How Rio de Janeiro is Building the City of the Future Sponsored This content is created collaboratively with one of our sponsors.
Landing fees need to be cut before Pittsburgh sees any halt to the decline of its airport business.
Allegheny County Executive Rich Fitzgerald describes Pittsburgh International Airport as an economic engine for Western Pennsylvania.
Yet while Fitzgerald points to improved employment, production and tourism as signs of the region’s economic vitality, growth at Pittsburgh International is stalled.
“I can’t explain it,” Fitzgerald said of the incongruity between the region’s surging economy and an airport that is scuffling in its core business of flying.
The airport was on pace through November to post its lowest annual passenger total since opening in 1992, according to the latest data. It recently learned that 600 airline jobs will vanish when the new American Airlines, created through a merger with US Airways, closes a flight operations center in Moon by next year. An unused section of one concourse in the $1 billion airport remains walled-off. The airport doesn’t have a CEO.
Fitzgerald and other observers see clearer skies ahead for an airport that earned industry praise for reinventing itself after US Airways closed its former bustling Pittsburgh hub a decade ago, developing a stable of low-cost carriers and seeking non-aviation sources of revenue. But traffic has fallen in each of the past two years.
Pittsburgh has an average of 139 daily flights to 36 destinations today — down from more than 600 flights to 110 destinations in the early 2000s. Traffic in the first 11 months of last year was down 2.4 percent compared to the same span a year earlier, when traffic fell 3.1 percent year-to-year, authority records show.
William Lauer, an airline industry analyst who chairs Allegheny Capital Management Inc. in Downtown, says getting back above 200 daily flights would be a “wild success” — and he thinks it can happen.
“But in order to make Pittsburgh more attractive to airlines, costs absolutely have to come down,” Lauer said.
Airlines pay about $13.92 per passenger to operate at Pittsburgh, when landing fees and ramp and terminal rents are factored. That’s almost twice the median for midsized airports of $7.33 per passenger, according to Moody’s Investors Service.
Lauer thinks the airport should use proceeds from a natural-gas drilling deal with Consol Energy to cut airlines’ per-passenger costs in half. The deal is expected to generate more than $500 million in royalties over the next 20-plus years.
“If those funds were to be used for that purpose, there’s a reasonable chance that carriers might be influenced by the fundamental economics that right now aren’t very attractive,” Lauer said.
Fitzgerald said the airport is using drilling proceeds to lower fees, which were $14.66 per passenger at the start of 2013. It received a $46.3 million upfront payment from Consol a year ago.
“Whether we can get to that number remains to be seen, but we’re working to lower it,” Fitzgerald said of the per-passenger cost.
In addition to drilling proceeds, Fitzgerald notes that in 2018 the authority will have repaid bonds issued to build Pittsburgh International, an obligation that amounts to about $66 million a year.
Fitzgerald said officials also are working to attract new airlines and flights.
In March, Fitzgerald will lead a delegation to Dubai to ask Emirates, the largest airline in the Middle East, to fly here. The airport is offering incentives such as waived landing fees and marketing support for up to two years for airlines that start service to sought-after destinations, including San Diego, Seattle, New Orleans, Myrtle Beach, S.C., and Jacksonville.
Incentives have appealed to some airlines. Southwest Airlin, which initiated service to Nashville and Houston last year, said it was a factor in starting the service. The airport also saw expanded or new service to markets such as Los Angeles, Boston and West Palm Beach, Fla.
The airport’s highly regarded Airmall, named the nation’s best concessions program for a midsized aiport by trade publication Airport Revenue News, grew as well. Jay Kruisselbrink, vice president of development for concessions manager AirMall USA, said the Airmall revenue totaled $56 million last year, up 2.2 percent from 2012. Per-passenger spending averaged $14.16.
The authority continues to look for a new CEO to be an airport promoter who works to boost air service. The authority’s former CEO Brad Penrod was reassigned a year ago, to focus on overseeing day-to-day operations as president and chief strategy officer.
The CEO search became a secondary concern to the authority’s efforts to finalize the drilling deal and preserve locally based airline jobs threatened by the American merger. Now, Fitzgerald says of the CEO search, “It’s a priority.”
Fitzgerald offered no timetable on when a new airport chief might be hired.
Bijan Vasigh, economics professor at Embry-Riddle Aeronautical University in Daytona Beach, Fla., said hiring a CEO to focus on flight development is a good step but landing additional flights will be driven more by economics, from airline fees to local demand. In the current climate of airline consolidation and cuts, it’s an uphill battle, Vasigh said.
“Having a very knowledgeable CEO could be instrumental but in this climate with only four major airlines that are focused on reducing, it’s challenging. In the next two to three years it will be extremely difficult to change the equation,” Vasigh said. “(A new CEO) is not a game-changer.”
Vasigh said it’s unlikely that one of the four major airlines — American, Delta, United or Southwest — would consider Pittsburgh as a hub but said if fares continue to rise as competition decreases, Pittsburgh could see interest from a start-up airline. He said flights could expand by 20 percent to 50 percent if that happened — a projection that, like Lauer’s, could lift the airport above 200 daily flights.
Pittsburgh doesn’t have a large enough population or enough large companies to support a large hub in current market conditions, he said.
“I don’t think you’ll see the previous position (Pittsburgh) had years ago but you could see improvement,” Vasigh said.