Wednesday, January 16, 2008

Phil Trenary on Pinnacle and Airline Mergers

Posted By on Wed, Jan 16, 2008 at 4:00 AM

Phil Trenary, CEO of Memphis-based Pinnacle Airlines, suggests we think of the airport as a manufacturing plant.

"We manufacture connections, and we can manufacture them at a lower cost than anyone else," Trenary told the Flyer in an interview about the possibility of a merger of Northwest Airlines and Delta Air Lines. Memphis is a hub for Northwest, and analysts have speculated that it could lose that status if the airlines merge and consolidate hub activity in Atlanta.

"One misconception about our hub is that it is a weak hub," said Trenary. "It was weak at one time. It is a small hub, but by having a mix of regional carriers and Northwest it has really changed the complexion and made it more successful financially."

Pinnacle, a regional passenger carrier, has ten-year contracts with both Northwest and Delta.

"Pinnacle is in pretty good shape," said Trenary. "I think we would fare pretty well."

Trenary said Pinnacle is a low-cost airline and Memphis is a low-cost airport, both of which could be advantages to Memphis even if a merger takes place.

In an environment of $100-a-barrel oil, the average taxi time here is six minutes," he said. "It's much higher than that at airports in Chicago and Atlanta. I don't think Memphis going away is a slam dunk at all. Memphis stands a decent chance of being around long term."

According to The Wall Street Journal, U.S. airlines as a group are expected to show a fourth-quarter loss for 2007 because of winter storms, fuel prices, and the early signs of a recession. Delta and Northwest were the last two major carriers to come out of bankruptcy protection. A merger would likely result in higher fares nationwide and fewer jobs in Memphis if it loses hub status.

Northwest and FedEx are the keys to the "aerotropolis" long-term plan for improving the area around the airport.

Trenary said a merger would have to happen "sooner rather than later" because of the change in the presidential administration this year and the difficulty of getting regulatory approvals once the current administration leaves.

"If they don't get it done, then it will probably be late 2009 or 1010," he said.

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