"US Airways' woes may hurt Pittsburgh more than Philadelphia"

Monday, June 14, 2004

US Airways' woes may hurt Pittsburgh more than Phila.
By Tom Belden
The Philadelphia (PA) Inquirer


The folks at Standard & Poor's Corp. who track the financial health of
aviation are keeping a close watch these days on debt levels at US Airways
and its hub airports, including Philadelphia International.

But there's far more concern about what's going on at Pittsburgh
International Airport than there is at Philadelphia, S&P officials said last
week at an industry seminar the company held in New York.

Ratings services such as S&P base their outlooks for airport bonds largely
on how airlines are doing, since most airports depend primarily on the
carriers' landing fees and rental payments to meet obligations to
bondholders.

Last month, S&P lowered its ratings on Pittsburgh's debt to "BBB," from
"BBB-plus," and put the airport on its Creditwatch list. S&P said the
downgrade was based on the "ongoing deterioration" of US Airways' credit
quality and the airline's service cuts at Pittsburgh. The airline carried
about 80 percent of Pittsburgh air travelers in recent years, but air
traffic this year is expected to be about one-third less than it was four
years ago.

In the meantime, Philadelphia's airport debt is rated "A" by S&P - that's
the third-highest level, after "AAA" and "AA" - mostly because of different
market characteristics of the two cities. US Airways has a bit less than 60
percent of the traffic here. Even if US Airways' finances worsened and it
cut flights, the region's larger population would enable Philadelphia to
attract service to many cities by other airlines.

"If it were an immediate collapse by US Airways, they would be in trouble,
but not if it was a more gradual reduction in service," Kurt Forsgren, a
director in S&P's public finance division, said at the seminar. "There will
be other carriers willing to step into that market."

That's much the same thing Philadelphia airport officials have said for
years when asked what would happen if someday the region's dominant airline
were no longer so dominating.


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