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Delta to Expand Service to Latin America, Caribbean From Atlanta

Posted on: Monday, 15 May 2006, 09:02 CDT

MIAMI _ As it struggles to emerge from bankruptcy protection, Delta Air Lines is looking southward, pinning part of its hopes for the future on expanding service to Latin America and the Caribbean.

Adding new routes mostly from its Atlanta hub, the airline's growth in the region could pose competition for rival flights out of South Florida. Delta's new focus on international service is a key component of its reorganization plan, said James Whitehurst, Delta's chief operating officer.

"Delta is the emerging leader in the U.S. to Latin America and the Caribbean," Whitehurst told participants at AvGroup's 14th annual International Airline CEO Conference at the Doral Golf Resort & Spa recently. "And we have our eyes absolutely set on being the second-largest U.S. player in the region very, very quickly."

American Airlines, which bases its Latin American and Caribbean hub in Miami, has long held the largest market share in the region. Continental Airlines, which flies to the area from Houston and Newark, N.J., ranks second in passenger traffic. Delta currently ranks third.

Experts say Delta faces challenges as it begins to compete with long-standing carriers in the region.

"It's going to be a tough market," said airline analyst Ray Neidl, who is with Calyon Securities. He cited American's dominance as well as competition from other carriers in both the United States and Latin America.

"The question is, which is better, Atlanta or Miami? Atlanta is a bigger city, more of a business city," Neidl said. "But Miami is still considered the financial capital of Latin America."

In fact, American spokeswoman Martha Pantin said that American's strength lies in its Miami hub, "because Miami is in a class by itself. We believe it's like the door to Latin America," she said.

Whitehurst argues that Atlanta is the "natural gateway" to the region, citing its geographic position, growing ethnic base and lower operational costs. Delta's massive Atlanta-based domestic network can also feed connections to Latin America and the Caribbean.

With Delta's volume of flights from Hartsfield-Jackson Atlanta International Airport, the airline estimates its airport rental costs and landing fees are about $3 per departing passenger, compared to what Whitehurst calculated as $30 per departing passenger in Miami. (Delta currently pays $18.10 per passenger in landing fees at Miami International Airport, plus $88,951 per month in rent, said MIA spokesman Greg Chin.)

"We clearly have a substantial cost advantage versus Miami as a gateway to Latin America," Whitehurst said.

But Atlanta's Latin population is much smaller than Miami's or even Houston's, said Continental spokeswoman Macky Osorio. Continental is also expanding in the region.

"Delta has difficult work ahead," Osorio said.

Latin America and the Caribbean appear poised for growth. Boeing, which published its last market outlook in December, estimates that traffic in the region will grow an average of 7.8 percent per year during the next 20 years, said John Wojick, Boeing's vice president of sales for Latin America and the Caribbean. That is the fastest of any region except China, which is at just over 8 percent, he said. Last year, traffic in Latin America and the Caribbean rose 14 percent, according to Wojick.

This year, Delta is adding 20 new regional routes. In January, it began flights to Managua, Nicaragua, and in its first month eclipsed Continental, which has served the market for 15 years, Whitehurst said.

In the last three months, Delta has begun more nonstop services, including flights to San Pedro Sula and Roatan, Honduras from Atlanta. Among other new routes are Atlanta to Santo Domingo and Punta Cana, Dominican Republic, and new service to Antigua and Barbados. New flights to the Puerto Rican cities of Aguadilla and Ponce, and Kingston, Jamaica are also planned for June, said James Sarvis, director of Latin America and the Caribbean.

Delta's goal is to increase international revenue from 20 percent of revenue to 35 percent by September, and to rank second in Latin America _ excluding Mexico _ and the Caribbean by the end of this year, Whitehurst said.

At the same time, Delta has cut domestic capacity by 15 percent and converted wide-body aircraft for international use, mostly to Europe, where it also aggressively expanding its service. It expects to be the world's largest carrier between the United States and Europe this summer.

The moves come as Delta cuts 7,000 to 9,000 jobs and trims costs in an effort to emerge from bankruptcy next year as a much leaner, lower-cost carrier.

At the same time, it is trying to change from a "frankly stodgy" culture to "innovative and stylish," Whitehurst said.

As it pushes into Latin America, the airline is adding Spanish language check-in kiosks, making Spanish announcements on flights and ensuring that every flight to Latin America has Spanish speakers aboard, Whitehurst said.

Competitors such as American and Continental say they have been doing that, plus more _ like offering onboard Spanish language magazines and music _ for years.

"We know we are not where we need to be," Whitehurst said. "But we are making good strides."

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Source: The Miami Herald

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