Fee cuts from gas drilling deal won't add flights at Pittsburgh International Airport

Tom Fontaine
| Thursday, July 11, 2013, 11:48 p.m.

Airlines serving Pittsburgh International Airport are happy to accept reduced fees and charges they're getting from a blockbuster deal to drill for natural gas at the airport.

But Pittsburgh's two largest carriers, US Airways and Southwest Airlines, say they have no plans to add flights.

Allegheny County Airport Authority officials on July 1 began using part of the $46.3 million in up-front money the authority got from Cecil-based Consol Energy Inc. to cut airlines' rates and charges, including landing fees and rent for terminal space.

“Low costs are at the DNA of our existence, so obviously we're thrilled whenever we can reduce them,” said Southwest Airlines spokesman Brad Hawkins.

The fee reductions cut airlines' average cost per passenger in Pittsburgh by 55 cents, to $14.11, but the charge remains almost double the $7.33 median for airports rated by Moody's Investors Service, which upgraded the authority's bond rating last month. Moody's said it “could be achievable” to use drilling royalties when they come to reduce per-passenger costs below $10.

“It could be a good tool to attracting new airlines,” said Bijan Vasigh, economics professor at Embry-Riddle Aeronautical University in Daytona Beach, Fla.

Vasigh said the latest fee cuts are not likely to result in a big jump in service, but they could make Pittsburgh more attractive to new or low-cost airlines. The cuts are smart at a time when the airline industry is scaling back the number of flights through mergers, he said.

A proposed merger of American Airlines and US Airways, Pittsburgh's busiest carrier, could constrict flights even more from the 150 daily flights.

Pittsburgh had about 8 million passengers last year, down from 8.7 million in 2008 before the recession began and 19.8 million in 2000, when the airport served as a bustling hub for US Airways.

The drilling deal, which officials finalized in February, could generate about $500 million for the airport authority, based on county estimates. The county predicts average annual royalties of $22.5 million for 20 years, plus the up-front bonus to lease mineral rights for the airport's 9,263 acres.

The authority will spend the bonus over five years, in average installments of nearly $9.3 million. It will spend 54 percent of the money — or about $5 million annually — to reduce airlines' rates and fees, while the rest will be for economic development and capital projects.

Financial records show that airlines pay more than $80 million a year in landing fees, terminal rent and other aviation charges in Pittsburgh.

“We always view a potential reduction in airport fees as a positive,” US Airways spokesman Todd Lehmacher said.

Fees alone don't drive airlines' decisions on where to add or eliminate flights.

“The real reason airlines fly routes is because they have people sitting in the seats when they take off,” said Randy Forister, the airport authority's development director. “But certainly it gives us an advantage if we're competing with an airport and we can show that we have lower costs.”

It's hard to predict royalty amounts and how the money — 18 percent on the gas produced — will be used.

“You're dealing with commodity prices that vary wildly,” Forister said, noting natural gas prices have ranged from $2 to $13 per million metric British thermal units in the past five years. They opened at $3.68 MMBtu on Thursday.

Tom Fontaine is a staff writerfor Trib Total Media. He can be reached at 412-320-7847 or tfontaine@tribweb.com.

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