Wednesday, June 18, 2008

Rhetoric Takes Flight In Delta-Northwest Merger

It’s always curious when economic development officials start talking like politicians who seem to think that admitting there is a problem is the same as being blamed for it.

We thought of this as we read Tennessee Commissioner of Economic and Community Development’s upbeat column in The Commercial Appeal explaining why we should all have goose bumps of excitement over the merger of Northwest and Delta Airlines.

Well, maybe we should expect that from Commissioner Kisber, who is after all a political appointee of Governor Phil Bredesen, but it seems to be an attitude that is rampant among the people who should be telling us the cold, hard truth about this deal. There’s no sin in being optimistic, but we’d have a better feeling if some of our economic development and airport experts would tell us what the down side could ultimately be and what we would do if it happens.

Hubs And Spokes

Yes, Commissioner Kisber, we recognize the value that a hub brings to Memphis’ economy, and although we gripe about our airfares, we still understand that it gives us a distinct competitive advantage. If it were not so, why do all major cities beg and plead for hubs of their own.

The headlines alone made for a revealing counterpoint.

The headline on Commissioner Kisber’s column said: Northwest-Delta merger: good for Tennessee.

A day later, on the CA’s front page was this one: Airline merger may be trouble for Pinnacle.

Just The Facts

In other words, it seems like all the wishful thinking and happy talk to the contrary, there is a price that Memphis will have to pay in this merger, notably a wound to our 2,000-employee regional carrier. Meanwhile, Delta CEO Richard Anderson assures in a speech here us that this has nothing to do with the merger. It seems these days that every one immediately shifts into their spin cycle in response to any question.

According to Delta officials, canceling the Pinnacle contract was a result of a continuing problem, but it sure seems more than a passing curiosity that it was announced in the wake of the merger announcement. And the folks packing their boxes at Pinnacle sure connect the dots in this way.

Mr. Anderson continued his reassurances at a breakfast sponsored by the Memphis Regional Chamber, Memphis Convention and Visitors Bureau, Economic Club of Memphis and Memphis-Shelby County Airport Authority, but it sure was hard to put much stock in his Panglossian view from the bridge with the Pinnacle headline shouting from the front page. What were we to believe – our eyes or our ears?

Wanted: More Specificity

He did promise that Memphis would remain a hub, but then again, he didn’t say how that hub would be defined – by the current number of flights or half the present number of flights or a quarter of the present flights. It was cold comfort, but in Memphis, hope springs eternal and we seem given to “everything’s going to be fine” speeches from our economic development leaders. We guess our civic response to Mr. Anderson’s speech is supposed to be that he told us everything would be just fine, so everything will be just great.

Since the merger was announced, speculation in industry journals has been rampant about the hit that Memphis will take, and although we hope that all good things come to pass, it’s just hard to see a future that will be as bright as the present. But despite that serious concern, we’ve been given a steady dose of upbeat rhetoric suggesting that this merger will be a great thing for Memphis. We’ve even heard some Airport Authority board members suggest that our strong personal friendships and relationships position us to be a winner in the tug-of-war between Memphis and Atlanta.

While we are as Southern as the next person and know the power of relationships in this part of the world, we have a sneaking hunch that at the end of the day, the spreadsheets that will drive decisions about this merger won’t have a column called “relationships.” Facing serious corporate challenges even with the consolidation, it’s hard to imagine Delta Airlines making any decision that won’t be based on the cold, hard facts of profit-making, friends be damned.


We appreciate the power of positive thinking, but we would appreciate even more some suggestions from the powers that be about what our options are if worse comes to worse. Surely, there is some contingency planning going on in this volatile environment, and we think that the citizens who own the airport deserve to know more about our scenarios for the future.

Here’s the thing we need to assure our economic development officials. When you tell us we have a problem, we aren’t going to say you are the cause of it. That’s particularly true of any negative developments from this merger. Surely, no one thinks that our economic development folks have any real power to change the forces that are reshaping the aviation industry.

So, shoot straight with us. We promise we won’t shoot the messenger.


Harvey said...

I agree that Delta probably won't be consulting the friendship column, but speaking as one whose father has been a Delta employee for 20+ years, let me say this. If Delta were to make a decision based on more or less than solid data, that wouldn't surprise me one bit. In fact, a decision like that probably wouldn't make the top 10 list of boneheaded decisions the company has made in the last decade. Sure, they are big time, but so was Chrysler.

Anonymous said...

Options if worse comes to worse? I believe we are already there or swiftly approaching that point. Rapidly escalating oil prices are already changing the airline industry and more drastic changes are sure to come. It seems to me that high oil prices are going to result in an airline industry that resembles what it was in the very beginning. Flying will become an option only for the wealthy and for business travellers employed by large companies. The days of a low cost flight to Destin for the middle class leisure traveller will soon be history. In that kind of market, the idea of a hub in a mid-tier city like Memphis is a pipe dream. What people in this community should really be concerned about is the overall effect of high oil prices on our biggest employer - FedEx. The news of the past couple of days is probably some indication of things to come. In an era of increasing oil prices, coupled with the fact that documents can be sent rapidly and for free electronically, it seems inevitable that the volume of shipping done by FedEx will decrease. The prospects for our local economy - supported by FedEX and shipping/distibution in general - is downright scary.

Anonymous said...

I agree with you anon. We are too tied to transportation/shipping/distribution. with high oil prices, we're bound to take a hit in those areas, especially if economies localize more in the future; it's not like we're near any other metro areas we can form synergies with.

Steve said...

Pinnacle contracts to serve Delta (approx. 12 flights?) as a regional airline (name?). Delta has some specific dissatisfication with that role, particularly its on time performance.

Pinnacle also contracts, under the name Northwest Airlink, for many, many more NWA flights. As far as I know NWA is satisfied with that arrangement.

Because Delta is dissatisfied with Pinnacle's limited business with Delta, doesn't mean that in a merged airline Airlink would disappear.