Delta Air Lines is a powerhouse at the Hartsfield-Jackson Atlanta International Airport, making up about 70 percent of the airport's flights, and it has no problem flexing its muscles. With Delta's 30-year lease up in 2010, the carrier is already suggesting that any proposed fee increases aren't acceptable, including threatening to move operations to Memphis or Detroit unless they get good deal. There's nothing wrong with negotiating for a fair price -- but Delta's last few moves have made it a bit of a bully.
Airport officials in Atlanta are attempting to finance and build a $1.6 billion international terminal but so far can't secure financing. Recently, reporters uncovered a letter from Delta's vice president of corporate real estate, John Boatright, sent on Sept. 10 to the airport's prospective loan underwriters saying that Delta opposed the airport's plans and the international terminal project.
Although city officials think the current credit crisis had more to do with not securing loans, it's unknown how much influence Delta, a major stakeholder, had over the process.
Delta's main opposition to the $1.6 billion project is due to possible higher fees, and the carrier still hasn't agreed to a memo of understanding about the terminal. Construction on the terminal will be halted around Jan. 26 until there can be some common ground, airport officials said.
Delta wanted $400 million cut from the budget and airport execs cut $300 million, but still Delta wants a bigger and better deal before committing to another lease. "Our position remains that we must understand our long-term financial future at Hartsfield-Jackson before we can commit to major capital investments," Boatright wrote in a memo. Delta's main stumbling block? The airport's plan to raise passenger boarding costs from $5 per passenger to $10. Memphis International Airport charges $5.91 per passenger.
Delta suggested Atlanta should be price-competitive with other hubs like Memphis, Detroit or Cincinnati or risk losing their business. (Although moving is a possibility, most in Memphis believe this is simply a power play. "Airline negotiations include a certain amount of saber rattling, and that's where they are right now," a Memphis airport official told the Memphis Commercial Appeal.)
It's one thing to use leverage to negotiate better deals, most people won't fault Delta for that. But trying to sabotage another's municipal bonds or sink loans isn't a sound business practice. Delta and Atlanta are supposed to be business partners, not competitors, and negotiations should occur face-to-face -- not behind another's back.