Dow Jones Business News
Any Changes By AMR Would Inconvenience St. Louis Firms
Tuesday July 15, 2:51 pm ET
By Desiree J. Hanford, Of DOW JONES NEWSWIRES
ST. LOUIS (Dow Jones)--The closing of American Airlines' hub in St. Louis would be an inconvenience for the business community, but not much more, according to area businesses and community leaders.
AMR Corp. (NYSE:AMR - News) , the parent of American Airlines, said on July 1 that it was close to finishing a review of its hubs, routes, reservation centers and maintenance facilities in an effort to cut costs and pull its bottom line out of the red.
American plans to announce the outcome of that review "soon," spokeswoman Julia Bishop-Cross said Tuesday.
Speculation has been that any changes will be felt the most by the carrier's St. Louis hub, which American acquired when it purchased the assets of Trans World Airlines shortly after TWA filed for bankruptcy in January 2001. The purchase made American the largest carrier out of Lambert-St. Louis International Airport.
American and its regional partners have 416 daily departures out of Lambert, compared with 455 in July 2002, Bishop-Cross said. In June, 36.6% of the people boarding those flights were starting their travel in St. Louis and 63.4% of them were connecting, she said.
American also has hubs at Chicago's O'Hare International Airport and at the Dallas/Ft. Worth airport.
Although a decrease in service by American at Lambert wouldn't affect Emerson Electric Co.'s business plans or operations, it "would likely result in scheduling inconveniences for our business travelers," spokesman Mark Polzin said in a written statement.
One of the reasons that Smurfit-Stone Container Corp. (NasdaqNM:SSCC - News) likes being in St. Louis is that there's a hub at the airport, spokesman Tim McKenna said. The company's employees fly in and out of Lambert regularly to Smurfit's plants all over the country, and it would be difficult for those employees if they had to connect through Chicago to do that, he said.
"If we had to connect, it would be a headache," McKenna said.
Other Carriers Could Increase Presence
McKenna is optimistic that even if American does reduce its presence in St. Louis, there will still be enough demand for nonstop flights to cities such as New York and Los Angeles. He's also hopeful that other carriers, such as Southwest Airlines Co. (NYSE:LUV - News) , the second-largest carrier at Lambert, will offer more flights if American scales back.
There's no doubt that having easy access to other cities from St. Louis is key for economic development, said Richard Fleming, president of the St. Louis Regional Chamber and Growth Association. But that access existed before Lambert was a hub for American and given the amount of origination and destination traffic in the region, St. Louis will always have good access to other cities, Fleming said.
An independent analysis of Lambert, O'Hare and Dallas/Ft. Worth showed that Lambert is the most efficient and cost-effective hub of the trio, Fleming said. Some of that stems from Lambert handling fewer flights, but it's still an advantage, he said.
Lambert and St. Louis officials have reportedly been talking to other carriers about expanding their presence if American cuts back. That, combined with the fact that American will still have some type of presence at Lambert and that the Spirit of St. Louis Airport offers companies an alternative, means it's not bad news for businesses, said Denny Coleman, president of the St. Louis County Economic Council.
As for convincing new businesses to locate to St. Louis, Coleman said any changes by American will have a minimal effect on those types of decisions. Having a hub isn't in the top five reasons why a company would relocate or stay in a city, he said. Other factors, such as cost of doing business and the quality of an area's labor force, are more important, Coleman said.
"Certainly we'd like to see the same type of hub operation we've had in the past, but we'll still have a diverse business economy," he said.
Spirit Airport Offers Alternatives
The Spirit of St. Louis Airport in Chesterfield, Mo., home to roughly 125 corporate jets and about 27 miles west of downtown St. Louis, is a quality corporate airport that becomes even more important to area businesses if American reduces its presence, Coleman said. (Lambert is 14 miles northwest of downtown St. Louis.)
St. Louis-based companies that have their own corporate jets and hangers at Spirit include Anheuser-Busch Cos. and Emerson Electric, said Richard Hrabko, Spirit's director. Hrabko estimates that there will be about 190,000 total flights at the airport this year.
"I think it's certainly possible that if certain critical destinations were cut back severely or eliminated (by American), it will give (companies) the impetus to charter or purchase a corporate jet," Hrabko said.
St. Louis isn't the only Missouri city waiting to hear about American's plans. The carrier has a maintenance facility in Kansas City that employs about 2,200 workers and has an annual payroll of $132 million.
The city doesn't have a contingency plan if American decides to close it because the carrier hasn't given any indication that the facility will be closed, said Gary Sage, senior vice president for the Kansas City Economic Development Corp.
"Our commitment is to make sure they stay up and running," Sage said.
Kansas City has offered incentives to American in an effort to keep the facility open. One of the incentives is airport revenue bonds, which would help pay to upgrade the facility, Sage said.