The airline hopes to secure its single operating certificate by year's end, then casting all operations under Delta and headquartered in Atlanta, Ga.
"We view our partnership with these greater Minnesota communities as hand-in-glove," Stanoch said.
Airport managers in the 8th Congressional District, however, questioned that partnership when they met in late January in Bemidji with U.S. Rep. Jim Oberstar, DFL-8th District, who is chairman of the House Transportation and Infrastructure Committee which oversees commercial airline regulation.
The airport managers had questions about Delta maintaining flights to rural Minnesota, status of regional carriers, pricing issues and being able to get queries answered timely from the new conglomeration.
"The article inspired us to get out on a greater Minnesota tour," Stanoch said of the Pioneer article of the managers' meeting with Oberstar. Delta officials this week are meeting with editorial boards in Duluth, Bemidji, Grand Forks and Fargo.
"We're beginning to help customers get used to the single brand standard," Stanoch said, adding that the separate policies under Northwest and Delta for the first and second checked bag, ticket changes, etc., have all been "harmonized."
Ticket kiosks in terminals now also recognize both Northwest and Delta ticket codes and record locator number, she said. Eleven Northwest aircraft have been repainted with the Delta logo, she added.
Consumers can now use their American Express credit card as an affinity card, meaning it will allow Sky Miles frequent flyer miles, Stanoch said. "That's a huge part of the synergies as we're expecting $2 billion annually in synergies in combining the two carriers. To win the business, American Express also put up $2 billion in cash commitment, because they know this will be the world's largest frequent flyer program and the world's biggest affinity program."
The new Delta announced Wednesday that it plans by the third quarter to merge the three regional carriers under Northwest and Delta -- Mesaba (Northwest Airlink), Comair and Compass -- into one subsidiary called Regional Handling Services.
That's a good move for Bemidji and other rural Minnesota airports, says Stanoch, as the new subsidiary will be headquartered in Minnesota.
"Those synergies are very important to the value of the merger, but also it ensures a much greater likelihood that service to greater Minnesota and the Upper Midwest is maintained," Stanoch said. "The regional oversight was in Atlanta ... Delta agreed, as part of the merger, to consolidate all of those functions at MSP (Minneapolis-St. Paul International Airport)."
"That's great for airport directors in Minnesota, and nobody does it better than Bemidji, about making sure that the people who are making the schedules and making decisions know what's going on in the community, know what's going on at their airport," said Jeff Davidman, an attorney with Best & Flanagan LLP of Minneapolis and a Delta consultant.
"Having them in such close proximity and to understand the community, because they're just a few hours away, allows the two to meet on a more frequent basis and is a real advantage for airports in greater Minnesota," he said.
The regional carriers have more than 700 planes, Stanoch said, discounting a concern of Minnesota airport managers that an expansion of Essential Air Service locations will extend the retirement of regional jets and keep less desirable planes on Minnesota routes.
"I would call that concern unfounded and unwarranted because the aircraft type that we put around is based on demand," Stanoch said. "Granted, most people would prefer a regional jet over the Saab, but because we have the Saab and it has the right number seats on it, we can have three flights a day out of Bemidji, where if we were flying a 50-seater aircraft, we might only have two flights a day."
If there was the demand at Bemidji, Delta would place a 50-seat regional jet, she said.
"And it's not for the lack of availability of aircraft, because Delta works with numerous connection partners," Stanoch said. "Delta has a glut of regional airplanes right now -- they have too many regional airplanes in the fleet for the demand they have."
Davidman also said EAS applications specify service with certain aircraft, and all have been with the 34-seat turbo-prop Saab, not regional jets.
Stanoch said the new Delta is also conscious of pricing, and seeks to be competitive. At the Bemidji meeting of airport managers, it was noted that a flyer on the Iron Range could drive to Duluth and fly out than to connect from Hibbing-Chisholm Airport.
"We constantly monitor fares, and occasionally they get slightly out of whack," Stanoch said. "We looked at that (Hibbing-Chisholm). Air fares one-way were $15 and $30 higher out of Hibbing, so he was right on that. As soon as we see a problem , we immediately fix it and make sure that all the airports are competitive at the same fare structure."
Stanoch said Delta will make corrections "because we know that these airports have to be able to stand on their own, and we don't want to sacrifice one greater Minnesota airport for the benefit of another, because Delta needs this feed and we need these communities to be strong and continue to have air service that people will support."
And that support will even become more important as Southwest Airlines enters the market at MSP.
Oberstar tasked the airport managers to study the possibility of delinking the major airlines from regional carriers, as the major carriers can force regional carrier competitors out of a smaller airport by lowering fares.
But Stanoch said the direct connection offered by having regional carriers owned by the major airline is key. And few carriers not connected to a major carrier can survive in this economy.
"We have to keep fares attractive enough and the right capacity in the market so people will fly from Bemidji or from Hibbing, and not drive down to Minneapolis to get on a competing carrier," Stanoch said. "We want to get them on Delta in Bemidji and have then travel all the way through to wherever they're going."
If there was the demand, other carriers would do it, she said. "But for the strength of the hub system, you just can't make the numbers work."
Keeping one carrier also allows participation in the affinity program, seamless transition in terms of infrastructure such as luggage going into the system for the entire route, lower any risks in that process, said Mary Loeffelholz, Northwest regional director for airport affairs.
"For the customer who wants to fly out of Brainerd or Bemidji and travel the world, and get there on time, and safely with luggage, it's really seamless through a network carrier, and that's one of the big advantages that we can provide to the greater Minnesota communities," Loeffelholz said.
"I understand their argument," says Stanoch. "But we'll always compete very aggressively with any carrier, large or small, because this is a very competitive, thin-margin business. We know we've got to get the customer here and carry them all the way through the network."
Supply and demand control rates, she said. If there is only one seat on a flight as a customer walks up for a last-minute ticket, the rate will be at a premium, she said.
The three Delta officials came to Bemidji on a flight half-full, she said. "Those walk-up fares would be much, much less. It's seasonal demand, too. Summer here is much more peak demand."
Meanwhile, Stanoch said the average fare for Bemidji to Minneapolis in January 2008 was $223, and it stood at $229 for January this year with one less daily flight.
While Bemidji airport officials seek more flights for business passengers, Delta maintains that its scheduling matches demand.
"Even though we've taken about 10 percent capacity out of the schedule for the summer because of the economy and the recession, service to greater Minnesota has been maintained at previous levels," she said. Delta plans three daily departures out of Bemidji this summer, the same as 2008.
"That's a fairly substantial commitment for Delta to make, as we look at the economic gloom that's ahead," Stanoch said, adding that Duluth will increase one flight to eight daily departures.
The average load factor for Bemidji in January last year was 62 percent, she said, and was 67 percent this year. "Bemidji has done a pretty good job of maintaining passengers, even in a month like January which is a pretty weak month."
Adding a third winter flight would have load factors drop below 50 percent, Stanoch said. "We continue to look at the market and at demand cycles, and right now with the economy it's soft everywhere."
Delta would "always look at adding another flight if the market could bear it, but with these kinds of load factors, these are not profitable routes at these fares."