"Pittsburgh Airport debt worries Allegheny County controller"

Friday, June 28, 2002

Airport debt worries Allegheny County controller 
Others less concerned on US Airways' plight
By Mark Belko
The Pittsburgh (PA) Post-Gazette


Allegheny County taxpayers wouldn't be on the hook for Pittsburgh
International Airport debt or operating expenses should US Airways stop
flying, county Controller Dan Onorato said yesterday.

In that worst-case scenario, other airlines operating from the airport
would be required to step in to fill the financial void or the debt
payments would be covered by insurance.

But during a news conference, Onorato said there were risks associated
with both of those situations. Onorato's statements came as the airline
tries to negotiate nearly $1 billion in annual concessions from its
employees and millions more from suppliers in an effort to get $900
million in federal loan guarantees and to avoid bankruptcy.

Negotiations continued yesterday, and the airline hopes to reach
settlements by the end of today to support its application for a
federally guaranteed loan made this month to the Air Transportation
Stabilization Board.

At the airport, US Airways now covers 85 percent of annual debt service
payments, which will equal $66 million this year and $62 million in each
of the next five years. It also accounts for 85 percent of the airport's
annual operating revenue, which totals $131.6 million this year. The
revenue comes from rates and charges paid by airlines operating from
Pittsburgh.

Onorato doubted the other eight major airlines covered under the airport
operating agreement would have the financial wherewithal or desire to
cover US Airways' portion of debt and operating expenses.

Should they be unable to make the payments, insurance on $729.1 million
in revenue bond debt still outstanding from the construction of the
midfield terminal 10 years ago and other projects would kick in.

But Onorato said that comes with a price -- the bond insurers could step
in and take control of the airport from the airport authority and
essentially act as trustees.

That would not be desirable, he said.

"I don't think anyone at county government or the authority wants to be
in the position of telling people we're using insurance to pay for
[debt]," he said. "That's not a healthy sign."

His other worry was that any other airline willing to step in to take US
Airways' place should the carrier cease to operate may want concessions
from the authority or the county. In that situation, taxpayers
conceivably could be asked to subsidize the deal.

"We no longer will have leverage [in negotiations]," he said.

Both county Chief Executive Jim Roddey and airport authority Executive
Director Kent George dismissed Onorato's concerns.

George said the other eight major airlines would be legally required to
pick up debt and operating costs under their agreement with the
authority. He said it was "not a conceivable scenario" that they would
default.

Nor, he said, is it likely another airline seeking to enter the market
would demand concessions, since the other airlines and bondholders would
have to agree to any changes in the agreements.

Roddey accused Onorato of "attempting to create anxiety about the
long-term viability of airport operations by sensationalizing already
well-established facts regarding" debt obligations.

"Rather than conjecturing about unlikely circumstances, those of us who
are truly committed to the region's future are working to identify
solutions that ensure the success of US Airways and Pittsburgh
International Airport," he said.

George said the authority has developed contingency plans in light of a
possible bankruptcy by US Airways. However, even if the carrier were to
seek protection from its creditors, he does not believe that would
affect its airport payments.


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