Roddey questions US Airways' inaction on proposal to sustain hub operations here
Friday, August 15, 2003
By Mark Belko, Post-Gazette Staff Writer
Allegheny County Chief Executive Jim Roddey said yesterday that he is growing frustrated with the time it is taking US Airways to respond to a $263.9 million proposal to keep its hub in Pittsburgh.
In his strongest statements to date, Roddey questioned whether the carrier viewed the talks with state and local politicians as a priority and said it may be time to more aggressively pursue other airlines to fill the breach should US Airways close the hub.
"I guess I'm becoming very disappointed that they have not given their response a higher priority," Roddey said. "I think the time they are taking in responding is far in excess of what it should be."
During a high-profile meeting in Washington, D.C., on June 11, Gov. Ed Rendell and other Pennsylvania lawmakers offered US Airways a $263.9 million package of cost savings and capital improvements at Pittsburgh International Airport and Philadelphia International Airport, a move that generated positive comments from US Airways Chief Executive Officer David Siegel.
About a week later, a negotiating team put together by Rendell met with US Airways representatives at the state Capitol for four hours. Since then, state, county and airport officials have been waiting for US Airways to prepare a counteroffer, but one has yet to materialize.
At one time, both sides had hoped to complete negotiations by July 18, but that deadline came and went with no agreement.
Asked if the lack of a response indicated that US Airways was not interested in maintaining its Pittsburgh hub, Roddey replied, "I hope that's not the reason, but it makes you wonder. They certainly don't seem to be in any hurry to respond. They've had ample time."
He said state and local negotiators had expected a response from the airline in each of the last two weeks but that did not happen, adding "it doesn't look like we'll have anything this week."
"I'm just irritated more than discouraged," Roddey said. "I guess I'm frustrated for the employees. They would like to have some answers. They would like to know what their fate is going to be and it's very frustrating not being able to tell them anything."
With negotiations moving slowly, Roddey said it is important for county and airport officials to intensify their discussions with other airlines about starting or expanding service in Pittsburgh. He said county officials have an obligation "to preserve the airport," where US Airways is the dominant carrier with about 80 percent of the passenger traffic.
"We're actively pursuing [other airlines]," he said. "We're not holding back."
A top US Airways official said the airline is not dragging its feet and is still interested in negotiating an agreement to maintain the Pittsburgh hub.
Chris Chiames, US Airways senior vice president of corporate affairs, said one reason it has taken so long for the airline to respond is that it has had to hire municipal finance experts to examine ways to reduce the airport's $673 million debt, which the carrier says makes Pittsburgh uneconomical. It wants the airport to cut the debt by $500 million.
"In actuality, we haven't had sufficient time [to respond] because, frankly, we are undertaking efforts that perhaps Allegheny County might have been doing as well, including thinking creatively about what to do with the debt," he said.
Chiames said the airline has informed negotiators that the $263.9 million package offered by Rendell doesn't adequately address debt costs. He added the carrier was told by local officials that they were not in the "position to adequately address the debt."
"We said we would look at the issue and see if we could come up with some answers," he said.
Chiames said the airline's goal is to find a way to keep the Pittsburgh hub. But even if it can't, the airport needs to reduce its debt costs if it is to be attractive to other airlines.
"Ultimately, this is not about helping US Airways. This is about making Pittsburgh International Airport a competitive place to do business and allow us to continue to operate the hub because it's more cost-effective," he said. "We really think it's in the interest of the entire region that the debt at the airport be reduced."
Roddey questioned whether US Airways could come up with a plan to reduce the debt, generated mostly during construction of the $1 billion midfield terminal, which the airline agreed to build.
"They're in financial distress, we're solvent, and they're lecturing us about how to handle debt?" he asked.
In US Airways' most recent employee newsletter, Chiames addressed the status of the Pittsburgh hub in a question-and-answer format. He said the airline pays about $54 million a year to pay off airport debt and that $8 of the airport's $9 per passenger cost goes to cover debt.
Roddey retorted that the airline's decision to cancel flights at the Pittsburgh airport -- it has eliminated 143 daily departures since Sept. 11, 2001 -- was "a major contributing factor as to why we have a $9" passenger cost. As passenger traffic decreases, per passenger costs increase.
