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Airlines to reap savings from bond refinancing
Saturday, November 13, 1999 By Mark Belko, Post-Gazette Staff Writer
In one of its first official actions, the Allegheny County Airport Authority board took steps yesterday to make life a little bit easier -- financially, at least -- for US Airways at Pittsburgh International Airport.
The seven-member board approved a $60 million airport revenue bond refinancing that will save an estimated $6 million in interest costs over the next 20 years -- money that will be returned to US Airways and other airlines that use the airport.
The board also learned during its meeting that the airport's cost of doing business as an authority rather than a department of county government may be higher in at least one respect -- health insurance premiums.
The authority's costs could increase $147,000, or 5.7 percent, to cover 400 employees at Pittsburgh International and the Allegheny County airports who now work for the authority rather than the county.
Solicitor Jeffrey Letwin said the authority is facing the increase because its employee pool is much smaller than the county's 6,000-strong workforce, which previously included workers at the airports.
"I think you can get a better rate if you have a larger pool," Letwin said.
Board members took no action on insurance matters yesterday. A board committee will try to negotiate a lower rate. In the interim, all employees will continue to be covered by the county's insurance.
Critics of the authority had complained that aviation-related costs under the authority would go up, not down as supporters suggested.
Aviation Director Kent George acknowledged that some costs will go up as a result of the change. But he also stuck with his prediction that the authority would be able to cut costs and/or increase revenues by $7.2 million over the next 18 months.
The $60 million in bonds being refinanced originally were issued in 1990 mainly to pay for US Airway's automated baggage system at the airport, the airline's largest hub. The savings, equal to about $300,000 a year, will be returned to the airlines through reduced fees related to airport usage. US Airways, as the airport's largest carrier, will realize the bulk of the savings.
Letwin said the savings could have been higher -- 13 percent instead of 10 -- had the Federal Aviation Administration given the authority the right to operate by the target date of Oct. 1. As it was, the FAA did not grant its approval until Nov. 3, the day after Republican businessman James Roddey, an authority supporter, won the county executive election. His opponent, Cyril Wecht, opposed the authority.
Yesterday was the authority board's first meeting since the FAA approval.
The refinancing is a move to help reduce costs to US Airways. The airline has been pushing the county to cut costs, which, according to the county, total $6.40 per enplaned passenger. US Airways puts the costs closer to $8 and wants to see them slashed to about $4.
"The reduction in costs in Pittsburgh makes us more attractive [to the airline]. Hopefully, it will be passed on one way or the other to consumers," Aviation Director Kent George said.
"We certainly appreciate the board's action," US Airways spokesman Rick Weintraub said.
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