"US Airways can't leave Pittsburgh before January"

Saturday, July 26, 2003 

US Airways can't move until January
By THOMAS OLSON
The Monessen (PA) Valley Independent


ALEXANDRIA, Va. - US Airways and Allegheny County settled an arcane legal
dispute here Friday, assuring that the airline cannot pull out of Pittsburgh
before Jan. 5, 2004, without the county's approval. 

The settlement in U.S. Bankruptcy Court also will hand Allegheny County and
its Airport Authority roughly $4.2 million in new US Airways stock, which
the airline plans to issue. 

Jan. 5 had been US Airways' drop-dead date for extracting from the county
cheaper terms for leasing gates and other facilities at Pittsburgh
International Airport. If the Airport Authority did not lower the carrier's
roughly $62 million per year lease payments by then, it threatened to drop
its Pittsburgh hub. 

As part of the settlement, the county and the Airport Authority agreed to
withdraw its claim of $1.4 billion against US Airways. The amount is what
Pittsburgh International figured it stood to lose over the next decade -
namely the time left on its 25-year airport leases dated 1988 - if US
Airways suddenly pulled out. 

The two sides agreed to reduce the $1.4 billion claim to $211 million, which
will be reduced under US Airways bankruptcy to about 2 cents on a dollar, or
$4.2 million in stock. 

The two sides are expected to finalize details of the settlement over the
weekend. They had been quietly negotiating a settlement for several weeks,
attorneys involved said. 

"We are pleased to have cooperatively resolved these issues. Now we can
focus more of our attention on reaching an amicable agreement with the state
of Pennsylvania and Allegheny County to find a way for us to profitably
retain our Pittsburgh hub," US Airways CEO David Siegel said in a statement.


The hearing was in U.S. Bankruptcy Court, where Arlington, Va.-based US
Airways declared Chapter 11 bankruptcy last Aug. 11 and where it legally
exited bankruptcy on March 31. 

The county and Airport Authority filed the $1.4 billion claim against US
Airways in early April. It did so days after US Airways rejected its leases
at Pittsburgh International as of Jan. 5, as bankruptcy law protection
allows. 

In addition to rejecting those leases, US Airways wants Pennsylvania to pay
for improvements at Pittsburgh International and at Philadelphia
International Airport. In Pittsburgh, that would mean modifying terminal
gates and hangars in order to accommodate US Airways' incoming fleet of
regional jets. 

The airline, Pittsburgh's largest, said it wanted $846 million in lease
concessions and improvements to the two airports. Most recently, state and
local officials countered with a package worth about $264 million. 

Gov. Edward Rendell had wanted to reach agreement with US Airways by July
18, but the two sides continue to negotiate. 

By settling the $1.4 billion claim instead of litigating it, the feuding
parties sidestepped the crux of the dispute over the multifaceted operating
agreement between US Airways and the Airport Authority. Namely: Does that
agreement, under bankruptcy law, represent just a fancy property lease, or
something more? 

"The parties do not believe this agreement has any precedential value," US
Airways attorney John Lyons told the court. 

Industry watchers and debt-strapped airports around the nation were watching
to see how the dispute would play out. But the last-minute settlement meant
U.S. Bankruptcy Court Judge Stephen Mitchell did not have to legally define
the operating agreement. 

The operating agreement sets out how US Airways -- and all other carriers at
Pittsburgh International - split the cost of running the airport. The
agreement covers carriers' payments on gate and ramp leases, landing fees,
airport debt service payments and the like, as well as airlines' share of
non-airline revenue from rental car and parking fees. 

When the airport has a good year financially, it returns money to US
Airways. When it's a poor year, US Airways' costs go up. 

The airport authority spends about $62 million per year to repay holders of
the bonds that funded construction of Pittsburgh International. Opened in
October 1992, the airport was primarily structured around the needs and the
growth plans of its main tenant, US Airways. Of that annual $62 million, US
Airways lease payments represent about $50 million.


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