County may file challenge to US Airways'' move to reject airport leases
Tuesday, April 08, 2003
By Mark Belko and Frank Reeves, Post-Gazette Staff Writers
The Allegheny County Airport Authority may challenge the right of US Airways to reject its leases at Pittsburgh International Airport, a move certain to strain the already tense relationship between county officials and Pittsburgh''s dominant carrier.
Glenn Mahone, airport authority board chairman, said yesterday the agency may file objections to the carrier''s action in U.S. Bankruptcy Court, claiming the decision to reject the leases moments before the airline emerged from bankruptcy protection violated the letter and spirit of the federal bankruptcy code. The authority has until Thursday to do so.
US Airways spokesman David Castelveter declined to comment directly on the threat of legal action. "Our intent is to resolve this issue through direct negotiations with Allegheny County executives," he said.
In an 11th-hour filing before emerging from bankruptcy last week, US Airways rejected its leases at Pittsburgh International and gave county and airport authority officials until January to renegotiate the leases at lower fees than the airline is paying now.
Allegheny County Chief Executive Jim Roddey said last week US Airways might abandon Pittsburgh as a hub if the airline can''t reduce its costs at the airport.
Authority Executive Director Kent George added yesterday that even if the airline gets the concessions it wants, it still could drop its Pittsburgh hub, depending on the state of the airline industry as a result of the war and the economy.
"Even if we do everything they ask for, they''re not making any promises," he said.
In court, the authority may challenge the right of the airline to "prospectively" reject the leases as of January 2004. Mahone said leases traditionally have been accepted or rejected as of the date a bankruptcy plan is confirmed.
Officials also may claim they were misled by US Airways in the weeks leading up to the airline''s emergence from bankruptcy. During a meeting with the Post-Gazette editorial board yesterday, Mahone and George said US Airways had confirmed two days before coming out of bankruptcy that it was assuming the airport leases.
It did not file to reject them until 21 minutes before the deadline.
Had the airline rejected the airport leases earlier in bankruptcy, the authority most likely would have filed a claim for the $673 million in debt on the airport terminal, the bulk of which US Airways is obligated to pay off under its leases.
Mahone said the airline''s reorganization plan, as constituted, never would have been approved by the court knowing that a potential $673 million liability existed.
During the bankruptcy proceedings, the airport authority did not object to the US Airways reorganization plan because it believed the airline would assume its leases at Pittsburgh International.
Instead of going to court, the authority is still hoping to work out a deal with the carrier through negotiations. It has asked the airline to sign a stipulation setting a 60-day timetable to renegotiate lease terms while preserving the authority''s right to file a challenge in bankruptcy court.
George said the authority is carefully evaluating its strategy with an eye toward protecting nearly 9,000 US Airways jobs in the region.
However, if the authority challenges US Airways in court, its case probably will be on shaky legal ground, said William Lauer, chairman of the Tarentum-based Allegheny Capital Management.
"Contract rejection is an absolute right" of US Airways or any company in bankruptcy protection, he said. "During every stage of the proceeding, the leases were subject to a unilateral rejection."
US Airways decided to reject the leases even as it sought $115 million in financing for new, retrofitted and expanded facilities at the airport, including terminal modifications and hangar improvements. It also wants another $40 million to build a maintenance hangar and training center for its regional jet operation.
George and Mahone expect those requests, which would be financed through public dollars or passenger facility fees, to become part of the larger negotiations with the airline over lowering lease costs.
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Mark Belko can be reached at mbelko@post-gazette.com or 412-263-1262. Frank Reeves can be reached at freeves@post-gazette.com or 412-263-1565.
