Pittsburgh Int'l Airport slipping slipping slipping.. (Philadelphia: leases, credit, bankrupt)

[BrianTH]

Originally Posted by South Range Family

We all know that hindsight is 20/20, but let me ask this. If the County would have lowered every airline's fees, even if it was to temporarily get through tough times, would the airport be better off with more flights today?

The debt overhang is why they couldn't lower landing fees. They've only been able to do some smaller deals recently thanks to casino money.

[BrianTH]

Originally Posted by Geeo

I don't think there is a definite "good guy" or "bad guy" in this scenario. The county had to watch out for the interests of the taxpayers in order to pay off the debt. The airline wanted to operate as cheaply as possible. . . . I just can't get the bad taste out of my mouth that the airport was built to USAir specs to be the premiere hub for the airline

I don't know if identifying the various parties as "good guys" and "bad guys" matters, but this is the problem in a nutshell. The locals overbuilt the airport on the theory that USAir would voluntarily keep throwing this overbuilt airport a lot of business, but without any guarantee of USAir actually doing that. So then USAir decided to take most of their business elsewhere, and the locals are still paying off that debt and will never recover the wasted resources.

And maybe it is good business practice on the part of USAir to take advantage of gullible locals, people willing to give them handouts without enough strings attached. But I don't think those locals should have to like it.

[Copanut]

Maybe off topic, Hi Yac.

This area is poised to do great things. A world class airport. Low housing costs. Arts/museums/ that used to belong to a 600K city. But what do we get, stupid Democrats making sure they get re elected.

Man, we need a visionary to promote this area.

Hey, maybe Luke Boy will do it.

[pman]

Originally Posted by BrianTH

The debt overhang is why they couldn't lower landing fees. They've only been able to do some smaller deals recently thanks to casino money.

I'm not so sure. Obviously they were receiving a heck of a lot less revenue I imagine when they were downgraded from 500 to 50 flights a day so in the long run, the airport was foolish not to lower the fees...and US Air is a healthier airline today than it was a decade ago FWIW. Sometimes lower fees creates more revenue. that's what is happening today as flights are being added back to pittsburgh. and yes, it's good business sense to take free money when it's handed out..it's bad business sense to build without a guarantee, especially in this case since the airport wasn't being built to serve demand but to attract business that otherwise wouldn't be there. I would imagine losing USAir would have driven a private operator into bankruptcy to rework the debt (like a company losing Wal-Mart as a supplier). btw, how much was spent on the upgrades?
never mind: here's a good article on it
$1bn spent, $800 million in debt, and sky high fees, bankruptcy might have been a better option, isn't that what it's for? when you're revenues are undermined by a complete change in your business model?
Pittsburgh could foreshadow future of Cleveland Hopkins International Airport | Business - cleveland.com - cleveland.com

The airport construction saddled the Allegheny County Airport Authority with $800 million in debt, since reduced to $500 million. Gaming legislation passed in 2004 allots $150 million over 12 years for the airport to help pay off the debt.
Still, the burden keeps landing and lease fees to airlines at $13.41 per enplaned passenger -- among the highest in the country and a deterrence to expansion by struggling airlines. At Hopkins, the rate is $9.13, about average for a mid-sized airport.

also interesting

This addition of new, mostly low-cost carriers has increased the airport's origin/destination traffic from 6.1 million in the late 1990s to 8.2 million in 2007, causing the airport to add additional parking.

Pittsburgh International Airport - Wikipedia, the free encyclopedia

seems like bankruptcy aside, leasing gas rights, and other ideas to reduce the impact of the debt while increasing flights over time (decreasing fees) is the way to go. maybe they can put a hotel in there. ; )

[Bizowner00]

The past two ' visionaries' I have supported against boy mayor have lost in not so close elections. Pittsburgh continues to get what it deserves given they love Luke enough to keep putting him on Grant Street. Thank god that Pittsburgh is home to some grand not for profits, and private thinkers. Terrible local government has kept the city struggling and limited the local development potential of research excellence coming from our education and research complex.
The airport mess is yet another example of local political leaders showcasing their non existent creative ways in which to deal with troubles. **** happens but in Pittsburgh that **** hardens and becomes a part of the fabric. Keep electing the same old same old. Opps I have to run for my non stop to Philadelphia so I can get back to Erie.

