Post Merger and looking forward, there are some future changes that will probably occur that may support some of the information that the General and others are proclaiming. The following hypothetical will be stated for consideration and discussion. Being a forward looking statment, most of it is speculation, however, it has a strong basis, based on some common sense, objective business strategies. The following is only one change that will probably take place. It supports to some degree the General's information. Here we go:
NWA operates a hub in Memphis. This Hub has 3 defined flight banks or turns a day. Memphis and the surrounding area do not generate alot of local boading traffic. Memphis is primarily a "connecting hub" and has been maintained by NWA over the years because of geographical location in the Southern region and because the Airport operation costs are probably the lowest in the country.
Although a very compelling argument has been put forth regarding very little route competition and overlapping between NWA and DAL by the respective CEO's in the Congressional hearings, there are some other considerations that have not been in focus. One of those considerations is the NWA Memphis Hub and the DAL Atlanta Hub are 384.48 miles apart. Furthermore, there is direct and fierce competition between between these two airlines in these two respective hubs for the passengers that travel to and from the many cities that mutually feed both of these hubs.
When these two airlines merge, it is most probable that the consolidated company will implement hub restructuring to achieve maximum efficiencies. Although, there will be some other Hubs affected also, the focus of this discussion will be on ATL and Memphis. Due to close proximity and the fact that these hubs directly compete for the same passengers for feed in the same region of the country, there is compelling logic that one of these hubs will be eliminated or greatly diminished to achieve greater efficiencies and maximum profitability of the combined company. As most would agree, ATL would be the surving hub. This would result in the funneling of more traffic into the surving hub, ATL.
The hub rationalization in this instance would then divert more traffic to the surviving hub, ATL, from the "feeder" cities that once fed both Memphis and ATL. It is reasonable to expect that the present total of all traffic from these "feeder" markets would not be diverted, in total, to ATL. This will depend on remaining competition in each of those cities. It could be assumed that some of the present total traffic in each of those "feeder" cities could migrate to a competitor. However, due to the combined and strong frequent flyer programs of the new merged company, it seems reasonable to assume that most of the higher yield traffic will be maintained. Again, in each of these "feeder" cities more traffic in total will be diverted to ATL. In this example, most of the traffic will be maintained in the combined company, but directed to one hub, therefore eliminating Memphis and the associated costs.
This hub elimination and subsequent increase in total traffic to the surviving hub in ATL, would require the need for larger airplanes in these "feeder cities." Thus, this supports the information that the General and others are sharing. In many instances, it may require narrow body airplanes. It could also require more 70/76 airplanes. From an efficiency perspective, it most likely would require a combination of both. It does appear that most likely, it could result in a decrease, but not elimination, of 50 seat airplanes.
In summary, in effect, competition is eliminated in these "feeder" cities, resulting in diversion of additional traffic to ATL. There will be a need for larger airplanes to right-size for the new traffic.
As an example, VPS is a "feeder" market for ATL and MEM. NWA, from Memphis, currently serves VPS with 3 DC-9's a day. DAL currently serves VPS, from ATL, with 9 flights a day. Of those 9, 5 are ATR's, 1 CRJ 50, 2 CRJ 70, and FOR NOW only 1 MD-88. If Memphis is eliminated, then most of that traffic would be diverted through ATL. This will most likely require the replacement of the smaller aircraft with more narrow body aircraft. This market example may not be the best for the reduction of the 50, but it demonstrates the possible change very well. There are probably better market examples for the 50. What will happen in XNA, LIT, BTR, MLU, SHV, and many of the others that already run high load factors? Post-merger, there will be a need for larger airplanes if Memphis is eliminated, and to some undetermined degree, the need for less smaller aircraft.
