"American aims to consolidate flights into 1 Lambert concourse"

Friday, July 18, 2003

American aims to consolidate flights into 1 Lambert concourse
BY KEN LEISER AND CYNTHIA WILSON
The St. Louis (MO) Post-Dispatch

  
American Airlines wants to consolidate its remaining flights into one
concourse at Lambert Field when it dramatically scales back schedules in
November. 

And airport officials said Thursday that temporarily closing portions of the
main terminal remains a possibility. 

American spokeswoman Julia Bishop-Cross said the airline would prefer to put
its main-line jets and regional jets in the C concourse and maintain
turboprop service at the smaller B concourse. There have so far been no
talks between the airline and the city about a gate consolidation. 

Responding to its ongoing financial losses, American announced this week
that it will chop its flight schedule at Lambert to 207 departures a day
from 417, discontinuing nonstop service to 27 cities and reducing its
flights on larger jets by 75 percent. 

The Fort Worth, Texas-based airline and its regional partners flying as
AmericanConnection use the B, C and D concourses at Lambert. 

Bishop-Cross said American plans to hold onto the gates until 2005 but
acknowledged that the service cuts would enable the city to take some of the
gates back and rent them out to another carrier. 

"At this point we don't know if the airport wants to take gates back or not.
But they have that option," she said. 

Lambert Field Director Leonard L. Griggs Jr. confirmed that the airport
could take back some gates if traffic dips too much. 

Griggs said American and the other major air carriers collectively pay about
$35 million in rent. American's share is about 60 percent, he said. Those
charges cover gates, ticket counters and other airport space used by the
airlines. 

American also pays a $650,000-a-month surcharge stemming from the city's
purchase of 57 Trans World Airlines gates and related equipment nearly a
decade ago. The city, in turn, uses those proceeds to retire the debt it
took on to finance the bailout measure. 

"I am going to have to sit down with American Airlines because ... they have
debt obligations to us to pay rent on every one of those gates between now
and 2005," when the airline leases and surcharges expire, Griggs said. 

Just how the gates would revert to the city and what American's financial
obligations would be would have to be negotiated, he said. But Griggs said
the airline would have to continue to pay rent until the city finds a
replacement carrier. 

Despite the surcharge and the likelihood of higher landing fees, Griggs said
the airport should still be competitive in luring new airlines. It is not
known whether the airport will pass the surcharge along to a replacement
carrier, Griggs said. 

In the meantime, he said the airport is looking at places to cut costs. One
measure could involve temporarily closing a concourse. Griggs said other
airports have had to close parts of their terminals temporarily. 

"We are looking at every possible contingency to include what would happen
if we vacated a concourse. What would we save by turning the lights out?"
Griggs said. "I am looking at every prudent measure I would have to take." 

Contract carriers will handle most flights for American 

They're the stealth operators of the aviation industry - airlines whose
names are anonymous to most passengers. And come Nov. 1, three of those
airlines together will become the dominant passenger carriers at Lambert
Field. 

The three have contracts to fly routes to dozens of cities under the
American Airlines banner. And while American announced this week that it
will eliminate 210 departures from St. Louis in November, most of those
routes involve American-owned and -operated planes. 

Of the surviving 207 daily flights American will offer here, more than 150
will be flown under contract by Chautauqua Airlines, Corporate Airlines and
Trans States Airlines - all operating as AmericanConnection. 

While the three companies share an affiliation with American, they couldn't
be less alike: 

Trans States, based in St. Louis, flies turboprop planes and 50-seat
regional jets. The company, which flies only for American in St. Louis, has
more than 1,200 employees in the region. 

Chautauqua, based in Indianapolis, flies only regional jets, small aircraft
with a capacity of 44 passengers and a maximum range of 1,200 miles. It is a
growing player in the regional jet business, flying not only for American
but also for US Airways and Delta Air Lines throughout the Midwest, East and
Southeast. 

Corporate Airlines, based in Smyrna, Tenn., flies 19-seat turboprop planes
for American. Most of its flights originate from St. Louis, but it has
several departures from Nashville, Tenn. The company concentrates primarily
on small- to medium-sized cities within 150 miles of St. Louis. 

Of the three, Trans States was hit hardest by American's cuts, losing 37 of
121 daily departures. As a result, it will ground 10 prop planes, said Bill
Mishk, vice president of marketing. 

"Our hope is we can find productive uses for them in the spring. We may be
disposing of them," Mishk said. 

Given the state of the aviation industry, Mishk acknowledged that it might
be difficult to find buyers. In that case, he said, the company would
mothball the planes, an expensive proposition because it still would have to
make lease payments. He declined to say how much the leases cost. 

In addition, the company expects to trim employees, but the number isn't yet
determined. 

Although the affiliates knew cuts were coming, they did not know the details
until American's announcement Wednesday. 

"I will tell you, we essentially had to restructure our entire operation in
a very short period of time," Mishk said. "We had to restructure our
scheduling patterns, the arrivals and departures." 

While both Chautauqua and Trans States lost routes, they also picked up
cities abandoned by American's own planes. 

In addition, Trans States also picked up two cities formerly handled by
Chautauqua: Indianapolis and Cincinnati. Starting Nov. 1, passengers flying
American to either city will travel on Trans States prop planes. They are
the only two large cities that will be served by such planes. 

