"Pittsburgh airport stunned by US Airways' bid to cut lease"

Tuesday, April 1, 2003

County stunned by US Airways' bid to cut lease
By Frank Reeves and Mark Belko
The Pittsburgh (PA) Post-Gazette


When Jim Roddey got a phone call from US Airways Chief Executive Officer
David N. Siegel yesterday morning, he expected a conversation about the
carrier's emergence from bankruptcy.

He offered his congratulations and then Siegel broke the news: US Airways
had decided to negotiate new leases at Pittsburgh International Airport, an
option permitted during bankruptcy but not one it had discussed with the
county.

Roddey, Allegheny County's chief executive, was stunned.

"I can't remember exactly my reaction but it was less than positive. My
congratulatory tone changed," he said.

The airline said it wanted to negotiate new, less costly agreements to
reflect its decision to deploy dozens of smaller, more economical regional
jets at the airport.

The decision will have no immediate impact, Roddey said. US Airways will
continue to make payments under its existing lease, at least until it is
re-negotiated. But there could be big changes if there is no agreement
before next January.

The airline finances the lion's share of the airport's operating budget each
year and is responsible for 85 percent of debt service payments on the new
terminal, which opened in 1992.

In 2001, the airline paid $60.5 million in rental charges and $11.8 million
in landing fees. Should US Airways pull out of Pittsburgh, the other
airlines operating here would be obligated under their leases to pick up the
costs, which Roddey conceded was "not practical." None has anywhere near the
number of daily flights from Pittsburgh as US Airways.

"It's a serious situation, much more serious than it has been at any one
time in our negotiations," Roddey said, adding that the airline already has
re-negotiated its leases at its hubs in Philadelphia and Charlotte to lower
its costs.

He said he plans to meet with Siegel as quickly as he can, possibly later
this week, to begin discussions. He also plans to meet with US Airways
unions.

The decision surprised and angered Roddey and county Airport Authority
officials, who were not expecting the airline to take any action on the
leases as it emerged from bankruptcy, which it did yesterday.

With federal bankruptcy court approval, companies in Chapter 11 may cancel
leases and other obligations as part of their efforts to reorganize so they
can survive once they are no longer shielded from their creditors.

Roddey said that before yesterday's conversation, US Airways officials had
always said they did not intend to reject the airport leases. He described
county and airport officials as "very disappointed" with the way US Airways
had handled the matter.

"We hope that we can negotiate and solidify their position here but at this
point, given the circumstances and given their actions today, I no longer
will take anything for granted," Roddey said.

Roddey ruled out the use of county tax dollars to help the airline. He said
lease savings would have to come from cutbacks in operating costs at the
airport.

He said the county and the Airport Authority also are talking with other
airlines about the possibility of starting or expanding service in
Pittsburgh.

US Airways expects to place an order within the next 30 days with either
Bombardier Inc. of Canada, or Empress Brasileira de Aeronautica SA of Brazil
for 50 50-seat jets and 50 70-seat jets, plus options to purchase another
100 of each aircraft.

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