"Philadelphia airport plans bond issue to fund checkpoint upgrades"

Monday, February 7, 2005

Airport plans bond issue to fund checkpoint upgrades
By Larry Rulison
The Philadelphia (PA) Business Journal


Philadelphia International Airport is planning a bond issue to raise money
for a variety of projects, including a $10 million expansion of the security
checkpoints at Terminal B/C used for US Airways flights. 
  
The airport, which is owned by the City of Philadelphia, has not decided how
much it will raise in total for the bond issue, or when the bond issue will
take place. 

Scant details of the expansion project are mentioned in documents filed
recently in U.S. Bankruptcy Court in Virginia as part of US Airways' Chapter
11 reorganization. The city received US Airways' support for the expansion
project as part of the city's recent pledge to buy $6 million in jet bridges
from the troubled airline in a deal that will save the airline $11 million
during the first quarter of the year. 

"As partial consideration for the city's agreement to enter into the
purchase agreement, the debtors (US Airways) have agreed to provide an
affirmative majority-in-interest vote for a terminal expansion and
modernization request dated Jan. 10, 2005," US Airways wrote in a Jan. 24
bankruptcy filing. 

Mark Pesce, an airport spokesman, said the project was being planned because
the current Terminal B/C checkpoints, which were built in 1998 as part of
the terminal consolidation project, are "limited by size" compared to the
passenger growth the airport has been experiencing. 

He said the airport will issue the bonds for the project, but the total
amount and date of the bond issue has not yet been determined. The project
will take 18 months to complete once funding is approved. The expanded
checkpoints will increase capacity and also meet new security requirements
of the U.S. Transportation Security Administration. 

"The maximum for the checkpoint project is $10 million, but we anticipate
that the project may cost less," Pesce said. 

The airport's use and lease agreement with the airlines stipulates that any
capital expenditures of $100,000 or more requires so-called
"majority-in-interest" approval. Participating majority-in-interest airlines
are US Airways, American, Delta, Northwest and United, according to Pesce. 

US Airways spokesman David Castelveter said the airline would not comment on
its agreement with the city. A letter of intent signed by both the city and
the airline dated Jan. 14 and filed along with other US Airways bankruptcy
documents states US Airways will provide an "affirmative" vote for the
expansion project. 

The airport has issued bonds in the past that have benefited US Airways'
operations. In 1998, the city agreed to construct a new international
terminal and a new US Airways Express terminal. According to Securities and
Exchange Commission documents filed by US Airways, the Philadelphia
Authority for Industrial Development issued $632 million in airport revenue
bonds to finance the two terminals and other projects. In 2000, PAID issued
$71 million in revenue bonds to finance the construction of a new aircraft
maintenance hangar and two US Airways Clubs, as well as other airport
improvements. 

Although US Airways is in bankruptcy reorganization, the city still has a
lot at stake with its success. The airline is the largest at the airport,
with roughly 450 daily departures, and is planning to increase the number to
nearly 500 flights this month. 

The second-largest airline at the airport is Southwest Airlines of Dallas,
the nation's most successful low-cost airline and one of US Airways'
fiercest competitors at Philadelphia International and nationwide. US
Airways is hoping to transform itself into a low-cost carrier through
bankruptcy by slashing labor costs along with fares, and restructuring its
schedules. All indications are that US Airways plans to rely heavily on
Philadelphia International to make that plan succeed, unlike in other cities
such as Pittsburgh, where it is cutting back. The city's deal to buy the jet
bridges could also give the airport future flexibility in allowing other
airlines to expand in Philadelphia. 

"We're trying to be very supportive of US Airways," city Commerce Director
Stephanie W. Naidoff said. "We want very much to help them through this. We
think it's better for Philadelphia and the region."


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