"US Airways unveiling plans for Pittsburgh hub"

Wednesday, September 17, 2003

Airline unveiling its plans for hub
US Airways finally responding to state's cost-cutting offer
By Frank Reeves
The Pittsburgh (PA) Post-Gazette


Critical talks that could go a long way in deciding whether US Airways keeps
or abandons its hub operations in Pittsburgh begin today in Harrisburg
between the airline and government officials.

Months after the state made its pitch to keep US Airways here, the airline
is expected to present Gov. Ed Rendell with a counter-offer on slashing its
costs at Pittsburgh International Airport.

US Airways Chief Executive Officer David Siegel has said that the airline
must reduce those costs and that if it is unable to do so, the carrier was
"fully prepared to exit Pittsburgh."

Such a move would threaten the jobs of many of the nearly 9,000 US Airways
employees in southwestern Pennsylvania.

Today's closed-door talks are only the second time that government and
airline officials have met face-to-face since Rendell in June offered the
airline a $263.9 million package of cost-savings concessions and airport
improvements.

The package fell well short of the $600 million the airline said it needed,
but Siegel nonetheless welcomed the move and expressed optimism that a deal
could be worked out. But the goodwill that marked that meeting faded as the
airline failed to get back quickly with a formal response.

At today's meeting, the airline will offer a plan that it said will solve
the airport's "debt problem" and allow it to achieve the savings it says are
necessary for it to be profitable in Pittsburgh, according to spokesman
David Castelveter.

US Airways last year paid about $62 million in lease costs at the airport,
nearly all of which went to pay down the airport's construction debts.

US Airways has said it would like to reduce the airport's $673 million debt
by $500 million, thus bringing its overall costs here -- now about $9 per
passenger -- in line with those at its Charlotte, N.C., hub, where it's less
than $2.

Since the two sides last met on June 18, government officials have grown
increasingly wary of the airline's delays in responding to Rendell's offer.

But this week, Allegheny County Chief Executive Jim Roddey, a member of the
13-member negotiating team appointed by Rendell, said he was cautiously
optimistic that an agreement can be reached that would permit the airline to
keep significant operations in Pittsburgh.

"I tend to be optimistic. But they've disappointed us so much during the
past few months," Roddey said.

The airline's decision as it was exiting bankruptcy in March to cancel its
Pittsburgh airport leases, effective Jan. 5, angered Roddey and many local
and state officials, who thought they had the airline's assurances that
everything was OK.

Allegheny County and airport authority officials have been skeptical that US
Airways could find a way to reduce the airport's debt costs without
extending the life of the bonds and, in all likelihood, increasing the
amount of interest paid over time. They've also rejected any proposal that
would have the airport default on the debt.

Roddey said he was trying to go into the meeting with an open mind, prepared
to listen as airline officials explain the carrier's plans.

"I think we're going to be looking at what they have to offer and what they
perceive they would like to have from us. We gave them an offer. We're
waiting for an offer back.," said Airport Authority Executive Director Kent
George.

Rendell has said that US Airways will get nothing to bolster its operations
in Philadelphia if it abandons Pittsburgh or significantly scales back its
operations here.


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