"A Nation of Airport Haves and Have-Nots"

Sunday, September 26, 2004

A Nation of Airport Haves and Have-Nots
By MICHELINE MAYNARD
The New York (NY) Times


BRADFORD, Pa., has good reason to treasure its air service. Without it, the
10,000 people who live in the town, which is nestled in the Allegheny
Mountains near Pennsylvania's border with New York, would face a drive of
one hour - maybe much more during bitter winter weather - to reach another
airport.

The end of air service would spell trouble for workers at the big Zippo
lighter plant, for students at the local branch of the University of
Pittsburgh and for guests at the sprawling Glendorn resort, where visitors
pay as much as $695 a day so they can fly-fish and skeet-shoot in utter
privacy.

But Bradford relies solely on US Airways flights, operated by Colgan Air, a
regional airline, which continues to serve the town because it collects
federal subsidies under the Essential Air Service program adopted after the
industry was deregulated in 1978. And now that US Airways is operating under
bankruptcy protection for a second time in two years and is slicing cities
from its schedules, Bradford's air link to the world is in jeopardy.

Bradford is not alone in that prospect. In Pittsburgh, 125 miles to the
southwest, US Airways is dismantling the hub that let residents fly directly
to Frankfurt or reach dozens of cities across the United States, including
Bradford. By year-end, the airline will offer half the flights from
Pittsburgh that it had there in 1997.

"It's very frustrating: one week we think we have a city, and the next week,
you don't have a city," said Kent George, the airport's executive director,
referring to the destinations US Airways serves from Pittsburgh. 

Martin M. Glesk, executive director of the Bradford Area Alliance, a
business group, says the problem is even worse for small towns like his.
"We're the very tip of the tail," he said, "and we're not wagging the dog."

With the industry losing billions of dollars each year, and half of the
major airlines operating under bankruptcy protection or threatening to seek
it, such uncertainty is becoming the norm. In searching for a business model
that works, airlines are dropping some flights and routes while picking up
others at a hectic pace rarely seen before. Loyalty to cities they have long
served is a thing of the past, even if those cities are hubs like
Pittsburgh, St. Louis, Dallas, Nashville and Raleigh, N.C. At many of those
airports, the airlines have dropped dozens of flights. 

"Scrutiny is being made, at very harsh levels, of what an airline can afford
to do," said Michael Allen, chief operating officer of Back Aviation
Solutions, a consulting company.

IN places where airlines are flocking to add service - popular destinations
like Florida, for example, or hub cities they want to protect from low-cost
rivals - passengers are benefiting mightily, often enjoying rock-bottom
fares. But the changes are causing sleepless nights for airport officials in
Bradford and other cities served by one airline that may pull up stakes at
any moment. In those cities, consumers have no idea whether the flights they
booked in July will still be in the airline's route system come
Thanksgiving.

That is especially true for the nation's weakest airlines, which are tearing
up their old schedules and refocusing on cities that may generate more
business. This month, Delta Air Lines, which has warned that it may be
forced to seek Chapter 11 bankruptcy protection if it cannot cut costs
significantly, announced that it was dismantling its hub in Dallas in order
to emphasize other hubs in Salt Lake City, Cincinnati and especially
Atlanta, its hometown, where it is adding 80 daily flights. 

That will mean a loss of 2,000 jobs in Dallas, and one less challenger for
American and Southwest, both of which are based there. But those airlines
offered far more service in Dallas than Delta did, because Delta did not
have the resources to battle them head on. "Obviously, with our current
challenges, both financial and competitive, we're having to make some
aggressive changes on using our assets," said Doug Blisset, Delta's senior
vice president for network planning.

Analysts say the airlines have little choice but to quickly abandon routes
where their traffic does not justify a commitment. "In the past, when there
was not so much competition, you could afford to wait things out," said
Darin C. Lee, senior managing director of LECG, an economic forecasting and
consulting firm based in Cambridge, Mass. But with low-fare airlines
cherry-picking the major carriers' most profitable markets, any delay on
dropping money-losing routes "means you could be in a situation where you
put your whole airline at risk," he said.

No company knows that better than US Airways, which filed for bankruptcy
protection a second time on Sept. 12. It has taken a chainsaw to its
schedules in hopes of carving a low-fare airline out of its voluminous East
Coast route system. Much of that cutting has been done in Pittsburgh.

Seven years ago, US Airways had more than 500 flights a day at Pittsburgh
International - 89.9 percent of all commercial service at the airport. By
the end of this year, the airline will have just 228 daily flights there,
Mr. Allen estimated.

The airport, built to accommodate US Airways' once-vast ambitions, is
becoming emptier by the day. Juan Avila, 39, of Pittsburgh, said his family
could no longer fly on US Airways to Kansas City, Mo., his wife's hometown,
because the airline had stopped flying there.

Ticket prices, meanwhile, are spiking for some destinations and dropping for
others as US Airways shifts its emphasis. Mr. Avila, a manager at
Sanofi-Aventis, the pharmaceutical company, says a round-trip ticket to
Baltimore costs him $700. But if he flew to Philadelphia, an hour's drive
from Baltimore, the cost would be just $200. Prices for that route tumbled
when Southwest, which also serves Baltimore, began service to Philadelphia
in May. "This is ridiculous," he said. 

