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Analysis: Searching for pluses in US Airways' deal at Pittsburgh International Airport
Tuesday, January 06, 2004

The long-term lease that US Airways signed yesterday for 10 gates at Pittsburgh International Airport -- down from the 50 it had before -- reflects the drastic reductions the facility could face if the airline decides to close its Pittsburgh hub.

John Beale, Post-Gazette
Christopher Chiames, US Airways' senior vice president of corporate affairs, answers questions from reporters during a press conference yesterday at pittsburgh International Airport as Allegheny County Executive Dan Onorato listens, right.
Click photo for larger image.
For Allegheny County officials, the agreement also reflects how much Pittsburgh depends on its dominant carrier. Even at 10 gates, US Airways will still be the largest carrier at the airport.

That's partly why observers tried yesterday to put the best face on the interim agreement, in which US Airways committed to keeping at least 10 gates here through 2018 and to keeping its maintenance hangars, cargo, mail sorting, de-icing and food service facilities for at least another year and possibly up to three years. US Airways had been operating the maintenance hangars month to month; the other facilities had been leased until 2018.

The airline will keep its other 40 gates at least for the time being, leasing them month-to-month.

Frank Schifano, president of the Pittsburgh local of the International Association of Machinists, viewed the hangar leases as a positive sign for the 2,000 mechanics who work at the airport. It eliminates some anxiety about maintenance jobs and "gives people a chance to catch their breath,'' he said.

The head of US Airways' pilots union, Bill Pollock, also viewed the broader announcement as a "positive step'' and a sign of the airline's continued interest in Pittsburgh.

Yesterday's deal, struck following talks involving airline officials, the Allegheny County Airport Authority and new county Chief Executive Dan Onorato, signaled a thaw in relations that had grown icy between the airline and former county Chief Executive Jim Roddey -- a change some viewed as necessary. Onorato, said local airline observer and investor Bill Lauer, "did what Roddey advised him not to do, which is to make it a little easier for US Airways.''

The interim deal gives US Airways the flexibility to shut down its hub if negotiations fail on efforts to cut the airport's debt. The deal will govern its airport operations through September while talks continue with Gov. Ed Rendell, Onorato and the airport authority on ways to tackle the debt.

The new agreement also lowered the number of commuter gates US Airways operates on a month-to-month basis, to 12 from 22, and replaced airport leases that US Airways rejected in late March while emerging from Chapter 11 bankruptcy. Under the old leases, it was committed to operating 50 mainline gates at Pittsburgh International until 2018.

When the airline rejected the leases, it said it no longer could afford them and other expenses at the airport, whose $640 million construction debt was costing the carrier about $50 million a year. US Airways, which maintains that burden exceeds costs at other airports, wants authorities to slash the airport's debt by $500 million, which would save it millions of dollars annually.

During a news conference after the interim agreement was finalized, Chris Chiames, US Airways senior vice president of corporate affairs, said the 10 gates the airline chose to lease long-term reflected the number it could support in Pittsburgh with or without the hub.

"Essentially we weren't going to sign for more gates than we thought we could use through 2018," he said.

In an economic impact study released last summer, US Airways said that daily departures from Pittsburgh would drop from about 375 a day to 73 without the hub and nonstop destinations would fall from nearly 100 to 19. The 10 gates leased through 2018 are consistent with such levels.

Chiames said, however, that the airline is committed to maintaining current service and employment levels at least through September while the parties try to reach a deal on airport debt. The airline and its commuter affiliates employ more than 8,000 locally.

The interim agreement marked one of Onorato's first official acts as chief executive. He described it as a "temporary arrangement" maintaining the status quo while bargaining continues.

He reiterated that any debt relief offered by the state, county and airport authority will benefit all airlines, not just US Airways.

"I'm not happy or sad. It is what it is," Onorato said of the agreement. "I'm glad we got some room to continue to negotiate."

Nonetheless, he pointed out that a long-term lease for 10 gates was better than nothing, which was exactly what US Airways was responsible for early yesterday morning when the lease rejections made in March became official.

Airport authority Executive Director Kent George said he was "disappointed" US Airways did not sign a long-term lease for more gates.

"These are the first steps," he said of the interim deal. "We have a lot of work to do."

US Airways will pay a 20 percent premium to lease gates on a month-to-month basis. That will increase its total airport costs, including ancillary facilities, by $2.5 million, to $75 million.

The airport authority would have the right to take some of those 40 gates from US Airways if other carriers wanted them. George said the authority is continuing to talk to discount airlines Southwest, JetBlue and Frontier about starting service in Pittsburgh.

Chiames described the $2.5 million increase as a "short-term investment in trying to get a long-term cost reduction solution."

He said the carrier agreed to go from a month-to-month lease to a three-year agreement -- with the option to terminate after one year with penalty -- on maintenance hangars as part of the give-and-take of negotiations.

"It was important for the airport authority to have a longer-term commitment on some of the other facilities," he said.

No formal round of talks is scheduled on the larger issue of debt relief. But Roy Kienitz, deputy chief of staff for Rendell, said talks are continuing behind the scenes. He said the governor is "sensitive to the desire to make Pittsburgh a cost-competitive airport."

First published on January 6, 2004 at 12:00 am
Staff writer Dan Fitzpatrick contributed to this report. Mark Belko can be reached at mbelko@post-gazette.com or 412-263-1262.