Delta to shrink Memphis hub

DELTA Air Lines has announced a 25 per cent reduction of its smaller hub at Memphis International Airport. The US carrier acquired the hub in its merger with Northwest Airlines two years ago.

A Delta senior vice-president said: “Our changes at Memphis are designed to improve the performance of the hub by trimming unprofitable flying on smaller, regional routes with little local demand and focusing our service on flights to the top destinations that matter most to Memphis customers.”

“At this point we don’t have enough information to say what the impact will be on financial performance but a reduction of that size, if service is not replaced by another carrier, will impact revenues,” said Seth Lehman, head of the US airport sector at Fitch Ratings.

Memphis International Airport was, until this year when Hong Kong stole the crown for its 18-year reign, ranked first worldwide in handling cargo, thanks to FedEx, which is based there. FedEx’s continued business there will act as a stabilising factor on the airport’s fortunes but any reduction during these early stages of economic recovery is a blow, especially with rising fuel prices.

“While there have been widely held expectations for improving economic conditions for 2011, elevated fuel prices can dampen such prospects,” Fitch Ratings said. “What has been observed so far is traffic has grown quite robustly in recent months. However, the rise in jet fuel costs has subsequently resulted in responses from several of the leading US network carriers to cut back planned growth in flights and capacity scheduled for later in 2011.”

The news has led to speculation that this is a forerunner of further cuts and perhaps even closing of the hub completely. This is thanks to an expected 35 per cent hike in fuel prices this year at an estimated US$3 billion, said Delta president Edward Bastian, who added that capacity cuts overseas are also on the table.