Looking at an Airline-Airport Negotiation

Earlier this year, Delta Air Lines' VP of Corporate Real Estate sent a letter to Ben DeCosta, the GM of Hartsfield-Jackson Atlanta International Airport addressing the master lease agreenment between the parties that was set to expire in 2010. After reviewing the letter, it seems that there are many issues that the airport and airline each care about, therefore making the negotiation a somewhat complex discussion. Some of the important issues addressed in the negotiation:

• Enplanement costs (i.e. cost paid by an airline to the airport for every individual carried on their planes)
• Process for agreeing on major capital expenditures
• Construction of the new Maynard Holbrook Jackson Jr. International Terminal (MHJIT)
• Leasing costs and terms (i.e. common-gate vs. exclusive-gate rights)

From Delta's point of view, they would like to see the operation costs remain what they have been as the Atlanta airport's enplanement fee of only $5/passenger is one of the lowest of all major airports. Moreover, they do not want to continue supporting constructino of MHJIT until they confirm their financial situation for the future at the Atlanta airport.

From the airport's point of view, they would like to increase enplanement costs to fund future growth and improvements at the airports. They also would like to continue development of the International Terminal. Finally, they do not want to lose any of Delta's business to other Delta hubs because of the large financial impact the airline has on the airport and more importantly, the city of Atlanta.

After months of negotiations, Delta and the airport were able to reach an agreement. Shortly after their agreemen was published, the FAA contacted both parties with a letter that claimed the agreement may be somewhat anti-competitive, including terms that restrict Delta's competitors to enter or expand at the Atlanta airport. The FAA, Delta, and the Atlanta airport are still working to finalize the lease agreement.

Let's hope the three parties can figure something out soon!