[jimmyev]

Some people choose their airline based upon which hub they'll have to fly through. I know people that refuse to fly USAirways because they can't stand flying through Charlotte or Philadelphia. I prefer Southwest because I like Midway and (especially) BWI. Much nicer, cleaner airports. In the long term, the abandoning of Pit will have a detrimental effect on USAir.

[pman]

Originally Posted by jimmyev

Some people choose their airline based upon which hub they'll have to fly through. I know people that refuse to fly USAirways because they can't stand flying through Charlotte or Philadelphia. I prefer Southwest because I like Midway and (especially) BWI. Much nicer, cleaner airports. In the long term, the abandoning of Pit will have a detrimental effect on USAir.

I don't know about nicer and cleaner (I've been to all of them and can't really agree-esp since much of the work at PHL is finally done) but I'd avoid connecting through places like NY, Philly, and chicago because of the likelihood of delays. It's also worth noting that it's relative undersize from conservative financial management has yielded a healthier overall airport. OTOH, from USAir's perspective, most east coasters would choose not to fly through PIT due to it's out of the way location for European flights, and most major east coast markets have direct flights elsewhere in the US (and the east coast market is huge).I also don't particularly like Miami but really, I hate connecting flights period. Interestingly, the real problem here was the decision to overbuild for the hub, PIT has seen increased patronage despite fewer flights so I think there is a good argument that US Air was holding them hostage...even if losing those jobs wasn't good for the area. one has to wonder what the airport would look like without overbuilding, seems safe to say there would be more flights today though.

[BrianTH]

I'm no expert on airport economics, but my understanding is that when you combine the fact that cutting landing fees doesn't actually stimulate that many more flights and the fact that there is a marginal operating cost for servicing each flight, operating more gates, and so on, it made more sense for the airport to downsize and cut costs than to try to stay the same size by cutting fees. Again, my specific understanding is that it ran the numbers on USAir's demands and just couldn't balance the books if it cut its fees, whereas it has in fact managed to downsize and stay on top of its payments.

I'll also admit I have never been quite clear on the bankruptcy issue, which I agree seems like a logical solution when circumstances gives you debts you can't pay, but here is what I understand. The Airport Authority owed the County money, and in a bankruptcy the County would have taken a big haircut. So instead the state authorized the use of casino money for the airport, which in turn has allowed the airport to pay back the County in full, and the airport has also been borrowing against future casino payments to help lower landing fees. The latter also would have been more costly if it had gone to bankruptcy instead.

The good news is that I believe the County is almost paid off, and now the casino money should all go to lowering landing fees. The bad news is the new casinos aren't doing that well. So we'll see.

[neurodistortion]

The point is, it's cheaper to fly out of places such as Dulles or New York than Pittsburgh if we're talking about international flights, and given the distances to some of these airports, more people would be willing to make the trek if it involves saving a few hundred dollars.

[pman]

Originally Posted by BrianTH

I'm no expert on airport economics, but my understanding is that when you combine the fact that cutting landing fees doesn't actually stimulate that many more flights and the fact that there is a marginal operating cost for servicing each flight, operating more gates, and so on, it made more sense for the airport to downsize and cut costs than to try to stay the same size by cutting fees.

It's clear to me that no matter what, the airport had to be downsized )no matter what the fees are). Since they've cut fees they've added flights, though it was unlikely they ever could have added anywhere near the flights necessary once US Air left...as you've noted, the airport wasn't built for pitt's market. Certainly, in retrospect, appears to have been a mistake without guarantees...of course, the airline market was only starting to be shaken up at the time. a more prudent measure might have been to build only some excess capacity. of course, what's done is done...anyways, cleveland has about 11.5 million passengers I think so perhaps PIT can eventually expect ~ 10 million in the near future. I think if I were going to subsidize a European flight I'd have picked london because connections out of london are cheaper than paris.

Originally Posted by BrianTH

I'll also admit I have never been quite clear on the bankruptcy issue, which I agree seems like a logical solution when circumstances gives you debts you can't pay, but here is what I understand. The Airport Authority owed the County money, and in a bankruptcy the County would have taken a big haircut. So instead the state authorized the use of casino money for the airport, which in turn has allowed the airport to pay back the County in full, and the airport has also been borrowing against future casino payments to help lower landing fees. The latter also would have been more costly if it had gone to bankruptcy instead.

certainly seems plausible. I wonder if it's better for citizens and the city than further reductions of property taxes. It's not the only overbuilt PA airport (HIA and Johnstown come to mind).
here's to hoping table games do better