"US Airways says losing Pittsburgh hub would cost region $1.8 billion a year"

Thursday, September 18, 2003

Airline says losing hub would cost region $1.8 billion a year
By Mark Belko
The Pittsburgh (PA) Post-Gazette


As US Airways executives made their pitch to government leaders behind
closed doors, the carrier launched a separate public campaign yesterday on
the need to cut costs at Pittsburgh International Airport, saying the loss
of the hub could cost the region $1.8 billion a year and 17,100 jobs.

Without the hub, according to an economic impact study released by the
airline yesterday, Pittsburgh also would lose 74 of 110 nonstop
destinations, including Los Angeles and San Francisco, and nearly two-thirds
of its 8.5 million annual boardings.

Eight smaller Pennsylvania cities -- Altoona, Bradford, Du Bois, Franklin,
Johnstown, Latrobe, Reading and Williamsport -- would lose air service
altogether. And Pittsburgh travelers no longer would be able to fly nonstop
to four international destinations -- Frankfurt, Montreal, Montego Bay and
Ottawa, the analysis said.

The study was done by Campbell-Hill Aviation Group Inc., an Alexandria,
Va.-based consulting firm. US Airways spokesman David Castelveter said he
did not know the cost of the study.

US Airways posted the study results on its Web site and made a pitch for
support in an e-mail to frequent fliers.

In the e-mail, B. Ben Baldanza, senior vice president of marketing and
planning, said the airline's "ultimate objective" is to remain in Pittsburgh
and improve service with the introduction of regional jets.

"We continue to believe that there is a solution that will allow us to
retain our hub at Pittsburgh International and continue to provide our
customers in Western Pennsylvania with the highest levels of air service
possible," the e-mail said.

Besides touting the economic benefits of the hub, the study said it was
unlikely the Allegheny County Airport Authority and local politicians could
recruit other carriers to replace service lost by US Airways.

Brian Campbell, president of Campbell-Hill Aviation Group, said he did not
believe any new carriers would enter the market and existing airlines would
expand only modestly, if at all.

He said JetBlue, one of the sought-after discount carriers, would have to
devote nearly its entire fleet of 45 planes to Pittsburgh to replace the
lost US Airways service. Air Tran, another discount carrier that dropped
service to New York and Philadelphia from Pittsburgh because of a lack of
interest, would have to devote nearly half of its fleet here.

"My guess would be that within the first two years after US Airways pulls
down the hub, the sum total [of replacement service] might be 20 percent of
what US Airways vacates and that, I might say, is optimistic," Campbell
said.

With the loss of US Airways' traffic, the airport's cost per passenger, now
slightly more than $9, would skyrocket to an estimated $25, Campbell said,
making Pittsburgh uneconomical to low-cost carriers.

At $25 a head, "Southwest [Airlines] would laugh at you," he said.

He said two airports that lost hub carriers years ago -- Raleigh-Durham,
N.C., and Nashville, Tenn. -- have been unable to replace the majority of
the nonstop destinations they lost.

While not disputing the overall thrust of the report, Allegheny County Chief
Executive Jim Roddey said he believed the county and the airport authority
would be more successful than the study suggests in recruiting airlines.

He also disputed Campbell's claim that the airport's per-passenger cost
could jump all the way to $25 without US Airways, saying the airport
authority's projections aren't that high.

Michael Boyd, an Colorado-based aviation consultant who has done work for
Pittsburgh International Airport, concurred with the study's major findings.

"If US Airways leaves, you're not going to get them back and you're not
going to replace them," he said. "People who tell you otherwise are either
charlatans or people who don't know what they're talking about."

John Estey, Gov. Ed Rendell's chief of staff. said, "We might quibble about
whether the [US Airways] impact is $2 billion or $3 billion or $4 billion,
but we all agree that US Airways is a significant presence in Pennsylvania."


The US Airways study also claimed the hub has helped to attract and maintain
major employers, noting that Pittsburgh has seven Fortune 500 headquarters,
compared to 2.7 for similarly sized cities.

The carrier said the hub contributed about $3.1 billion in 2002 to the
greater Pittsburgh economy through a variety of direct and indirect ways,
including tourism.

In its negotiations with the state, US Airways is seeking to eliminate $500
million in airport debt. It said that could be done by finding $31 million a
year in new revenue sources -- "a small price to pay," it said, compared to
the economic losses that would occur should the hub be eliminated.

One frequent flier who wasn't buying the US Airways pitch was Dr. Arthur E.
Uber III, a research engineer for Medrad Inc.

"The fact that Pittsburgh has seven Fortune 500 headquarters is a reason for
US Airways to want to keep a hub here," he wrote in a reply to Baldanza.
"These headquarters will not leave if you do. These headquarters also will
encourage other airlines to quickly move in to fill your void."

He also suggested that service to smaller Pennsylvania markets would be
filled by other carriers and that US Airways' current dominance in the
market may actually hinder tourism.

"It seems from the content of your e-mail that you believe US Airways is the
lone horse pulling the economic cart, rather than one useful member of a
whole team of draft horses. If you have to quit the team for your own
reasons, there are seven other strong horses and we'll work to find an
eighth. Having a friendly parting of the ways makes more sense than giving
one horse double rations in response to its whining," he said.

On the Net:

ECONOMIC IMPACT STUDY FINDS PITTSBURGH AIR HUB GENERATES $3.1 BILLION FOR
REGION, SUPPORTS 33,300 JOBS

http://www.usairways.com/about/press/nw_03_0917.htm


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