James Huscher, 38, of Hartford, says he has to travel on US Airways because
it is the only carrier serving the small cities he visits as a
pharmaceutical sales representative. But in the past year, Mr. Huscher said,
he has repeatedly encountered canceled flights. The airline blames a
shortage of crew members for the problem, but Mr. Huscher said he suspects
that the flights were dropped because there were just too many empty seats
on them.

He said he missed being home for Valentine's Day this year because US
Airways canceled two flights from Buffalo to Hartford. The closest the
airline could send him was Newark, more than 100 miles away. So, despite his
bank of frequent-flier miles - 200,000 and counting - he is now likely to
drive more. "You have flexibility that way," he said.

Soon, that could be the only choice for him and many other travelers.
Industry analysts, as well as US Airways' chairman, David G. Bronner, have
warned that the airline could end up liquidating quickly if it cannot reduce
its costs and find new investors. Last week, the airline said it planned to
file a motion in federal bankruptcy court in Alexandria, Va., asking for
emergency cuts in union members' pay.

Seeking to blunt the effect of US Airways' cutbacks, Mr. George is courting
five low-fare airlines that do not now serve Pittsburgh, including JetBlue,
Frontier and Southwest. Such a move is not out of the question, said Gary C.
Kelly, Southwest's chief executive. "We have the good fortune of remaining
profitable," he said, in a jab at competitors, "and we're well prepared to
move into abandoned territory."

But even Southwest has to be careful in choosing new destinations, and in
deciding how many flights to offer, because it must fill 15 to 25 flights a
day to and from any destination for the route to make money, Mr. Kelly said.
Pittsburgh may qualify, but many of the nearly three dozen cities at risk of
losing service if US Airways goes under, including Bradford, are too small
for Southwest to consider. Bradford has three US Airways flights - all to
Pittsburgh - each day.

The climb in jet fuel prices this year is hastening airlines' decisions to
leave cities where business has declined, Mr. Kelly said. "If it was
marginal before, and then fuel prices go up, now we can't afford to maintain
a marginal market," hey said.

Even so, expense can take a back seat when an airline believes it must
protect its turf. All this year, for example, Northwest Airlines has been on
a determined push to dominate cities in the Midwest. It is beefing up
service from Indianapolis next month, and has added flights from Milwaukee
and expanded operations at its hubs in Detroit and Minneapolis. Last week,
Gov. Tim Pawlenty of Minnesota endorsed Northwest's plan to take over the
main terminal at the Minneapolis airport, pushing competitors to a smaller
building used primarily by charter airlines.

Likewise, Delta is emphasizing Atlanta, building it into a superhub and
spreading out its flights during the day so the airport is not jammed at
certain times. The move comes as AirTran, a low-fare carrier, has increased
flights in and out of the city.

These developments lead Dr. Lee, the consultant, to say that the current
environment is actually good for many travelers, who are finding lower fares
and more choices. "Even though it's been horrible for airlines, horrible for
airline employees and horrible for airline investors, you have to think that
the consumer is the big winner in all of this," he said.

Others agree that travelers are benefiting - at least those lucky enough to
live in areas that low-cost airlines want to serve. The number of those
areas is growing: low-cost airlines served 44 states in 2004, up from 14 in
1990, Dr. Lee said. But low-fare airlines make no pretense of offering
comprehensive service. They focus on nonstop flights and consistently
profitable routes.

As traditional airlines are pushed to compete with their low-cost rivals,
passengers in some cities - the smaller hubs and thinner spokes of the
hub-and-spoke model - may find fewer flights and higher fares, if they
continue to have service at all. "Smaller cities are the most vulnerable,"
said Mr. Allen, the consultant.

Mr. Blisset, the Delta planning executive, said the hub-and-spoke model that
traditional airlines use actually protects smaller cities because passengers
from them can go through a hub like Atlanta to hundreds of other
destinations. 

If Delta served only people who wanted to travel the 230 miles from
Savannah, Ga., to Atlanta, for example, the service from Savannah would be
minimal, he said. "There is no way we could support 12 or 13 flights a day
there if we did not have a hub in Atlanta," he said.

CLEARLY, the business has changed from the one portrayed in old movies like
"Casablanca," in which customers at a crowded Moroccan cafe glance up as the
afternoon flight to Lisbon roars overhead. "Perhaps tomorrow, we'll be on
that plane," a hopeful young refugee says wistfully.

Back then, passengers may have been able to count on airlines to fly the
same routes on the same schedule, day after day. But in the ruthless new
airline industry, where no carrier is resoundingly healthy, such certainty
has vanished. 

"I tell my board that there are no guarantees, because the whole industry is
in such turmoil now," said Mr. Glesk, the development official in Bradford.
"I guess our hope and thought is that if US Airways does go under, there
will be other airlines" willing to serve the community, he said.


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