US Airways says airport debt must be lowered by $500M
A senior executive at US Airways said Thursday that debt at Pittsburgh International Airport must be cut by $500 million and that a proposal by state officials to keep the airline's hub in Pittsburgh fails to do that.
The proposal by Pennsylvania officials "did not address the critical cost issue because it did not focus on reducing existing debt as much as adding facilities," said Chris Chiames, senior vice president of corporate affairs, in an employee newsletter issued yesterday.
Chiames said Pittsburgh International must cut the $500 million from its $673 million in remaining payments to bond holders who paid for construction of the airport. Of the airport's $62 million in annual debt payments, US Airways' lease payments provide more than $50 million.
"Disingenuous," is how Allegheny County Chief Executive Jim Roddey described Chiames' comments.
"The whole time they were in bankruptcy, they never mentioned the debt issue to us," Roddey said. "All the time they asked us to help them in lobbying for pension plans and bailouts, they never mentioned they had a problem with debt at the airport."
A soft deadline of July 18 for the state and airline to reach an agreement passed without a deal, and no talks have taken place since.
"They're sending us a clear signal this is not a priority for them," Roddey said. "No meetings are scheduled, which says a lot about their interest in trying to solve the problem."
About 20 minutes before exiting Chapter 11 on March 31, US Airways exercised its right to void its leases at Pittsburgh International. The airline said it would abandon the Pittsburgh hub next Jan. 5 if the county Airport Authority did not slash US Airways' lease payments there, plus upgrade and modify gates and other facilities to accommodate the carrier's addition of smaller regional jets.
Including demands for improvements to Philadelphia International Airport, US Airways wanted about $864 million in cost cuts and facilities improvement in Pennsylvania.
The state countered with a proposal worth about $264 million. Roddey said that plan included bond debt reductions, but he could not immediately recall by how much.
Chiames praised Pittsburgh International as "a very efficient and well-run airport." But US Airways' share of repaying the bond debt "drives up the cost of doing business to a level that makes it very uneconomical."
The airport essentially adjusts airline lease costs according to the number of passengers served. The airline's cost for each passenger at Pittsburgh International equals about $9, Chiames said. That's well over the roughly $2 at Charlotte-Douglas International Airport, which last year edged out Pittsburgh as US Airways' largest hub.
US Airways' daily flights from Pittsburgh have dropped to less than 400 a day from more than 500 two years ago. The number of people on the airline's local payroll has fallen to less than 9,000 from about 11,600.
A spokesman for Gov. Ed Rendell, who leads the state's negotiating team, could not be reached last night.
