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Potential Mergers Leave MEM, CVG Hopeful But Uncertain

Rep. Jim Oberstar, D-Minn., confirmed for the Minneapolis Star Tribune last week that Northwest Airlines and Delta Air Lines had entered formal merger discussions, and several industry officials have heard that talks have progressed far enough where a deal could be announced in the coming weeks.

Rumors of the potential deal have officials at several airports wondering how their futures will look if the resulting combination withstands government scrutiny.  Industry experts say Memphis International (MEM) and Cincinnati/Northern Kentucky International (CVG), with their proximity respectively to Hartsfield-Jackson Atlanta International (ATL), a Delta hub, and Detroit Metropolitan (DTW), a Northwest hub, are the two airports with the most on the line from a combined Northwest and Delta.

Local airport and economic development officials in Cincinnati think a scaled-back or closed CVG hub could attract a low-cost carrier to the airport, which could relieve some of the highest airfares in the U.S., according to the Cincinnati Enquirer. However, they also acknowledge that such a deal could cost hundreds or even thousands of people their jobs and reduce the frequency of service at CVG, which would be unattractive to many businesses.

“The nonstop service is an incredible asset we use to sell the area for new business and the expansion of existing businesses,” Doug Moormann, vice president of economic development for the Cincinnati USA Regional Chamber, told the Enquirer. Losing the hub “would have a chilling effect on business-attraction efforts.”

Ted Bushelman, a spokesman with CVG, declined to comment on whether the airport is studying potential merger scenarios.

“Were not discussing that matter,” he says. “That’s something that we work on and the less that gets out the better.”

MEM officials acknowledge that the merger is on their minds.

“We can’t predict what will occur,” says Arnold Perl, chairman of the Memphis-Shelby County Airport Authority and a partner in the Memphis office of law firm Ford & Harrison LLP.

However, Perl can make a case for why he thinks the airport should retain its standing as a hub airport regardless of any airline consolidation. MEM, he says, has excess capacity for both passenger and cargo travel, meaning a resulting company would have room to expand in the market. The airport also has one of the best on-time departure records in the U.S.

“Delays in the air or on the ground are more costly than ever,” says Perl, citing rising oil prices. “The higher it goes, the more vital Memphis becomes as a connecting hub.”

Its location in the middle of the country also makes it a valuable partner for the airline industry. Perl cited Sept. 11, when more planes landed at MEM than any other airport.

“Memphis is there on 9/11 and it’s there in good times as well as the preferred place to do business and to keep costs under control,” he says.

One airline industry observer thinks both MEM and CVG might end up faring alright in spite of any consolidation that might take place. Terry Trippler, founder of Minneapolis-based TripplerTravel.com, says Northwest and Delta both carved back their schedules while in Chapter 11 bankruptcy and don’t have room to scale back much more. MEM could be especially attractive because ATL is already congested and doesn’t have room for much expansion.

“Three more passengers might take Atlanta to a grinding halt,” he says. “Why would you start to feed more into Atlanta? It doesn’t make any sense. In fact, if they become one airline, Memphis might gain a little. With Memphis sitting there with security lines of five to seven minutes and Atlanta sitting there with security lines of five to seven days people may say ‘Maybe we’ll siphon some of these people over to Memphis.'”