Cleveland Accord Aims to Avert Cincinnati Flight Cuts

Cleveland, home to Continental Airlines Inc.’s smallest U.S. hub airport, is trying to avoid the fate of another Ohio city caught in the fallout of an industry merger.

An agreement with United Airlines and Continental will keep at least 90 percent of their Cleveland flights for two years after they combine. That sets Cleveland apart from Cincinnati, the Delta Air Lines Inc. hub where cutbacks continue after that carrier’s 2008 purchase of Northwest Airlines Corp.

“To an economy like Cleveland, that kind of stability is critical in terms of helping us rebound from this economic downturn,” Ricky Smith, the city’s airport director, said today in a telephone interview.

Yesterday’s accord assures travelers at Cleveland Hopkins International Airport, Ohio’s largest, that air service will hold steady, Smith said. The new United, as the combined company will be known once the merger concludes this month, has a “commitment to actually use that space,” he said.

Continental has about 170 daily departures from Cleveland and accounts for two-thirds of passengers. UAL Corp.’s United has about 14 departures, according to the airline’s web site. The agreement with Houston-based Continental, United and Ohio Attorney General Richard Cordray is based on 2009 service levels, and has additional commitments for three more years. That may ease some concerns raised in an antitrust lawsuit by consumers who said Continental may cut Cleveland flights.

Delta in Cincinnati

Delta now operates 160 daily flights at Cincinnati, or 47 percent fewer than two years ago, said Trebor Banstetter, an airline spokesman. Delta and Northwest had 300 departures as of September 2008, before the recession cut travel and Atlanta- based Delta acquired Northwest, Banstetter said.

Cincinnati service began shrinking in 2005 as Delta started adjusting its hubs, Kristin Baur, an airline spokeswoman, said today in an e-mail. Buying Northwest gave Delta a hub in Detroit, about 229 air miles (368 kilometers) from Cincinnati.

“We’ve always thought that Cleveland was a stronger market” than Cincinnati, Smith said. More than 70 percent of Cleveland air traffic is driven by passengers starting or ending a trip there, compared with 15 percent for Cincinnati, he said.

Besides Cleveland, Continental’s U.S. hubs are in Houston and Newark, New Jersey. The airline also runs a hub in Guam, a U.S. territory. United has hubs in Denver, San Francisco, Washington and Los Angeles along with its hometown base at Chicago’s O’Hare airport, which is 315 air miles from Cleveland.

Cleveland’s population as of July 2009 was 431,369, according to the U.S. Census Bureau, while Cincinnati’s was 333,012.

‘Competitive Advantage’

The agreement is a “competitive advantage” that gives the city time to show that the Cleveland hub “can be very profitable for this new airline” and that businesses can use the airport as part of their business model for travel, said Joe Roman, president and chief executive officer of the Greater Cleveland Partnership, the area’s chamber of commerce.

The region is spending $1.2 billion on four new university hospital units from 2009 to 2011 and $1.3 billion on downtown projects including a new convention center, housing development and a casino, according to the group. Such spending is expected to increase demand for air service, Roman said.

If Cleveland Hopkins can retain at least 70 percent of its 2009 traffic during the next five years, the agreement has the potential to be extended for another five years, said Smith, the airport’s director. That “five-year threshold” is part of “Continental’s efforts to hedge themselves against a catastrophic downturn in the economy,” he said.

Unemployment for the Cleveland metro area was 9.3 percent in July, according to the U.S. Bureau of Labor Statistics. That compared with a 9.5 percent U.S. rate. The city is home to companies such as Eaton Corp., the manufacturer of electricity meters and vehicle transmissions; Parker Hannifin Corp., the world’s largest maker of hydraulic equipment; and Sherwin- Williams Co., the biggest U.S. paint retailer.

To contact the reporter on this story: Juliann Neher in Washington at jneher1@bloomberg.net