Friday, August 15, 2003
By Mark Belko, Post-Gazette Staff Writer
Allegheny County Chief Executive Jim Roddey said yesterday that he is growing frustrated with the time it is taking US Airways to respond to a $263.9 million proposal to keep its hub in Pittsburgh.
In his strongest statements to date, Roddey questioned whether the carrier viewed the talks with state and local politicians as a priority and said it may be time to more aggressively pursue other airlines to fill the breach should US Airways close the hub.
"I guess I'm becoming very disappointed that they have not given their response a higher priority," Roddey said. "I think the time they are taking in responding is far in excess of what it should be."
During a high-profile meeting in Washington, D.C., on June 11, Gov. Ed Rendell and other Pennsylvania lawmakers offered US Airways a $263.9 million package of cost savings and capital improvements at Pittsburgh International Airport and Philadelphia International Airport, a move that generated positive comments from US Airways Chief Executive Officer David Siegel.
About a week later, a negotiating team put together by Rendell met with US Airways representatives at the state Capitol for four hours. Since then, state, county and airport officials have been waiting for US Airways to prepare a counteroffer, but one has yet to materialize.
At one time, both sides had hoped to complete negotiations by July 18, but that deadline came and went with no agreement.
Asked if the lack of a response indicated that US Airways was not interested in maintaining its Pittsburgh hub, Roddey replied, "I hope that's not the reason, but it makes you wonder. They certainly don't seem to be in any hurry to respond. They've had ample time."
He said state and local negotiators had expected a response from the airline in each of the last two weeks but that did not happen, adding "it doesn't look like we'll have anything this week."
"I'm just irritated more than discouraged," Roddey said. "I guess I'm frustrated for the employees. They would like to have some answers. They would like to know what their fate is going to be and it's very frustrating not being able to tell them anything."
With negotiations moving slowly, Roddey said it is important for county and airport officials to intensify their discussions with other airlines about starting or expanding service in Pittsburgh. He said county officials have an obligation "to preserve the airport," where US Airways is the dominant carrier with about 80 percent of the passenger traffic.
"We're actively pursuing [other airlines]," he said. "We're not holding back."
A top US Airways official said the airline is not dragging its feet and is still interested in negotiating an agreement to maintain the Pittsburgh hub.
Chris Chiames, US Airways senior vice president of corporate affairs, said one reason it has taken so long for the airline to respond is that it has had to hire municipal finance experts to examine ways to reduce the airport's $673 million debt, which the carrier says makes Pittsburgh uneconomical. It wants the airport to cut the debt by $500 million.
"In actuality, we haven't had sufficient time [to respond] because, frankly, we are undertaking efforts that perhaps Allegheny County might have been doing as well, including thinking creatively about what to do with the debt," he said.
Chiames said the airline has informed negotiators that the $263.9 million package offered by Rendell doesn't adequately address debt costs. He added the carrier was told by local officials that they were not in the "position to adequately address the debt."
"We said we would look at the issue and see if we could come up with some answers," he said.
Chiames said the airline's goal is to find a way to keep the Pittsburgh hub. But even if it can't, the airport needs to reduce its debt costs if it is to be attractive to other airlines.
"Ultimately, this is not about helping US Airways. This is about making Pittsburgh International Airport a competitive place to do business and allow us to continue to operate the hub because it's more cost-effective," he said. "We really think it's in the interest of the entire region that the debt at the airport be reduced."
Roddey questioned whether US Airways could come up with a plan to reduce the debt, generated mostly during construction of the $1 billion midfield terminal, which the airline agreed to build.
"They're in financial distress, we're solvent, and they're lecturing us about how to handle debt?" he asked.
In US Airways' most recent employee newsletter, Chiames addressed the status of the Pittsburgh hub in a question-and-answer format. He said the airline pays about $54 million a year to pay off airport debt and that $8 of the airport's $9 per passenger cost goes to cover debt.
Roddey retorted that the airline's decision to cancel flights at the Pittsburgh airport -- it has eliminated 143 daily departures since Sept. 11, 2001 -- was "a major contributing factor as to why we have a $9" passenger cost. As passenger traffic decreases, per passenger costs increase.
