Delta: It's unfair to offer American Airlines revenue guarantee fund

Friday, October 19, 2012 | 5:20 p.m. CDT; updated 6:01 p.m. CDT, Friday, October 19, 2012

COLUMBIA — Delta Air Lines Inc. has begun talking with city officials about the possibility of creating a revenue guarantee fund like the $3 million one offered to American Airlines for new flights to Chicago and Dallas.

"Unfortunately, if we're not able to see a comparable package from the city we'll be forced to exit the market," Delta spokesman Anthony Black said.

Delta operates flights between Columbia and Atlanta Hartsfield-Jackson International Airport twice daily, and between Columbia and Memphis International Airport once a day. The flights to Memphis are set to end in March.

Black said that the flights have been performing well but Delta deserves its own revenue guarantee so it can be on a "similar playing field" as American Airlines.

"If you have two similar companies and one has $3 million, the company without the $3 million is at a disadvantage," Black said.

Mayor Bob McDavid said he had received an email from Delta with a request for a revenue guarantee. He said the city would discuss a new contract with Delta, but he didn't specify whether it would offer a revenue guarantee.

"We're certainly willing to negotiate to improve our relationship with Delta," McDavid said.

Black said that Delta has sent emails to McDavid and City Manager Mike Matthes and that Delta representatives have spoken on the phone with Matthes about a new deal.

Third Ward Councilman Gary Kespohl said Delta would not be at a disadvantage if American receives the guarantee because Delta's flights are profitable.

"If they run at 90 percent capacity, they wouldn't touch the guarantee anyway," Kespohl said, adding that Delta would be making a mistake to end its flights through Columbia.

"It's like a kid who says, 'I'm gonna take my toy and go home,'" Kespohl said. "If Delta decides they want to leave the market, maybe we could get American to add that flight under their guarantee."

Under the deal with American Airlines, which is subject to the approval of the Columbia City Council, the airline would receive money from the fund if it fails to bring in total revenue averaging $4,403 per flight to Chicago O'Hare International Airport and $5,010 per flight to Dallas-Fort Worth International Airport each month. The airline could receive a maximum $1.5 million a year for two years.

The city of Columbia, Jefferson City, Boone County, Cole County and other regional organizations such as the Columbia Chamber of Commerce have reportedly pledged $3.3 million total to the fund.

In 2008, Delta signed an Essential Air Service contract with the U.S. Department of Transportation to begin a flight between Columbia and Memphis, receiving a $2.2 million annual subsidy. The airline opted out of the subsidy in 2010, saying it was no longer necessary.

Delta began running daily flights between Columbia and Atlanta in June and started running the flights twice a day in September. In August, the airline announced it would stop running its daily flight between Columbia and Memphis in March, replacing it with another flight between Columbia and Atlanta.

Black said Delta learned about the deal with American Airlines by reading about it in the Missourian.

"We were surprised," Black said. "Generally, we have good communication with the airport and the city officials."

Supervising editor is Scott Swafford.

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