"Pittsburgh's Midfield Terminal a white elephant?"

Sunday, December 19, 2004

Midfield Terminal a white elephant?
US Airways' paring of flights and gates leaves gaping holes
This is one in an occasional series about the rise of US Airways, threats to
its survival and the ramifications for the region. 
By Mark Belko
The Pittsburgh (PA) Post-Gazette


Its hub status is gone. Its commuter terminal has been closed. Nine jet and
22 commuter gates sit empty. Nonstop European service has vanished.

Is the world-acclaimed midfield terminal at Pittsburgh International Airport
in danger of becoming a white elephant only 12 years after it opened?

"It has that potential, certainly. It is much larger than we need," former
Allegheny County Chief Executive Jim Roddey said.

The $800 million terminal built for US Airways is now suffering because of
the airline's decline. It is an airport travelers love, if surveys are any
guide -- an airport efficient in design and practice, but one that is losing
traffic and losing flights almost daily it seems.

Traffic has fallen from a high of 20.7 million passengers in 1997 to 14.2
million in 2003, the lowest total since 1984. It is expected to be even
lower when the airport closes the books on 2004.

There are currently 66 gates in use, down dramatically from the 97 jet and
commuter gates occupied before the 9/11 attacks.

The falling fortunes have everything to do with twice-bankrupt US Airways,
the region's dominant carrier for whomthe new airport was effectively built.
Since 2001, the carrier has slashed 313 daily flights from Pittsburgh,
leaving it with less than 230 and turning what just a few years ago was its
largest hub into what it calls a "focus city" -- even as it boosts service
at its two remaining hubs, Philadelphia and Charlotte, N.C.

With the retrenchment has come the empty gates, the closing of the commuter
terminal, and the loss of the Frankfurt, Germany, and London flights, both
of which were operated by US Airways.

It wasn't supposed to be this way.

When the 75-gate terminal opened in October 1992, local politicians and
airport officials were lavish in their predictions, saying that the facility
would expand to 93 gates by 2003 and that passenger traffic would soar from
17 million to 32 million in the span of a decade.

So confident were they of future growth that there were plans to add a
Y-shaped terminal once midfield filled between 2006 and 2010.

But none of it ever happened. In fact, the terminal, despite steady
passenger growth during the 1990s, never hit 24 million -- the traffic level
predicted for 1993.

Now, with the US Airways hub gone, the terminal is actually about twice as
large as it needs to be for a market the size of Pittsburgh, county Airport
Authority Executive Director Kent George said.

Nonetheless, George does not fault the late county commissioner Tom
Foerster, the chief proponent of the terminal, or other county and regional
leaders for building it as big as they did.

When Foerster and the county solidified a deal with former USAir Chief
Executive Officer Edwin Colodny to build the terminal, the airline, now
called US Airways, was the toast of Wall Street.

It had grown from its regional roots to be the sixth-largest carrier in the
country, boosting annual revenues from $373 million in the mid 1970s to a
hefty $6.6 billion. The sky seemed to be the limit.

"We did exactly what we should have done in building that facility," George
said. "You have to go back to the premise that US Airways came to the
community and said, 'I want you to be a primary hub, I want to run 30
million passengers through here,' and they were the most profitable airline
in the country at the time. The community did exactly what it should have
done."

The irony, said former county aviation director Stephen George (no relation
to Kent George), is that county officials had cautioned US Airways against
overbuilding. Midfield, as originally designed, had 62 gates. But US Airways
insisted on 13 more.

"It isn't our fault that we have a big airport out there. We built that
airport to accommodate US Airways' hub status," he said.

"Obviously, there was an enthusiasm to build one tremendous airport. There
would obviously be caution to add that many additional gates, but we were
trying to please US Airways. Everything we did they had a say in."

At the time, US Airways saw the new terminal, essentially designed and built
to its specifications, as the cornerstone of its growing hub-and-spoke
network, in which travelers were brought through Pittsburgh to make
connections to their ultimate destinations.

In retrospect, building such a large airport probably was a mistake, Roddey
said. But it's one that could not have been avoided without biblical-like
prophecy powers.

"I don't know anyone who would have made a different decision at the time,"
he said.

"All of the indications were that US Airways was going to grow and that it
was going to be one of the largest airlines in the country," he said. "I
don't think anyone had any reason to doubt that they were going to grow
along with the rest of the industry."

Former county commissioner Pete Flaherty, who partnered with Foerster to
build the terminal, said no one had any inkling that the mainline carriers
such as US Airways would be awash with the kinds of problems they are facing
today or that US Airways would be in such a dire position.

As an integral part of the planning for midfield, Stephen George said he
shakes his head every time he reads about US Airways complaining about high
passenger costs at Pittsburgh International. If anybody's to blame for the
$600 million in debt that burdens the airport, it's US Airways, he said.

"That came as a result of everything they asked for," he said. "What were we
to do at the time? We left it to them to be the best judge of what the
industry needs were, what their needs were and how they could be
accommodated at the airport."

US Airways wasn't the only one to employ a hub-and-spoke system at the time.
It was as much a part of the traveling experience as a pack of peanuts.
Virtually every major carrier in the country was doing the same thing. And
during the '90s, Pittsburgh's new terminal certainly seemed to be paying
dividends.

Passenger traffic grew from 18.4 million in 1993 to 20.7 million in 1997 as
Pittsburgh became US Airways' largest hub. After falling to 18.7 million in
1999, traffic rebounded in 2000 and was closing in on the 1997 record as the
summer of 2001 neared its end. And then came Sept. 11.

The terrorist attacks proved to be a turning point for not only US Airways,
which has been in bankruptcy twice since then, but for Pittsburgh
International Airport as well.

