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Merger with Northwest likely to mean bigger international footprint
The Atlanta Journal-Constitution
Published on: 04/15/08
Atlanta joined the global jet set on July 1, 1971, when now-defunct Eastern Airlines introduced flights to Mexico and Jamaica. "International" was also added that day to the airport named for former Mayor William B. Hartsfield.
Hometown Delta Air Lines, before and after Eastern's demise in 1991, succeeded in creating a mutually beneficial marriage of airline and airport that has helped propel Atlanta into the big leagues of global business.
In 1978, for example, only 37 German companies operated in Georgia. A year later, Delta started direct flights to Frankfurt. Soon, 79 German companies had set up shop here.
"I remember the increase was dramatic," said George Berry, who ran the airport between 1978 and 1983. "It certainly reinforced the value of direct flights to our economic development."
Now, Delta's proposed merger with Northwest Airlines could grow Atlanta's global presence considerably more. Northwest's hubs in Amsterdam and Tokyo, for example, would speed Delta's international footprint by many years, airline experts said.
"I cannot see Atlanta not becoming a larger global gateway," said Terry Trippler, a route and airfare expert in Minneapolis. "My gut tells me that within two years Atlanta could probably experience [at least] a 10-20 percent increase in Asian flights."
The power of a beefed-up Delta would extend beyond direct flights to Lagos, Kiev or Manila. Delta's new Shanghai route, for example, carries an estimated $387 million annual economic impact for the southeastern United States, according to the airline.
More than 56,000 people, including Delta employees, work at Hartsfield-Jackson, which kicks an estimated $23.5 billion into the local economy each year. That figure, experts said, is sure to grow with the merger.
Delta and the airport help lure domestic and international companies to Georgia. Today, 335 German "facilities" operate in Georgia, according to the state's Department of Economic Development.
"The main reason we [chose] Newnan was exactly because the location was close to the airport, which had nonstop flights to Munich," said Stefan Grenzebach, president of the Grenzebach Corp., makers of industrial machinery. "Our customers are global, so it's important to be close to many non-stop flights all over the world."
Delta's proposed merger could also play a crucial, yet intangible role in stamping Atlanta on the world's consciousness, as the Olympics did in 1996.
"A Japanese businessman traveling to Latin America talking about stopping through Atlanta helps generate interest in the city," said Jorge Fernandez, vice president of Global Commerce for Atlanta's Chamber of Commerce. "He helps put us on the map."
International flights crucial to growth
Delta, like its hometown, never shied from self-promotion. In August 1979, Delta announced it was "the first airline in the world to board one million passengers in one city in one month," according to its Web site.
Last August, Delta boarded 2.9 million people in Atlanta. Increasingly, they head overseas.
Many think Delta's long-term survival depends on global travelers, mainly full-fare business people. From Atlanta, its main hub, the airline flies directly to 232 destinations, one-third outside of the United States. In all, Delta touches down in 58 countries. CEO Richard Anderson recently said that, by summer, international flights will account for nearly 40 percent of all Delta business.
"The international expansion has been successful," he said in a recent conference call with reporters and analysts. "We've been pleased with the revenue growth and profitability of the new international routes."
Asia, China in particular, is one of the keys to Delta's growth. The airline won the right to fly directly from Atlanta to Shanghai in September. The inaugural flight was March 30.
Ken Stewart took it.
"The fact that you have a nonstop going all the way directly to Shanghai, without having to change in Seoul or Narita [Tokyo] or New York, brings value to Atlanta," said Stewart, economic-development commissioner for Georgia. "Delta's merger will strengthen Atlanta's position as an international hub."
Already, Delta's growing reach appears to be having an impact. Two Chinese companies —- Sany Heavy Industry and General ProTecht —- said the direct flight to Shanghai helped convince them to propose building factories near Atlanta. Northwest runs more than 200 nonstop flights between the United States and Asia each week.
William Bogner, an associate professor at Georgia State University's Robinson College of Business, said Northwest makes a perfect match for Delta, given the latter's already extensive ties to Europe and burgeoning links to the Middle East, Latin America and Africa.
"The primary reason Northwest would be such a great partner is [its] complement of international routes," said Bogner, who studies airline management. "Northwest, essentially, runs a hub-and-spoke system out of Tokyo to the rest of Asia."
For airport, 'larger role today than ever before'
More than 15 million visitors arrived in Atlanta through the airport in 2005, according to an Economic Development Research Group study, and spent almost $8 billion on hotels, restaurants, rental cars and shopping.
"The airport has played the central role in our economic life now for more than 50 years," said former commissioner Berry. "If anything, it's playing a larger role today than ever before."
Nothing, of course, is guaranteed. Despite what the experts predict, the merger may not bring many additional overseas flights to Hartsfield; Northwest operations in Minneapolis and Detroit could grow.
Skyrocketing oil prices or a lengthy recession could harm Delta. The airline could be bought out down the road and its white-collar workers shipped elsewhere.
"Nobody wants to lose the headquarters. That's got a negative economic and image impact," said Sam Hollis, a senior director for Cushman & Wakefield, the international real estate firm. "But you would presume if the headquarters moved, the airport would still be viable [and] remain the busiest airport in the country."
Merger or not, Delta's future lies overseas. So does Atlanta's.
"Many, many times in calling on companies in Europe and Asia we would have to explain the difference between Atlanta and Atlantic City," said Berry. "It got to be sort of a standing joke. Once we got direct flights, we never had to do that again. People knew where Atlanta was."
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