Chautauqua will lose 10 flights a day - winding up with 41 daily departures
at Lambert - but it will not lose a penny in revenue, said spokesman Warren
Wilkinson. That's because Chautauqua insists on an unusual contract. 

Most affiliate contracts call for revenue to rise and fall with the number
of flights. But Chautauqua negotiates fixed fees, so revenue is not
dependent on the number of flights. 

Despite eliminating flights, the company will not lay off any of its 250
employees in St. Louis, and it will keep flying all 15 of its St.
Louis-based jets, Wilkinson said. 

In fact, Chautauqua planes will fly more miles after the flight reductions
in November, because the company will take over longer routes operated today
by large American jets. Company officials declined to say which cities. 

"They will be much larger markets," said Wilkinson. "The capabilities of the
(regional jet) aircraft will be fully utilized." 

Unlike Chautauqua and Trans States, virtually nothing will change for
Corporate Airlines, said President Doug Caldwell. All 35 routes will stay
intact, reflecting the special niche that the company serves, primarily
business travelers to smaller cities in the region. 

"The people going to small- and medium-size communities are not going to be
served from Peoria to Eugene, Ore., on JetBlue," a profitable, low-fare
airline that limits its operations to large markets, Caldwell said. 

Pressure by Southwest hurt AA 

Competition from low-cost leader Southwest Airlines was likely a major
factor in American Airlines' decision to cancel service to 27 cities from
Lambert Field and reduce the number of flights it offers to other
destinations. 

Southwest, which operates 67 daily nonstop flights from the East Terminal at
Lambert, offers competing service to 13 of the 27 cities where American
canceled service, effective Nov. 1. The two airlines will continue to
compete on five other routes, including to three cities in Florida. 

American, the world's largest airline, laid out its latest plans for St.
Louis on Wednesday, when it announced it would cut service here by more than
half to strengthen its Chicago and Dallas hubs. The plan, American said, is
to shift much of the connecting traffic that now comes through St. Louis to
those other hubs, leaving Lambert with flights mainly used by passengers
leaving and coming here. 

A spokeswoman for American said the 27 cities had high operating costs and
low profits. "The reason we picked those routes is because they were not
performing well" financially, said Julia Bishop-Cross. 

Industry experts say American was getting hammered on those routes because
it had to compete on fares with Southwest. 
  
Tom Parsons, chief executive of BestFares.com, said Southwest's $34 one-way
specials made it especially hard. 

"When they ran a deal, it was not uncommon for Southwest to run St. Louis to
10 or 11 cities for $68 round-trip - which American had to match," Parsons
said. 

"American is forcing connections through (Dallas and Chicago) where they
have more planes, and they don't want them to go through St. Louis because
they're not making (as much) money," Parsons said. 

American hopes the cuts also mean St. Louis-area travelers will fill 50
percent or more of the seats being offered at Lambert under the slimmed-down
schedule, Parsons said. 

Some flights, such as those to Vancouver, British Columbia; Honolulu; and
Shreveport, La., probably warranted cancellation, because they likely didn't
generate enough local business, said Richard Aboulafia, senior aerospace
analyst for the Teal Group in Fairfax, Va. 

That's a sign that the hub at Lambert is in decline, Aboulafia said. 

But even if the St. Louis routes where American did not compete with
Southwest were doing well, it might have canceled them in favor of routing
passengers through Chicago, because that's where the carrier sees growth. 

Parsons said American has always played second fiddle to United Airlines in
Chicago. But this may be a good time to apply pressure on its chief rival. 

"Now is the best time to strike, when everyone's not sure what United's
future is," Parsons said. "Business travelers are irritated with United.
American is concentrating on stealing United's passengers. " 

Bishop-Cross said American will add more American Eagle flights at Chicago's
O'Hare International Airport. But no other flight additions have been
announced for that hub or American's hubs in Dallas and Miami. 

American has available seats on many flights at those airports, Bishop-Cross
said. And the airline believes those extra seats will accommodate many of
the passengers who now connect through St. Louis. 

American hasn't said if it plans to move any large jets based at Lambert to
Chicago. Nor has it notified its pilots union of any planes to be reassigned
to Dallas or Chicago. 

But a spokesman for the pilots union said Thursday it would not be a
surprise if pilots are reassigned. 

Whatever happens in Chicago and Dallas, some industry experts say American
is giving its St. Louis hub a chance to become profitable by cutting routes
and relying more on smaller planes to the cities it will continue to serve. 

Area travelers will notice the difference. Only 53 of 207 daily flights
American will offer this fall will be on its own larger jets. Of the
remaining 154 flights, 85 will be on regional jets and 69 on turboprop
planes. 

American will offer fewer flights to cities on its larger jets than it will
on turboprop airplanes, but only three new cities, Cincinnati, Indianapolis
and Springfield, Mo., will be moved from jet service to turboprops this
fall. 

Some travelers may find the ride more cramped and a little bumpier. 

But American stands a better chance of improving its bottom line, Aboulafia
said. 

"Turboprops make sense on many short routes," he said. "They make a lot of
sense on routes of less than 250 miles, and a fair amount of sense or routes
up to 600 or 700 (miles). They're going to have better economics than
regional jets, especially since you can get used props for relatively
little" money. 

Bishop-Cross said American hopes the new schedule will help the airline be
profitable. "If that proves to be true, then we look for even more
opportunities to offer more flights from St. Louis." 

Attached Photo:

American Airlines Jetliner waits at Lambert Field.

aa18big.jpg