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Archive for Friday, May 28, 2004

Delta inquires about Wichita subsidies

May 28, 2004

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— In the wake of Wichita's decision to extend a subsidy given to discount airline AirTran Airways, a competing airline has asked about making a similar deal.

Mayor Carlos Mayans said he was interested in discussing the request from Delta Air Lines Inc. and its vice president for network analysis, Douglas Blissit.

Blissit didn't mention a figure or say how Delta would expand its Wichita service, but asked for details about the city's agreement with AirTran and any other possible incentive programs.

"After learning of the potential financial assistance being offered to other airlines, Delta has completed a review of the Wichita market and found additional capacity may be warranted," the letter said.

AirTran began service at the airport two years ago, a time when air fares to Wichita Mid-Continent Airport were among the highest in the country. Subsequently, fares dropped considerably and airport officials estimate Wichita passengers have saved nearly $75 million.

AirTran has collected $4 million in subsidies so far and terms of the first contract could mean another $500,000 for the discount carrier. The recently signed contract provides AirTran a subsidy of $2.5 million to keep operating three daily flights to Atlanta for another year.

A Delta spokesman wouldn't comment on Blissit's letter, which questioned the legality of the AirTran subsidy.

"As you know, as the airport sponsor, the City must offer incentives for air carrier service on a nonexclusive and nondiscriminatory basis," Blissit wrote.

Airport director Bailis Bell said the subsidy for AirTran was legal. The city got around the requirement to be nondiscriminatory by using city money rather than revenues generated by the airport.

Airline consultant Mark Sixel said cities have been able to give airlines limited introductory subsidies, and that the renewal of the one for AirTran may be trying Delta's patience.

"I think they are trying to force the city's hand, to get them to stop offering the subsidy to a competitor," Sixel said. "They feel like they can't compete on an unlevel playing field anymore."

Sixel said Delta might complain to the Federal Aviation Administration, or perhaps pull some of its Wichita flights if that doesn't work.

Another airline consultant, Mike Boyd, said it would be "a disaster" to drive Delta out of the Wichita market. He believes there's room for both Delta and AirTran to operate profitably in Wichita.

"The market can support both," Boyd said. "I hate to break anybody's bubble, but Wichita is not a small market."

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