We have worked diligently with Delta over the last year and will continue to support them to achieve the goal of "right-sizing" flight operations and returning the CVG hub to profitability. The impending May schedule pull down may prove to be the right size for Delta, but it is the "wrong size" for CVG and is inadequate to serve demand in the Tri-State.
Local passenger activity at CVG grew almost 21% in the 3rd Quarter 2009 compared to the same period in 2008 – moving CVG to the top position for largest increase in local passenger traffic (Department of Transportation). Triggered by Delta's reduced fares, this explosive growth in local passengers, coupled with load factors ranging to over 96%, confirms that CVG serves a large population base with a high level of demand for air travel. Indeed, a major and growing concern that we hear today from the traveling public is that they are finding it increasingly difficult to book a seat on a flight. Air Canada recognized this need and will commence new air service between CVG and Toronto starting in May 2010.
While working with Delta to retain its hub operations and significant employment base at CVG remains a top priority for the Board, the Airport and its many business partners have been actively discussing air service growth opportunities with our other CVG airlines and prospective new entrants. The February 17th article, "CVG: Fastest Growing Local Market," generated new service inquiries from four airlines that week alone. Since then, the number of airlines interested in CVG continues to multiply.
However, a major barrier to increasing air service at CVG will not be the lack of airline interest or passenger demand, but aircraft availability. Airlines have reduced capacity worldwide in response to the economic downturn, parking many of their aircraft in the desert. Making do with their current fleets for the time being, airline capital expenditures are mostly going into upgrading the passenger experience or increasing aircraft efficiency. For instance, jetBlue has deferred 100 aircraft orders (Centre for Aviation March 12, 2010). The lack of available aircraft is a significant challenge for airlines looking to increase market presence or commence new service.
There is a growing awareness by existing and new carriers that the reduction in air service at CVG is suppressing local demand. Last year's 3rd Quarter 21% increase in local passengers occurred when industry-wide domestic demand registered a -4% decline. This dramatic difference, coupled with our efficient airfield, best-in-class facilities and diverse economic base will only enhance CVG's ability to attract new air service when the economy rebounds and airlines start adding aircraft to their fleets – returning service choices and jobs to the Region.
The announcement released today by Delta Air Lines to consolidate its operations in Concourse B and resulting job layoffs is very disheartening to the Airport and the Tri-State community.
Previous Delta schedule adjustments at CVG essentially removed peak period "banks" of flight activity, for example, downsizing from 7 banks to the current 4 bank structure. However, peak activity through 2009 remained high enough with the 4 banks to require Delta to use of all of its gates in Concourses A and B.
The May, 2010 schedule will realign flight activity to provide greater flexibility for local travelers to travel to and from major markets in the same day. At the same time however, the schedule changes will reduce the number of daily peak aircraft departures from 55 today to 32, a 45% decrease.
Decreasing the number of aircraft operations during a peak period translates into reduced gate requirements, which is the underlying reason for Delta's announcement today.
We are currently assessing what affects Delta's consolidation will have on Concourse A concessionaires. Without any shift of Concourse A concessions to Concourse B, up to 120 concessionaire employees will be impacted. The Airport will be working with each concessionaire to evaluate opportunities for operations in Concourse B and assisting, where feasible, to minimize job losses.
Delta remains financially obligated for the leases in Concourse A through 2015.