Pittsburgh would be stripped of its hub status under a new US Airways recovery plan that also would reduce the number of local flights and the number of cities that can be reached on nonstop flights.
The Arlington, Va.-based airline, which has served the region since 1940 when it won the right to provide airmail service here and nine years later launched its first local passenger flight, yesterday said it intends to "remain the leading carrier" at Pittsburgh International Airport and that Pittsburgh will continue to be "an important focus city."
But the loss of hub status, which has long served as a selling point when wooing business and was the primary factor in building the new airport more than a decade ago, is expected to result in further reductions in the airline's local work force.
The airline now employs some 8,000 workers locally, down from about 12,700 before the 9/11 attacks, which forced drastic cuts in its systemwide service, including a reduction of 170 daily flights out of Pittsburgh to 379.
The airline yesterday would not say how many more flights may be cut, nor would it address what may happen to other US Airways facilities near the airport, saying only that "no final determination has been made." Other factors, including upcoming labor negotiations, "must first be resolved," the company said in a message to employees and in response to media inquiries.
Chief Executive Officer Bruce Lakefield yesterday explained the decision to further downsize Pittsburgh to Gov. Ed Rendell and Allegheny County Chief Executive Dan Onorato. Rendell, in an interview with Bloomberg News while in New York on state business, said the airline may have to cut jobs in Pittsburgh and that "it's also possible they just pull out of Pittsburgh."
But in a letter sent to Rendell, Lakefield reiterated the carrier's pledge to maintain existing service levels through September. "Our goal as we start this process is to preserve as many jobs as possible," he said, "with service to as many communities as makes economic sense. But there are going to be many difficult decisions we will undoubtedly face as we work through these issues with our labor leaders."
The company's larger recovery plan, laid out to the airline's unions yesterday in Arlington, calls for more "point-to-point" flying on the East Coast, especially between Philadelphia, New York, Washington, D.C., and Boston. It anticipates adding more trans-Atlantic flights from Philadelphia, where the airline is being challenged by low-fare rival Southwest Airlines, and using its Charlotte, N.C., hub to beef up its service to the Caribbean.
In yesterday's talks, US Airways executives did not refer to Pittsburgh as a hub, instead calling it a "focus city," the same title it applies to Boston, New York and Washington, D.C. Daily departures in Boston, Washington and New York currently run 102, 179 and 203, respectively, far below current levels at the Pittsburgh hub.
The company first hinted at Pittsburgh's reduced status last week, when an executive predicted a "de-emphasis" in markets that are "over-reliant" on connecting hub traffic, meaning Pittsburgh.
In pursuing this strategy, the company is doing what the experts have been asking large carriers such as US Airways to do for years: reduce reliance on a costly "hub-and-spoke" system that brings passengers to a major airport and then connects them to other destinations. US Airways instead wants to become more like its smaller, low-fare rivals by increasing its "point-to-point" flying in highly contested markets, perhaps with new planes.
"There are probably too many hubs in the country," said local airline analyst Bill Lauer, who predicted as many as two large carriers may "cease to exist" because of the high costs associated with such operations.
For cities such as Pittsburgh that stand to lose their hub status, "it means fewer jobs, it means fewer flights and less passenger convenience," Lauer said. "It probably could affect business decisions. There is nothing about it that I see as good locally."
After talking with Lakefield yesterday for about 20 minutes, Onorato said he came away with the clear impression that Pittsburgh -- and other US Airways hubs, for that matter -- were in for major changes, assuming the money-losing airline survives.
"It won't be the significant hub activity that we're used to. They're making it very clear that the hub status we're used to is going to be changed, not just in Pittsburgh, but at other hubs," Onorato said.
As part of its new strategy, US Airways wants its unions to help the airline reduce costs, perhaps to levels now occupied by America West Airlines or JetBlue Airways, two other low-fare fliers. The company will begin explaining exactly what it wants from the unions as early as today, in a meeting with the flight attendants. Meetings with other unions are planned for tomorrow and next week, as well.
To reinforce the delicacy of US Airways' predicament, New York bond rating agency Standard & Poor's downgraded US Airways' junk bond rating yesterday from B- to CCC+, further endangering the financing of the airline's new regional jets. Financier GE Capital Services had the option to pull its financing if S&P debt rating fell below B-.
GE indicated in a filing with the Securities and Exchange Commission that it was considering such a move, saying that due to US Airways' financial difficulties, "we are currently evaluating our legal obligations."
The airline's financial problems and the Pittsburgh International's heavy reliance on the carrier also prompted Standard & Poor's yesterday to downgrade Allegheny County Airport Authority's bond rating from BBB+ to BBB. The agency also placed the rating on Credit Watch with negative implications, meaning another downgrade is possible.