Airlines look to build route networks that involve dominant presences in certain airports. By offering significantly more options than their rivals, carriers can charge more for service and become the default choice of airline for that region's passengers. But a battle is shaping up over the Hartsfield-Jackson Atlanta International Airport, and the carrier calling Atlanta home is looking to defend it.
As the world's largest airport, Hartsfield-Jackson more than serves the needs of the Southeast region, at least according to Delta Air Lines (NYSE:DAL). As the largest carrier at this mega-airport, Delta wants traffic for the Atlanta area to flow through the Hartsfield-Jackson Airport.
The presence of Delta Air Lines dominates the airport in every way, from the airline's massive number of daily departures to the 140-foot-long sign reading "Fly Delta Jets" atop Delta's Technical Operations Center.
But another group could bring an alternative to Hartsfield-Jackson for travelers to the Metro Atlanta area.
Paulding vs. Hartsfield-Jackson
Thirty-eight miles northwest of downtown Atlanta lies the Paulding Northwest Atlanta Airport. Despite its Atlanta location, it pales in size to Hartsfield-Jackson. Paulding currently has no regular commercial activity and doesn't even have a control tower.
However, according to The Atlanta Journal-Constitution, Propeller Investments is looking to bring "one airline with a few flights a week" to the Paulding airport. With such a small planned operation, it's tough to see how this would sink operations at Hartsfield-Jackson. Nonetheless, Delta Air Lines and the city of Atlanta are fighting the proposal.
Airlines stake out their territory and fight hard when it comes to defending hubs. Recently, United Continental (NYSE:UAL) launched new flights on Atlanta and Minneapolis/St. Paul routes; both airports are major Delta hubs. This comes in the wake of Delta's launching new flights from the San Francisco Airport, a major United Continental operations center.
But the effects of United Continental's moving in are questionable. The Chicago-based airline would provide more competition but operates on a model similar to that of Delta -- the model of the large full-service network carrier.
Who's coming to Paulding?
At this point, nothing's final at the Paulding Airport. Delta and the city of Atlanta form a powerful team of opposition that may well end the Paulding Airport's chances to begin regular commercial service. But some reports have indicated talks between Paulding Airport officials and Allegiant Travel (NASDAQ:ALGT).
Known as a powerful discount carrier, Allegiant could bring some cheaper fares to the region for flights using the Paulding Airport. However, while this could improve Allegiant's total network reach, I don't see this as a major threat to Delta Air Lines for the following reasons:
- Allegiant's ultra-discount model makes it less likely to steal high revenue business travelers from Delta.
- Hartsfield-Jackson provides a closer location that travelers are more accustomed to.
- With such a small number of flights per week, Paulding would not mean a major Atlanta area capacity increase when compared to the 1,100-plus daily takeoffs at Hartsfield-Jackson.
So while the addition of an ultra-discount carrier such as Allegiant could bring some lower fares to the Atlanta market, the limited supply and differing level of service would prevent these carriers from becoming a major financial burden for Delta.
The Paulding airport faces an uphill battle at this stage, as it needs both new airline partners and infrastructure upgrades. Propeller Investments is launching the current drive to commercialize the airport, but Delta and the city of Atlanta are fighting back. While it's unlikely to have a major effect on Delta's total operations, the news surrounding Paulding could be important for other airlines looking to break into the Atlanta market.
Alexander MacLennan owns shares of, and has options on, Delta Air Lines. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.