Us Airways To Respond To Pennslyvania

AM49AAA

Member
Aug 20, 2002
92
0
US Airways' airport plan coming 'soon'

Wednesday, August 20, 2003

By Mark Belko, Post-Gazette Staff Writer

Two months after receiving a $263.9 million proposal from state and local politicians aimed at preserving its Pittsburgh hub, US Airways finally may be ready to counter with its own plan.

A spokesman for Pennsylvania Gov. Ed Rendell said yesterday that the state was expecting to receive a proposal from the airline soon, based on discussions with US Airways officials.

But neither Rendell spokesman Tom Hickey nor US Airways spokesman David Castelveter would say exactly when the proposal would be delivered to Rendell, who is leading the negotiations on behalf of the state, and Pittsburgh and Philadelphia authorities.

"We've been working on a solution that we expect to present soon," Castelveter said. "We're not going to put a timeline on it."

Hickey said the governor expected the proposal within the next month -- and probably sooner -- but could not be more specific.

The comments came less than a week after Allegheny County Chief Executive Jim Roddey expressed frustration with how long it has taken US Airways to respond to the $263.9 million proposal delivered to the airline during a meeting in Washington on June 11.

The proposal calls for cost savings and capital improvements at Pittsburgh International Airport and Philadelphia International Airport, but it did little to address the major issue US Airways claimed was confronting the Pittsburgh airport -- $673 million in debt.

US Airways, Pittsburgh's dominant carrier, pays $54 million a year to pay off that debt, most of which was incurred in the construction of the midfield terminal, which the airline agreed to build.

It wants the airport to cut that debt by $500 million -- a figure Roddey and other local officials believe is unrealistic unless the airport defaults on bonds or stretches out the debt, incurring millions in additional interest costs.

In an interview last week, Chris Chiames, US Airways senior vice president of corporate affairs, said the airline was working with municipal finance experts to examine ways to reduce the debt.

Told yesterday that US Airways soon might be providing a response, Roddey replied simply, "I hope that's correct, and that we do get it soon." He declined further comment.

Before emerging from bankruptcy, US Airways canceled its leases at Pittsburgh International, effective Jan. 5, and is seeking to lower its costs through the negotiations. Without cost reductions, it may shut down or dramatically scale back its Pittsburgh hub.
 
Back to headlines



US Airways: State would recoup aid

Previous Articles


Roddey snubs demand
US Airways says airport debt must be lowered
Dispute settled
With no deal, US Airways workers worry
Leaving London
US Airways to issue stock worth $425M-645M
Airline, state begin talking
Rendell names 12
County shouldering load
Competitor's interest worries US Airways
Seat on board sought
Negotiation team forming
Funds linked to hubs
Airline may abandon local hub
State will respond to US Airways


Tools
Print this article
E-mail this article
Subscribe to this paper




By Thomas Olson
TRIBUNE-REVIEW
Wednesday, August 20, 2003



US Airways is preparing a report for Pennsylvania officials that maintains the state would recoup in about 100 days the $500 million the airline wants officials to spend to reduce the debt at Pittsburgh International Airport.
Slashing the airport's debt would yield much lower lease costs for US Airways. Without the reduction, the carrier says, it will abandon Pittsburgh.

Even if the state complied, US Airways "cannot make commitments" to preserve jobs in Pennsylvania, Chief Executive David Siegel said in an e-mail obtained by the Pittsburgh Tribune-Review. State officials want such a pledge before giving the airline any incentives to stay.

The state would make up that $500 million, Siegel writes, because economic activity generated by the carrier's hub at Pittsburgh International each year easily exceeds a half-billion dollars.









"That's going to be their approach with the state," Allegheny County Chief Executive Jim Roddey said Tuesday. "But do they really mean the state would get all its money back? It's not like the state would get $500 million in cash."

Several government and labor officials received copies of an e-mail exchange between Siegel and an airline labor leader. According to a copy verified by this newspaper, Siegel writes, "There is a 100-day payback to the state if they agree to our request."

US Airways declined to comment on the "100-day payback." Senior Vice President Chris Chiames said last Thursday that Pennsylvania's $263 million incentive package proposed in April does "not address the critical cost issue." The airline pays about $62 million a year to use Pittsburgh International, including $50 million to help retire the airport's debt.

The airport's debt totals $673 million.

Gov. Ed Rendell leads a team of state and Allegheny County officials in negotiations with US Airways to keep its hub here. The state's proposal would lower US Airways' debt share by about $16 million a year, or $80.4 million over five years.

In exchange for state aid, however, the governor wants US Airways to operate at least 500 daily flights at Pittsburgh International and to employ at least 8,000 workers. Siegel's e-mail states: "We cannot make commitments to the state on employment levels or types."

Minutes before exiting bankruptcy March 31, US Airways declared it would abandon Pittsburgh International next Jan. 5 if the airport does not slash airline lease costs and upgrade gates and hangars. Including its insistence on improvements at Philadelphia International Airport, US Airways' demands totaled about $864 million.

The state last April countered with a proposal worth about $264 million -- which left both sides to negotiate the wide difference. A self-imposed deadline of July 18 passed. State and county officials still are awaiting US Airways' formal response.

"We will not comment on any specifics while there are negotiations going on," said Rendell spokesman Chuck Ardo. "We've waited long enough," said Roddey. "We're just going to go on with our lives and try to work with other airlines to bring them here."

To pressure state and county governments to slash the airline's lease costs here, US Airways' pending tally of its economic impact on Pittsburgh is expected to be much more in-depth than the airline's previous reports.

This time, US Airways has hired finance experts to measure the so-called multiplier effect. For example, when an airline worker spends part of his wages on clothing or groceries, it helps sustain those businesses, which then spend money at other businesses.

"The company is working on a creative solution to the debt problem at Pittsburgh International," said US Airways spokesman David Castelveter. "This is about bringing the cost down and the debt down at the airport."

Castelveter could not say when the report would be completed or how long it would take for the state and county to recoup the millions the airline wants spent on debt reduction.

A study by US Airways in 2001 showed the region's economy derived about $1.58 billion a year from the airline's Pittsburgh hub. The figure included $1.06 billion in airline workers' wages, almost $61 million in area leases and nearly $144 million in aircraft fuel. The report did not gauge or include a multiplier effect.

Both US Airways' local payroll and flight schedule have declined dramatically since 2001. The airline has cut Pittsburgh flights to fewer than 400 a day from more than 500 two years ago. US Airways' local employment has fallen to fewer than 9,000 workers from about 11,600 in mid-2001.


Thomas Olson can be reached at [email protected] or (412) 320-7854.

Back to headlines
 
It is starting to look like PIT may be another Tampa. Is it me or is any one else noticing how the shelves in the line tool room and part rooms are looking bare? Maybe the company is getting ready for a major downsize here. :shock: