Editor’s Note: Last week as this issue of the Mississippi Business Journal went to press, US Airways announced that it was withdrawing its bid for Delta, citing a lack of support.
JACKSON — Delta Air Lines probably never knew how many friends it had in Mississippi until it faced a takeover bid from US Airways. Mississippi’s business leaders and governmental officials came out in strong unity in favor of Delta Air Lines.
A “Keep Delta My Delta!” campaign event was held in Jackson in late January, similar to rallies in about a dozen other major cities in the U.S.
Delta, which is currently in bankruptcy proceedings, has said that a US Airways takeover would mean substantially reduced competition, reduced customer choice and higher fares due to a high percentage of overlapping routes. Delta also fears job cuts because of the duplicate hubs in many cities.
On the same day the event was held in Jackson, US Airways ran full-page advertisements in some of the state’s largest daily newspaper denying negative impacts from its proposed $15.1-billion purchase of Delta.
“Our merger with Delta is going to provide the service of a big airline with the fares of a low-cost carrier — and our new, wider network will give people more choices when they fly,” said W. Douglas Parker, chairman and CEO of US Airways. “The merger won’t cause fares to increase, either. Since the American West merger, we’ve initiated fare reductions in more than 1,100 markets by as much as 83%.”
Parker denied that any workers would be laid off, and said the merger would promote competition in the marketplace.
Central District Transportation Commissioner Dick Hall said the US Airways advertisements did nothing to ease his mind.
“I’m very worried,” Hall said. “If you look at the overlay for their routes, there is obvious duplication. Someone is going to lose some service in this. In fact, a US Airways spokesman said a combined company would immediately reduce service by 10%. Ten percent nationally could be 30% in Mississippi. I’m not just concerned about Jackson, but Tupelo, the Gulf Coast, the Golden Triangle and Meridian where Delta now provides service. The smaller airports may be even more impacted than Jackson.”
Hall said as Mississippi is strongly focused on building an intermodal transportation system vital to the economic strength of the state. Dependable, efficient, competitively priced air service is a major component. He said Delta has provided that.
“We worked so hard in Jackson to get a non-stop flight to Washington, D.C.,” Hall said. “As I understand, the Washington slot could be given to someone. I can’t see us winning that in Mississippi. US Airways calls it a merger and Delta calls it a hostile takeover. Whether you call it a merger or hostile takeover, I have never seen one of these where you come out of it with better service. It is not just a convenience thing being able to fly where you want to at a competitive price. If we are going to have a competitive economy, it is a concern. Delta has been here since 1929. A bird in hand is worth two in the bush. Delta is dependable. We know what they can and can’t do.”
Hall was a participant in the “Keep Delta My Delta!” campaign event in Jackson recently along with State Sen. Richard White, State Sen. John Hohrn, State Rep. George Flaggs, Hinds County Supervisor Charles Barbour, Rankin County Supervisor Larry Swales, MetroChamber president Duane O’Neill, Mississippi Economic Council president Blake Wilson and Rankin First executive director Tom Troxler.
“Delta Air Lines has always been a solid corporate citizen in the state of Mississippi,” Charles Barbour said. “If this hostile takeover goes through, it could mean the loss of both jobs and revenue for the state. I believe that competition in the marketplace is a good thing, and a successful merger between these two airlines will reduce competition and raise rates on consumers in Mississippi. And that’s a bad thing for the state.”
O’Neill said whenever a merger takes place, especially one that looks like hostile takeover, you are going to lose some service and competition
“We are concerned about loss of some service and some competitive pricing out of Jackson International,” O’Neill said. “Usually a merger means you are trying to put things together and cut costs. The way you do that is by eliminating some expenses. They are saying that it not their intent, to cut jobs, but that might be the outcome.”
Delta’s first flight in the state was 78 years ago. O’Neill said the airline has been a good corporate citizen for those many years providing great services and connectivity. He is concerned not just about the direct impacts of possibly less service andor higher rates, but the ripple effect on the economy.
“We surely don’t want to lose some of the things we fought so hard for,” O’Neill said. “There is no assurance the flight from Jackson straight to Reagan National Airport in Washington D.C. won’t be cancelled.”
Delta has 150 direct Delta jobs in the state, and an estimated economic impact of over $450 million per year. Captain Lee Moak, chairman of Delta’s Council of the Air Line Pilots Association, said the hostile takeover attempt represents the “perfect storm” of everything than can go wrong with an airline merger: extensive route overlap, reduced competition, higher fares, massive job losses, devastating economic impacts to the communities they serve and more.
“The employees of Delta stand united in our overwhelming opposition to this assault on our company,” Moak said.
According to Delta, with the merger the Jackson-Evers International Airport (JEIA) could face the potential loss of access to one major hub. Delta flies from JEIA to Atlanta and Cincinnati; US Airways flies from JEIA to Charlotte.
Delta said it is unreasonable to expect a new Delta/US Airways conglomerated airline to continue access to all three hubs which are located in the eastern U.S. and serve all major cities and many smaller eastern U.S. cities.
“JEIA and its passengers could lose direct, non-stop service to one major U.S. hub airport and many connecting flights to other large/small U.S. cities this hub airport services,” Delta said. “Access to fewer hubs means fewer options for domestic and international destinations for local and out-of-state passengers. Less competition at JEIA could ultimately lead to fewer options for flying travelers into Jackson and higher ticket prices for local and out-of-state passengers.”
US Airways counters by stating that consumers across the nation would benefit from greater choice and lower fares from the “New” Delta. The company said since the combination of America West and US Airways in 2005, US Airways has lowered leisure and business fares by up to 83% in about 1,000 markets. v
“Every domestic destination served today by either US Airways or Delta will continue to be served by the New Delta, which will provide consumers across the nation access to a larger network that connects them to more people and places,” US Airways says. “Employees also will benefit from working for a larger and more competitive airline. As US Airways has already announced, frontline employees of the new Delta will move to the higher cost structure of the combined airlines, and there will be no furloughs of frontline employees of either Delta or US Airways. The combination of US Airways and America West, which was accomplished without any involuntary mainline furloughs despite capacity reductions of 15%, demonstrates that a merger can be in the best interests of employees, not just shareholders.”
“This is a transaction that makes sense for US Airways stockholders, Delta creditors, the employees and customers of both companies, and the communities that we serve,” said Parker.
Parker said US Airways is the fifth-largest domestic airline employing nearly 35,000 aviation professionals worldwide. US Airways, US Airways Shuttle and US Airways Express operate approximately 3,800 flights per day and serve more than 230 communities in the U.S., Canada, Europe, the Caribbean and Latin America.
Contact MBJ contributing writer Becky Gillette at email@example.com.