$1.4 billion in Atlanta, $1.4 billion in NYC: Delta’s tale of two cities

By Maria Saporta
Published in the ABC on Friday, June 22, 2012

NEW YORK — Delta has had a long happy marriage with Atlanta but that’s not stopping it from having an affair in New York City.

The airline currently is part of a $1.4 billion investment at the two major New York airports — $1.2 billion to build a new international terminal at John F. Kennedy International Airport and $200 million to upgrade and expand its operations at two terminals at LaGuardia Airport.

In fact, Delta Air Lines Inc. proudly states that its goal is to become the leading airline serving New York City.

The combined New York investment equals $1.4 billion — the exact same amount that Atlanta and Delta have made to build the new Maynard Jackson International Terminal at Hartsfield-Jackson Atlanta International Airport.

But people close to Delta insist that the airline’s commitment to New York City is not an indication that it is moving its emphasis or its center of gravity from Atlanta to the Big Apple.

“They are quite complementary,” Delta CEO Richard Anderson said after the airline’s annual shareholders meeting in New York City on June 15. “We have a Southeast hub and a Northeast hub, and they both complement each other. They are both strategically important to Delta. Our combined investment at JFK and Atlanta of $2.8 billion is to make sure we have premium product.”

Anderson went on to say that both Atlanta and JFK are strong international gateways. Delta currently serves more European destinations from JFK than it does from Atlanta (25 versus 16); but the airline serves more destinations in Central and South America and the Caribbean from Atlanta than it does from JFK (42 versus eight).

And Delta’s investments in the two new international terminals in both cities indicate that the airline expects to continue its international expansion in each market.

Atlanta’s international terminal opened in May, and the JFK International Terminal is slated to open in 2013. It will replace the outdated Terminal 3, a circular space that had been built in 1960 as Pan American’s Worldport.

Paula Rosput Reynolds, a director on Delta’s board since 2004, said that in a meeting with analysts several years ago, the airline was told that its facilities at JFK “were a drag on your economics.” The challenge, she said, was to take a big asset that was “not that profitable” and turn it into a successful and forward-looking facility.

“We are executing on that opportunity,” said Reynolds, a former CEO of Atlanta-based AGL Resources Inc. Asked about what impact the New York investments would have on Atlanta, Reynolds echoed Anderson’s comments.

“They are totally complementary,” she said. “It doesn’t diminish Atlanta’s position at all. Having a profitable, smooth-flowing hub at JFK is one more way to make Atlanta stronger.”

Reynolds also added that New York is a strategic gateway for Delta because of its business traffic. “New York-London is the most coveted market in the world,” Reynolds said.

For Delta, one of the big differences between Atlanta and New York is that Hartsfield-Jackson serves as a major hub airport with connecting passengers while New York has a larger share of origination and destination travelers.

That’s why it works for LaGuardia to serve as Delta’s domestic airport in New York while JFK serves as the international airport. (JFK does have some domestic flights, but they are scheduled to serve the international flights).

Because of the different profiles of each airport, Delta actually handles significantly more flights out of Hartsfield-Jackson than it does at both New York airports combined.

For example, Delta’s peak-day departures from Atlanta for June 2012 will total 1,040. The peak-day departures for the same month out of New York is 394 — 210 from LaGuardia and 184 from JFK.

Atlanta has the same kind of dominance when it comes to destinations served. Delta serves 215 destinations from Hartsfield-Jackson, and 111 from LaGuardia and JFK combined.

Meanwhile, in touring Delta’s terminals at LaGuardia, it is obvious that the airline is catering to the frequent business traveler. Delta is upgrading and expanding its Sky Clubs at the terminals, it is building a new concourse bridge to connect both terminals (to be open by December), and it is offering all the electrical outlets and work stations that any business traveler would need at its gates.

In fact, at Delta’s LaGuardia gates, there are counters and booths lined with free iPads where travelers can access the Internet and order food that will be delivered to them as they wait to board their flights.

Delta’s expansion at LaGuardia is a result of an agreement that it made with U.S. Airways to swap its gates in Washington, D.C., for gates at LaGuardia. Delta took over the first half of its U.S. Airways’ gates on March 25, and it will take over the rest on July 11.

“The LaGuardia investment is really about building the closest, most convenient hub in New York,” Anderson said. “Our intentions are pretty straightforward — to be the leading airline in New York.”

Former Atlanta Mayor Shirley Franklin, who joined Delta’s board in 2011, said there is no reason for Atlanta to be paranoid about the airline’s investment in New York.

“Generally, I think the stronger and more successful Delta is as a global airline, the better it is for Atlanta as the company’s home base,” she wrote in an email. “Delta — its leaders and employees — are fully engaged as contributors to the health and welfare of the entire metro Atlanta community and state of Georgia.”

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