Mon, Jul 18, 2011
Airline Retires Saab Fleet, Will Apply For Increased Essential
Air Service Subsidy In Nine Cities
Delta Air Lines notified the U.S. DOT of its plans to adjust
flying in 24 small markets last Friday. In concert with the
retirement of Delta's Saab fleet and to halt $14 million in annual
losses, the changes will affect Essential Air Service (EAS)
markets.
Flights in these markets on average depart with 52 percent of
the seats filled, with some locations as low as 12 percent. This
compares to a domestic system load factor of 83 percent for 2010.
Weak demand in some markets has led to flights occasionally
operated with no passengers on board. "While Delta would prefer to
continue serving these communities, the new reality of mounting
cost pressures faced by our industry means we can no longer afford
to provide this service. As we continue to strengthen our business,
Delta is retiring the Saab turboprops and some 50-seat jet
aircraft, which will hinder the financial viability of serving
these smaller markets," Delta said.
Delta has taken a number of steps to respond to added cost
pressures. Delta previously announced its intention to reduce
capacity this fall by 4 percent and retire 140 aircraft. Delta has
reduced its facility costs at 170 airport locations and 10 cargo
locations across the system, saving more than $80 million
annually.
The notification provides the DOT the opportunity to select a
new carrier to begin service in affected EAS communities within a
90-day period. Delta will continue to serve the affected
communities through its Delta Connection partners until the DOT
selects a replacement carrier and appropriate funding is available.
In some cities, Delta is coordinating with other carriers to bid on
the routes. In addition, Delta will to continue service in some
subsidized and non-subsidized markets, but the subsidy rate must be
higher in order for Delta to fly larger regional jets on the routes
in question. A complete list of affected communities is available online.
The EAS program was created to ensure small communities continue
to have access to passenger air service. In some cases, airline
service in EAS markets is subsidized by the government. The Airline
Deregulation Act of 1978 provides that if a carrier is held in
beyond the 90-day notice period, it is entitled to receive
compensation "to pay for the fully allocated actual cost to the
carrier of performing the ...service ... plus a reasonable return
on investment that is at least 5 percent of operating costs; and to
provide the carrier an additional return that recognizes the
demonstrated additional lost profits from opportunities foregone
[by continuing to be held in and providing service]."
Delta will offer customers booked for travel in these markets
alternative transportation choices or refunds.
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