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US's Siegel Vs. ACI's Plavin On Airport Costs

Tue May 06, 2003 2:44 pm

Dear Gang,

Check out this food fight between the CEO of US Airways and the head of Airports Council International over airport bond costs:


We're all aware that US Airways rejected their PIT leases at the last minute before emerging from bankruptcy. It's very possible that United will do the same thing at DEN and possibly elsewhere.

It seems to me that Siegel is posturing for his negotiations with Allegheny County and PA over PIT. I don't think we're going to see this happen everywhere, though. PIT has circumstances that make it a white elephant. PIT was overbuilt at a weak O & D market back when US Airways ruled the Northeast and could charge what they wanted. Now the airline's got lower-cost competition, and they have realized that PHL is a much better market for a hub in a competitive world, even with its bad runway layout and terminal design.

At Denver, the city built a Taj Mahal when UA was fat and happy, and even when DIA opened people were complaining about the costs. I predict UA dumps those leases during bankruptcy.

But the fact is, people want to fly if the cost is right, and airport facilities are needed. I do think the market will be more rigorous about scrutinizing airport bonds, but I don't see a widespread inability of airports to build. Plavin's right to swing back at Siegel, but I'm not yet convinced that there's going to be a widespread financial crisis for airports. There will be some big defaults or bailouts, but most large airports in large markets will continue to have traffic and will be able to pay for their terminals.

Need a new airline paint scheme? Better call Saul! (Bass that is)