Airport to Deal for Link to Philly

Airport to Deal for Link to Philly

November 9, 2003

 

Southwest Airlines has announced plans to fly to Philadelphia in 2004, and the impact of that announcement has created ripples all the way to Erie.

"This could have a huge impact on US Airways," said Erie International Airport Director Kelly Fredericks.

US Airways' hub in Philadelphia is one of the airline's major revenue generators, said Christopher Rodgers, director of strategic development at Erie International.

Everyone is waiting to see what happens to the financially struggling US Airways if Southwest establishes a presence in Philadelphia and competition from the low-cost airline forces down fares and revenues at the hub.

What makes this relevant in Erie is that Erie International officials plan to convince US Airways to launch direct service from Erie to the Philadelphia hub in the second quarter of 2004 — just about the same time Southwest would arrive. Fredericks said he believes the planned direct Erie-to-Philadelphia service will go through as planned, despite the Southwest announcement.

"US Airways obviously has a lot bigger fish to fry than Erie, but we have federal grant money to wave in front of them," he said, adding that the grant money might be an even more convincing factor to a cash-strapped airline.

In fact, Fredericks said, Erie is in a better position to deal with whatever fate befalls US Airways than many other airports. US Airways was once the dominant carrier at Erie International, carrying more than 75 percent of Erie passengers to its Pittsburgh hub.

But over the past two years, airport officials have made a push for additional air service. Northwest Airlink — the commuter arm of Northwest Airlines — enhanced its service to Detroit and is now in a virtual tie with US Airways as the lead carrier in the Erie market. Also, airport officials recruited Delta Air Line's affiliate Comair to provide Erie-to-Cincinnati service, and CommutAir restored Erie service to Continental Air Lines' hub in Cleveland.

Local officials are not the only ones who see the advantages of that diversification. Pennsylvania's new Secretary of Transportation Allen Biehler does, too.

"That is an advantage. It's a good thing. That way, what happens to one airline doesn't cripple a city, as it might in the case of Pittsburgh and Philadelphia," said Biehler, on a visit to northwestern Pennsylvania Tuesday. US Airways' hubs make it dominant in both cities.

Biehler said the arrival of Southwest would be good for Pennsylvania, but he stressed that the status of US Airways is a statewide concern.

"The big concern is keeping our air industry healthy within the commonwealth," Biehler said. "Obviously the Governor (Edward Rendell) has been involved in discussions with US Airways, and he is obviously spending the majority of the time with Pittsburgh and Philadelphia interests under the theory that so go those really critical hubs, so might fall places like DuBois and other smaller cities throughout the commonwealth."

"We hope that has a happy ending; we are also hopeful that there will be more competition within the industry. There might be other airlines that have an interest in coming into our region," Biehler said.

Fredericks said until recently he was convinced US Airways would evolve into a leaner, stronger, more competitive airline after it emerged from bankruptcy protection. But now he questions that. He said the airline's costs remain among the highest in the industry, and to get costs down, the airline might have to make more cuts in capacity and available seats. That might further erode revenue.

In any case, Fredericks said, Erie International is committed to doing everything it can to promote the success of all the airlines that serve Erie.

Fredericks said the "hub-and-spoke" aviation model will survive, but there might be fewer hubs and a consolidation of major carriers. He said the introduction of low-cost carriers in Philadelphia, and possibly Pittsburgh, could lower fares, and Erie travelers could benefit.

"What we might also see is a lot more separate regional carriers step in," Fredericks said. "Because of the way the industry is going, we could see more point-to-point flying and regional jets going to more destinations."

Airline industry experts are divided on Southwest's intention of going into Philadelphia. If Southwest is going to Philadelphia as an assault on US Airways, as Fredericks said some in the industry suspect, the competition and fare war might be more intense.

But Colorado aviation consultant Michael Boyd said that is not the case. In an analysis posted on the Boyd Group's Internet site, he said US Airways is just a "bystander" in the move — that Southwest's real motivation is to protect its flanks from competition from other low-cost carriers — specifically JetBlue and its expansion plans.

Rodgers, meanwhile, said the move into Philadelphia also represents a gamble for Southwest. Southwest has announced plans to enter the Philadelphia market with 14 daily flights. US Airways has about 400 daily flights out of Philadelphia.

Rodgers said the danger for a low-cost carrier challenging a major airline in a hub is that it will force costs lower, but the airline will match them. Then passengers take the low fares on the dominant airline, which offers more destinations and provides the perks that earn loyalty of frequent fliers.

"The low-fare airline pushes prices down, but loses because people fly other airlines," Fredericks said.

In any event, local officials said air service in Erie has been growing, and they said the airport is in a relatively good position to deal with changes in the industry.