Stakes high for Delta, Atlanta

Delta Air Lines appears to be holding most of the cards in its escalating battle with Hartsfield-Jackson International Airport over a complex new business agreement, as the airline not-so-subtly raises the spectre of taking some of its business elsewhere.

“I think Delta is in the driver’s seat,” Minneapolis-based airline analyst Terry Trippler said Sunday. “You just don’t thumb your nose at being a headquarters and main hub for the world’s largest airline.”

The 70-year marriage of Atlanta-based Delta and Hartsfield-Jackson has run into serious headwinds. Billions of dollars and the future of the airport hang in the balance.

Delta, which is renegotiating its 30-year-old leases with the airport, has strongly hinted that it might move some of its flights to another city —- Memphis, for example —- if Hartsfield-Jackson does not come up with a way to let it keep operating at “competitive” costs.

The loss of Delta’s business would be a major blow to metro Atlanta. The airline is Hartsfield-Jackson’s biggest customer, accounting for more than 70 percent of its flights.

The city-run airport, meanwhile, has an estimated $23 billion annual impact on the region’s economy. More than 56,000 people work at Hartsfield-Jackson, and more than 89 million passengers pass through its gates every year.

The feud has pitted the world’s busiest airport against the world’s biggest airline in a battle that involves everything from landing and gate fees to the future of the Maynard Holbrook Jackson Jr. International Terminal now under construction.

The showdown indicates that Delta, which merged with Minnesota-based Northwest Airlines last year, apparently is willing to play hardball with its hub airports to gain financial advantage in the severe economic downturn that is expected to trim airline business around the globe.

“Delta has to play hardball in this environment,” Trippler said. “They have to say, ‘Look, we have other places to go.’ “

The Delta-Northwest merger created a mega-airline with major hubs across the United States, Asia and Europe, and it gave Delta unique options, Trippler said. The airline obtained additional domestic hubs in Minneapolis, Cincinnati and Detroit —- and in Memphis, a geographical stone’s throw from Atlanta.

“Memphis would be a great overflow for Atlanta,” Trippler said. “They could easily move some of their business to Memphis.”

In a two-page letter dated Jan. 13 from John Boatright, Delta’s vice president for corporate real estate, to Hartsfield-Jackson General Manager Ben DeCosta, Boartight broached that very possibility.

“With approximately two-thirds of Atlanta’s traffic able to be connected over other hubs (i.e. Memphis, Cincinnati or Detroit) —- and the difficult economic environment facing our industry —- it is more important than ever that Hartsfield-Jackson’s unit costs remain competitive with those of other hub airports competing for the same connecting traffic,” Boatright wrote.

Delta officials estimate that its enplanement costs per passenger at Hartsfield-Jackson could jump from $5 currently to $10, based on the airport’s multibillion-dollar capital improvement plan, which includes the new international terminal.

About 65 percent of passengers at Hartsfield-Jackson are transfer passengers; the other 35 percent begin or end their flights in Atlanta.

“Over time, if the cost per passenger doubles at Hartsfield-Jackson, it’s Delta’s responsibility to consider the advantage of routing some of the two-thirds of passengers connecting here to hubs where the costs are lower,” Delta spokesman Kent Landers said Sunday.

Mayor Shirley Franklin, in Washington this weekend, disputed Delta’s cost projections.

“That’s not the case,” Franklin said in an interview Sunday. “That’s what they’ve [Delta] said in a letter. But there is no proposal before the city, before me or before the City Council to double or triple their fees.”

The mayor said she has had several conversations with Delta CEO Richard Anderson and is confident the current impasse can be resolved.

“Delta grew up in Atlanta, and Atlanta grew up with Delta,” Franklin said. “I have every reason to believe we will negotiate successfully into this year, and we’ll move forward in partnership as we have before.”

To reduce airport fees, Delta has asked that the cost of the new international terminal, scheduled to open in three years, be trimmed substantially. As of November, the construction cost was estimated at $1.6 billion, more than twice the original estimate.

Delta wants $400 million cut from the project; the airport has agreed to cut $300 million.

So far, the two sides have not been able to reach an agreement, and DeCosta has warned that work on the project could be halted in a few weeks without an accord. Earlier, DeCosta said frozen credit markets could halt work on the project.

—- Staff reporter Bob Keefe in Washington contributed to this story.

TERMINAL TIMELINE

> Key dates and events in the history of the planned Maynard Holbrook Jackson Jr. International Terminal at Atlanta’s Hartsfield-Jackson International Airport:

> Fall 2000: Officials announce plans to build a new international terminal on the east side of the airport, doubling the size of the existing concourse.

> Fall 2002: Omaha, Neb.-based architecture firm Leo A. Daly gets a $38 million contract to design the terminal. In two years, the project size swells from 930,000 to 1.2 million square feet, and the number of gates expands from 10 to 14.

> Summer 2005: After paying $34 million for its work, airport officials fire the Daly team. Daly files a $60 million lawsuit against the city. The suit remains unresolved.

> January 2009: Terminal is now expected to cost $1.6 billion, about double the original estimate. Delta Air Lines wants the airport to cut $400 million from the project; the airport agrees to trim $300 million.

—- Kathy Jefcoats, kjefcoats@ajc.com