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Airline says loss will cost $1.8B
Brad Bumsted is a state Capitol reporter for the Tribune-Review. He can be contacted via e-mail or at 717-787-1405.
The airline used the six-hour, closed-door session in Harrisburg to lay out a plan for government to lower its cost of doing business at Pittsburgh International Airport. The only information it released to the public was a study trumpeting its importance to Pittsburgh International, where it's the dominant carrier, and to Western Pennsylvania.
A US Airways-commissioned economic impact study said that if the airline closes its Pittsburgh International hub, as it has threatened to do, it will blow a $1.8 billion hole in the region's economy each year. Job losses would total 17,000, the airline said.
The bottom line: The financially troubled US Airways wants officials to reduce the $673 million in debt on the airport -- built largely to the airline's specifications -- by $500 million. It didn't say where the money would come from.
"The goal is to find a way to keep that hub and to help service that debt," Chris Chiames, the airline's vice president of corporate affairs, said after the meeting. "That's the goal. What we discussed (Wednesday) as far as any type of proposal -- it was simply a concept... ."
Allegheny County Chief Executive Jim Roddey agrees that "we've got to lower the debt in Pittsburgh. We understand that. Whether we can lower it enough, that will have to come out in future negotiations."
That doesn't mean Roddey, who attended the meeting, is championing a deal to keep the airline.
"I think I'm still neutral," Roddey said afterward.
A debt reduction would benefit US Airways because it would lower the amount the airline contributes each year to pay off the bonds sold to build the Findlay airport. US Airways now pays $50 million a year, although it renounced its repayment deal with the Allegheny County Airport Authority just before it emerged from Chapter 11 bankruptcy protection on March 31. The cancellation is effective Jan. 5, and the airline has threatened to close its hub if it doesn't get a sweeter deal.
The airline says it has 7,292 employees in the region.
In keeping with the theme of few answers for the public, US Airways wouldn't say how much it would be willing to pay each year to maintain its near-monopoly at Pittsburgh International.
Also among the unanswered questions:
A US Airways news release says the "$500 million (in debt reduction) could be recouped through the realization of $31 million annually in new revenue sources."
Asked to explain the $31 million, US Airways' Chiames told a reporter, "Nice try."
US Airways spokesman David Castelveter would not say whether the airline proposed that the money come from new taxes, future revenue, Rendell's proposed $2 billion economic stimulus package, county government or the airport authority.
Negotiators said little about the proposal following the meeting. John Estey, Rendell's chief of staff and the state's lead negotiator, said the airline's proposal includes options for meeting its demand.
"There were a number of different options and strategies discussed," he said. "At the moment, there are several different things we are reviewing."
Rendell sent copies of the proposal to Allegheny County Controller Dan Onorato and Philadelphia Controller Jonathan Saidel to review. Onorato, like Rendell a Democrat, is challenging Roddey, a Republican, in this year's election for county chief executive.
US Airways' economic impact report, prepared by Campbell-Hill Aviation Group, of Alexandria, Va., said the airline's hub contributes $3.1 billion a year to the region's economy and is responsible for 33,000 jobs, including the airline's 7,292. The airline accounts for nearly 80 percent of the flights at Pittsburgh International.
If the airline shut down its hub, the region's economy would lose $1.8 billion annually and 17,100 jobs, the report said.
Aviation analyst Mike Boyd, of the Boyd Group in Colorado, said the figures don't sound farfetched. "Just hearing those numbers, I don't argue with any of them," he said.
Negotiations between the airline and the state and county began after US Airways canceled its leases at Pittsburgh International, effective Jan. 5, just before it emerged from Chapter 11 bankruptcy protection on March 31.
US Airways demanded the county airport authority lower the airline's cost of doing business by reducing airport debt. It also wanted various improvements at Pittsburgh International and Philadelphia International Airport, also a US Airways hub. The state estimated that meeting the airline's demands in Pittsburgh and Philadelphia would cost $864 million.
Roddey is expected to relay details of US Airways' proposal to the airline's labor leaders.
"I'm anxious because I do want to hear the proposal," said Chris Fox, president of the Communications Workers of America Local 13302. "I can't figure out what the new revenue sources would be."
Negotiators are expected to meet again in early October, Estey said. There likely will be one more meeting after the October session, he said.
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