Traffic has been plunging ever since, as US Airways tries to adjust its
business strategy to compete with low-cost airlines that have spurned hubs
for so-called point-to-point flying, which takes passengers to and from
where they want to go without shuffling them through connecting airports.

The dominance of US Airways, for so long a major asset in employment and in
supplying Pittsburgh with far more service than it deserved for a market its
size, has become the airport's Achilles heel, as it struggles to fill gates
and lower costs to attract other airlines.

However, Tasso Katselas, the architect who designed the midfield terminal,
does not believe the airport and the region's leadership did enough to keep
what they had.

A former close confidant to Foerster, Katselas does not think leaders have
been aggressive enough in negotiating with US Airways or in touting the
advantages of the airport to other carriers.

"Do you seriously think that if Tom Foerster were alive, this would have
happened?" he fumed.

Katselas faults local leadership for failing to negotiate commitments from
US Airways in exchange for the federal loan guarantees that helped it
survive its first bankruptcy, and for not being more forceful in trying to
keep flights in Pittsburgh.

"I wouldn't lose my big carrier without a big fight. A big fight is when you
jump in and do something, not after a corporate decision has been made, but
before the decision was made," he said. "We're reacting instead of acting."

He also says leadership has dropped the ball in selling the airport to other
carriers. He said one of the major advantages of the midfield design -- one
that helped to sell US Airways on the project two decades ago -- is its
central airfield location, thus the name midfield, and its short taxiing and
idling times.

All help to save airlines money on fuel at a time fuel costs are soaring and
creating havoc with airline budgets. The airport leadership should be
aggressively marketing the airport for its potential fuel savings, he said.

"The efficiency is still there. It still moves people and aircraft better
than any airport in the world," Katselas said of midfield. "The fact that
it's not being marketed makes me sick."

But both Roddey and Kent George dismissed Katselas' criticism. They said
they had met with every airline in the country, touting the benefits of the
airport and trying to interest them in Pittsburgh.

As for US Airways, they said they did what they could to keep the airline
here. "US Airways has been offered from the county and the airport authority
no less than five times up to $265 million worth of facilities and
assistance, and they've rejected that," George said,

"We should not extend ourselves any further than we have until we get
something in return that will aid our community. We are paying enough now.
We don't need any more obligations. You have a carrier that's not interested
in having a primary facility in Pittsburgh and their need far exceeds our
ability to pay."

So what does the future hold?

As low-cost carriers become more dominant and so-called legacy carriers such
as US Airways and United struggle to survive, the chances of Pittsburgh ever
becoming a hub again are virtually nil, many believe.

"That airport, that X terminal, was built as a connecting hub for US
Airways. There is on the horizon nobody who wants to put several hundred
flights a day into Pittsburgh to replace US Airways. It's as simple as
that," aviation consultant Michael Boyd said.

Roddey said the Pittsburgh market probably was not big enough to support
another hub.

"The answer is 'no, it's not likely,' and that's because we're not a large
origin and destination market," he said. "The hub system probably has gone
out of style. You'll probably see fewer hubs, not more hubs. I doubt that
you will see any more hubs created around the country."

If US Airways goes out of business, carriers such as Southwest and JetBlue
may come in and pick up the most profitable routes to fly point to point,
but nothing more, Roddey said.

He said he saw the airport closing at least one concourse, possibly two, as
it tries to match the terminal to the market.

One possible building block could be if an international carrier such as
Germany's Lufthansa, which the airport is trying to recruit to offer service
to Europe, establishes a presence here and attracts feeder traffic through
Pittsburgh. "That might give us a little revitalization," Roddey said.

George, meanwhile, is positioning the airport to rise or fall on its local
traffic. At 41st in the country, Pittsburgh's local market for air travel is
not huge by any means, but George believes it is larger than the numbers
suggest.

He believes the iron-fisted rule of US Airways for so many years suppressed
local traffic, as some travelers drove to Cleveland or other airports to
catch planes or didn't fly at all.

"The focus has to be to work off our [local] base and then, with a carrier
that shows interest, to get that carrier to do some connecting traffic and
then marry that with one of their partners to do domestic or international,"
he said.

County Chief Executive Dan Onorato also is pushing the authority to expand
cargo opportunities and the airport's military presence as a means of
keeping Pittsburgh International viable.

Unlike Roddey, George does not envision closing an entire concourse,
although the authority already has shut down the far end of one because of a
lack of business.

Both he and Roddey also believe there could be some opportunities for
carriers to establish minihubs or "focus cities" in Pittsburgh, particularly
those operating from congested airports in the Northeast and Midwest,
although no one has approached the authority about that prospect.

Despite the traffic losses and the problems confronting the airport, George
is still upbeat about its future. He said it was still one of the "most
efficient and functional facilities" in the world, regardless of whether
it's a hub or not.

With only a dozen years before the terminal is paid off and with gates to
spare, George believes that the airport has "the flexibility to handle
whatever the future should bring."

"I think you might see a little more shrinkage, but then it will open up and
start to expand again," added state Rep. Tom Stevenson, R-Mt. Lebanon, an
airport authority board member.

He also noted that the authority had launched a major initiative to develop
more of the county-owned land around the airport. If successful, that can
only help to generate more traffic for the airlines. He also thinks there's
a chance the commuter terminal will reopen at some point.

"Northwest has been picking up some of the commuter [traffic]. I think
that's a real positive sign. You can't let areas like State College go
unserved to Pittsburgh. Somebody will fill that need."

Flaherty also sees a bright future ahead.

"It's one of the best airports in the country, if not the best. It's been
proclaimed as the best in the country. I don't think it's a white elephant
at all. It's a great airport. It will survive US Airways," he said.

Attached Photo/Graphic:

Concourse D at the Pittsburgh International Airport.

Total passenger traffic at Pittsburgh International Airport.

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