BoeingBoy:
Chip said: Allegheny County built an airport based on old economic forecasts that did not pan out.
Jim said: did the ACAA decide to build the new terminal in a vacuum or was U a prime driver of that decision?
Chip responds: Jim, the parties negotiated a deal, but the economic climate has changed. Bankruptcy law permits the debtor to keep current agreements in place ,renegotiate new terms, or reject the agreement. US Airways is operating within the law.
Chip said: The world has changed and so far the ACAA has not been willing to change.
Jim said: haven't the ACAA, city, and state made offers that would reduce costs at PIT? Isn't it U who is sticking to the original demands and unwilling to compromise?
Chip responds: The ACAA counter provided capital improvements, but did very little to address the debt and cost problem. US Airways responded with a counter, but the information remained confidential at the mutual consent of the parties.
Chip said: However, just like at US Airways, everybody wants the other guy to take a haircut, but not me.
Jim said: again, it is U that is threatening to "take its marbles and go home" unless it gets everything it wants.
Chip responds: How do you know that? The last meeting was confidential with no public release, therefore, I believe an “absolute’ statement is incorrect. With that said, if the ACAA does not address the debt issue, then I believe US Airways will move its assets westward – in fairly short order. There is an alternate plan if the hub is rejected.
Chip said: US Airways must address its cost problem because domestic revenues will continue to fall.
Jim said: REVENUES are on the rebound as traffic picks up. YIELDS will continue under pressure due to the LCC's expanding presence.
Chip responds: System wide revenue is up, but the domestic RASM and yield (the amount of profit per ticket) as low cost carriers. In a presentation to the US Airways MEC last Tuesday, ALPA international E&FA told the MEC that industry revenue concerns for 2004 are rising – capacity growth without meaningful demand recovery (that is not yet visible) could disappoint earnings.
Chip said: US Airways' CASM must be below RASM and the ACAA has the opportunity to help US Airways balance that equation.
Jim said: once again, haven't offers been made that would do just that? Only Siegel's "give me everything I want or it's your fault" attitude is standing in the way.
Chip responds: Again, the offer was for capital improvements and barely addressed debt and cost reduction.
Chip said: The company has a good opportunity to move its assets to new areas, which have higher O&D traffic that may become available in the not-so-distant future."
Jim said: name one airport in the eastern half of the country with higher O&D traffic that doesn't already have a major hub tenent, significant LCC presence, or both.
Chip responds: I never said an eastern airport, in fact if the assets move, it will likely be westward.
Chip said: Industry consolidation is coming.
Jim said: quite possibly though not guaranteed. The bigger question is whether U will be a part of it if it comes.
Chip asks: How do you know that?
Chip said: Will Pittsburgh be a part of it or will the airport and its surrounding facilities be a vibrant operation or a white (empty) elephant?
Jim said: unfortunately for PIT, it is too close to the east coast to be a major hub for a true nationwide airline since they all have east coast hubs. AMR tried the mini-hub concept (RDU & BNA) and we all know how that worked out.
Chip comments: Agreed.
Chip concludes: US Airways mainline ASM’s will grow in 2004, however, one of the remaining questions is will Pittsburgh have any meaningful ASM’s in the fall? In my opinion, each day that goes by increases the odds US Airways will exit. Moreover, the current ACAA negotiating tactics are increasing the odds that Moon Township will have multiple “white elephantsâ€.
Regards,
Chip