"St. Louis gives American-TWA deal big thumbs up Hub status"

Tuesday, January 16, 2001

St. Louis gives American-TWA deal big thumbs up Hub status, direct flights
important
By Chris Woodyard
USA TODAY


On St. Louis talk radio, the airwaves crackled last week with calls from
concerned listeners pondering the fate of hometown carrier Trans World
Airlines.

Far from the hand wringing that might be expected, employees and travelers
alike gushed over the prospect of American Airlines' proposed $500 million
purchase that would wipe out another storied name in commercial aviation.

''I think you could boil everyone's reaction down to one word. It would be
'relief,' '' says Charles Jaco, host of KMOX's afternoon Newsmakers show.

The relief stemmed from American's assurances that St. Louis would play a
key role in its network, maintaining its status as a hub for a major
airline.

Anywhere else, a dearth of non-stops might be viewed as merely inconvenient.
For St. Louis, the possibility borders on disastrous.

That's because St. Louis has the nation's largest concentration of Fortune
500 companies, and high-level business travelers hate to make connections.

The ability to fly people directly to where they want to go is a source of
local pride. It makes St. Louis, and its famous arch, more than the gateway
to the West. Because of TWA, the Midwestern metropolis is the gateway to 91
cities, including London and Paris.

''It's important that our city maintain its hub,'' says Pat Farrell,
spokesman for Enterprise Rent-A-Car, which has its national headquarters in
St. Louis.

''We need to be a world-class city.''

A best-known business

With 73% of passengers flying from Lambert-St. Louis International Airport
on TWA, the airline is one of St. Louis' best-known businesses. The home of
the St. Louis Rams, which have less than two weeks left in their reign as
Super Bowl champs, is the TWA Dome.

St. Louis companies over the years helped TWA through its darkest days. In
one instance in the mid-1990s, companies bought millions of dollars in
advance-purchase tickets to pull TWA through a cash crunch.

But TWA always needed more than temporary fixes. The airline was dogged by
one hurdle after another: deregulation, pillaging by corporate raider Carl
Icahn and soaring fuel prices. Operational performance improved even if the
account ledger didn't.

''TWA has been struggling for so long,'' says Jack O'Neill, president of the
corporate division of St. Louis-based Maritz Travel, one of the nation's
largest travel services. ''Of several possible outcomes, American acquiring
TWA is one of the best.''

Rather than see TWA succumb, the deal assures that American would get up to
190 TWA planes, 175 gates and 173 landing slots at various flight-restricted
airports. American has vowed to salvage the 7,783 union-affiliated TWA jobs
in St. Louis, the bulk of its workforce of 8,960 around the city.

TWA's assets look like a relative bargain compared with the other deals that
American simultaneously announced last week.

American would pay $1.3 billion to buy aircraft, landing rights, gates and
other costs needed for US Airways' air shuttle between Boston, New York and
Washington.

US Airways needs to sell its shuttle to avoid antitrust complications
arising from its purchase by United Airlines.

American would become a 49% owner in DC Air, the airline being created to
operate the shuttle, and would fly its planes under a lease agreement.

As big as the shuttle deal is, TWA had center stage last week.

''The addition of TWA will not only give us an important new hub in St.
Louis, but also significantly improve our position as a (transcontinental)
carrier,'' Don Carty, CEO of American Airlines and parent AMR, said last
week.

Construction at American's primary hub at Dallas/Fort Worth airport will
limit growth in air traffic for the next three to four years, he says. And
the carrier's other main hub, Chicago's O'Hare, is also badly congested and
lacking room for growth.

St. Louis, halfway between the two, becomes a worthy alternative.

''Quite frankly, we're thrilled with this,'' says Larry Katzen, managing
partner for the St. Louis office of accounting giant Arthur Andersen, one of
TWA's larger customers with 400 traveling employees.

''Our No. 1 issue was whether the 'God forbid' scenario would happen and
create a void here in St. Louis.''

A high priority

Non-stop service, he says, is a higher priority than even low fares.
Employees need to get to their destinations quickly and easily, the kind of
service that TWA provided.

''We'd prefer to have a hometown airline,'' Katzen says. ''But if they
aren't going to be able to survive, we couldn't have come up with a better
choice than American Airlines.''

Besides, Lambert has seen more low-fare service that gives travelers an
alternative to higher-priced airlines. Southwest Airlines' market share in
St. Louis has grown to about 11%. The presence of Southwest tends to hold
down fares on the routes on which it serves.

The stakes for St. Louis aren't just flights and jobs. The awkward
disappearance of TWA could have spelled trouble for a $2.6 billion expansion
of Lambert that would add a sixth runway.

Airport officials have projected heady airport growth to justify the
expansion.

The 503,000 takeoffs and landings last year, for instance, are expected to
reach 632,000 by 2015.

Delays caused by weather cost $75 million a year for airlines flying in and
out of St. Louis. The cost could grow to $400 million annually if there is
no expansion, officials warn.

Already, the project is controversial. The airport, surrounded by factories,
suburban houses and hotels, is buying land to add another runway by 2006.

The sixth runway would allow the airport to continue operations with more
than a single runway during thunderstorms, snow or fog. Bad weather triggers
instrument flight-rule conditions that can slow air traffic to a crawl at an
airport that handled 30 million passengers in 1999.

But in order to build the runway, the airport would have to bulldoze two
schools, two churches and 2,000 homes, including the mayor's home, in
neighboring Bridgeton.

Much of the St. Louis business community supports American's purchase of TWA
because it would encourage the airport's expansion, says Richard Fleming,
CEO of the Regional Chamber and Growth Association.

That's why the deal is being viewed with local boosterism.

The expansion of the airport and American's flight schedule will ''bring St.
Louis back to the forefront,'' says Brad Frick, a principal at brokerage
Edward Jones.

About Lambert-St. Louis International

* It ranks 11th in North America for aircraft operations and 15th in total
passengers. About 30 million passengers passed through the airport last
year.

* There were 502,865 landings and takeoffs in 2000.

* The airport has 650 daily flights, of which 330 are on TWA. Two of TWA's
daily flights are international: London and Paris. The largest low-fare
carrier, Southwest, has 85 daily flights.

* In addition to TWA and Southwest, other major airlines serving the airport
include American, American Trans Air, America West, Continental, Delta,
Northwest, United and US Airways. Lambert also has five commuter airlines,
eight cargo carriers and four major charter airlines.

* There are 83 gates.

* A $2.6 billion expansion would add a sixth runway by 2006.

* Lambert employs more than 19,000 people.

* Estimated economic impact on the surrounding region because of activity at
the airport is estimated at $5.1 billion a year.

* The airport is named for Maj. Albert Lambert, who developed the location
as an airfield in 1920. After taking his first plane ride with Orville
Wright, Lambert became the first St. Louis resident to earn a pilot's
license.

* Charles Lindbergh stopped off at Lambert in May 1927 on his way to New
York, where he began his historic non-stop flight to Paris. His plane was
named ''The Spirit of St. Louis.''

Source: Lambert-St. Louis International Airport; Airport Council
International

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