Authority betting US Airways will maintain service

Saturday, November 15, 2003

By Mark Belko, Pittsburgh Post-Gazette

The Allegheny County Airport Authority, in adopting a 2004 budget, is betting that US Airways will keep its hub in Pittsburgh.

In approving a $134.8 million spending plan yesterday, the authority's board is banking that passenger boardings at Pittsburgh International Airport will reach 7 million in 2004, essentially the same level anticipated this year.

For that to happen, US Airways, the airport's dominant carrier, would have to maintain its current level of service another year, despite its threat to shut down its Pittsburgh hub unless it is able to get an agreement to reduce the airport's $673 million in debt.

"It's our feeling that the final outcome of the negotiations will result in US Airways reaffirming their commitment to the airport [to maintain service]," authority Executive Director Kent George said.

Yet while the 2004 budget reflects US Airways' continuing presence, it does not offer any of the debt relief the airline is seeking in negotiations with state and local leaders.

Debt service next year is budgeted at $61.9 million, only a fraction lower than this year. US Airways pays about $50 million of that. Most of the $673 million in debt relates to the construction of the midfield terminal, which opened in 1992, and which the airline supported.

In a speech Wednesday, airport authority board Chairman Glenn Mahone said the authority is offering to reduce debt-service payments by $25 million a year for five years for US Airways and the other airlines operating out of Pittsburgh.

But that is not shown in the 2004 budget approved yesterday. George said it wasn't included because "I do not have the $25 million yet." The authority hopes to get most of the money by securing about $95 million in reimbursements for some of the work done on the terminal over a decade ago.

In seeking to reduce debt costs, US Airways canceled its airport leases, effective Jan. 5, before coming out of bankruptcy in March. Last month, it asked the authority to extend the cancellation date to Oct. 3, 2004, in exchange for a commitment to maintain its hub until then, a deal the authority rejected. The airline separately has committed to U.S. Sen. Rick Santorum, R-Pa., to maintain service in Pittsburgh until Labor Day.

Instead of agreeing to an extension, the authority wants to get a deal with US Airways as part of the broader negotiations on the long-term lease. Without an extension, or a new deal, the rates and fees paid by US Airways to the airport would increase by 20 percent next year.

The authority's $134.8 million 2004 budget is actually slightly lower than this year's $135.2 million spending plan. Nonethless, the airport's cost per passenger is expected to increase to $10.01 next year, up from the current $9.93 and the $9.07 previously budgeted for 2003, reflecting continuing cutbacks by US Airways.

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