Allegheny County Airport Authority: US Airways Must Decide By January

November 13, 2003

Airport Authority: US Airways Must Decide By January
Pittsburgh Business Times, PA


Among all of the uncertainty surrounding the future of US Airways' hub at
Pittsburgh International Airport, one thing is certain from the Allegheny
County Airport Authority's perspective.

"The deadline to accept or reject the Pittsburgh lease will not be
extended," Airport Authority chairman Glenn Mahone told those gathered
Wednesday night for the Allegheny Conference on Community Development's
annual meeting.

After rejecting its leases at Pittsburgh International as part of its
successful emergence from Chapter 11 bankruptcy protection in March, US
Airways asked the county last month to allow it to operate under its
current lease for another year. In return, it pledged to keep its hub
there for the length of that term.

Previously, the airline had agreed to maintain its current number of
flights until Labor Day 2004, in order to give some breathing room to
negotiators working to reach a new lease agreement.

Airport Authority solicitor Jeffrey Letwin said the agency sent a letter
to US Airways about a week ago, informing the airline that it would not
grant its request for a one-year lease extension. He said the Airport
Authority was encouraged by US Airways' request, but it wants to negotiate
something more certain than just a short-term fix.

"We're interested in a long-term resolution that keeps US Airways here and
hubbing here," Mr. Letwin said. "We want them recommitted to Pittsburgh."

David Castelveter, a spokesman for US Airways, said that's what the
company wants, too.

"We regret that there continues to be confusion, even by the Airport
Authority, about what the negotiations are about," Mr. Castelveter said.
"We are not asking for a bailout or a subsidy of the airline. The issue is
whether there is a way to maintain our Pittsburgh hub by making the
airport more cost competitive in a rapidly changing industry."

The nation's seventh-largest airline initially set a Jan. 4 deadline for
wrapping up the lease negotiations and threatened to reduce or eliminate
its hub operations in Pittsburgh, as well as possibly move its
Pittsburgh-based regional airline, MidAtlantic Airways, depending on the
outcome.

Arlington, Va.-based US Airways, which operates its second-largest hub at
Pittsburgh International, wants to see the airport's $673 million in
outstanding debt slashed by $500 million.

US Airways accounts for the bulk of the airport's traffic, as well as the
bulk of its debt obligation. The airline has 396 daily flights from
Pittsburgh and employs 7,292 in Western Pennsylvania, according to its Web
site.

If the airline's self-imposed Jan. 4 deadline passes with no new lease
agreement, the airline would still be able to operate in Pittsburgh.

However, it would be required to pay the county Airport Authority
essentially a 20 percent surcharge on top of its regular lease and landing
fees.

Mr. Letwin said previously that the 20 percent premium is a standard
charge that so-called nonsignatory airlines -- those not covered by the
airport's residual operating agreement, such as newcomers America West,
AirTran and ATA -- must pay on top of normal lease and landing fees. That
premium would cost US Airways millions of dollars in additional fees for
operating here.

US Airways' current lease, signed in 1988, had been set to run through 2018.

Mr. Castelveter said that as far as the lease discussions were concerned,
US Airways was expecting to hear from negotiators appointed by Gov. Ed
Rendell.

"We have been told that terms for a lease extension will be deferred to
the governor's negotiating team," he said.

As bargaining leverage in the current new lease negotiations, Mr. Rendell,
a Democrat, and local government officials tied the Pittsburgh hub to US
Airways' profitable hub at Philadelphia International Airport. The
governor offered a $264 million incentive and improvements package, in an
effort to solidify US Airways' statewide presence.

Mr. Mahone told the more than 1,000 people gathered for the Allegheny
Conference meeting at the Carnegie Music Hall in Oakland that the Airport
Authority also is working to lure new low-fare carriers to Pittsburgh and
finalize an arrangement to reduce the airport's debt by $25 million a
year, for five years.


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