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Many airlines seek financial breaks

| Friday, April 18, 2003

US Airways isn't the only cash-strapped major airline trying to get a financial break from its hub airports.

"There's nothing in the airline world that's not being renegotiated right now," said Darryl Jenkins, director of the Aviation Institute at George Washington University in Washington, D.C.

US Airways threatened to pull its hub operation from Pittsburgh International Airport last Friday, after rejecting gate leases as its last act before exiting bankruptcy protection March 31. The carrier is demanding $155 million in new and improved airport facilities.

"Delta is trying to do the same kind of thing in Salt Lake City," the airline's western hub, Jenkins said.

Hubs are not forever either, experts said. America West "de-hubbed" Columbus, Ohio, in early 2002 as part of its post-Sept. 11 cutbacks, said Michael Allen, chief operating officer of industry consultant BACK Aviation Solutions, New Haven, Conn.

With passenger traffic woefully down, airlines are slashing costs from labor to aircraft leases to airport expenses. US Airways cut nearly $1.9 billion a year, and United Airlines is still trying to fight its way out of bankruptcy, declared in December.

"United Airlines is in default at about 20 different airports," Jenkins said.

Denver International Airport is one of those facing problems. Built in 1995, the airport still has about $4 billion left to pay on its construction bonds. And the lease payments from 52 of its 94 gates come from bankrupt United.

The Denver airport currently is talking to United about cutting its lease costs, airport spokesman Chuck Cannon said. It has already cut operating costs by 10 percent through a hiring freeze and capital cost cuts.

"We're certainly concerned and looking at contingencies," Cannon said. "Like what would we do if they reduced their presence here, or worst case, go away entirely."

Securities laws require Denver to outline such a scenario, in fact, in a prospectus it's circulating to attract investors to refinance those bonds.

"Plus, if an airport gives something back to United, it has to give something back to everybody else, too," said Michael Boyd, head of the Boyd Group, an airline consultancy in Evergreen. Colo.

"American Airlines, you can be sure, is asking for givebacks at Fort Worth," Texas, its main hub and headquarters, Boyd said.

Ditto for Lambert-St. Louis International Airport, he said. American, the world's largest airline, inherited a huge presence in St. Louis when it acquired TWA two years ago.

Chicago O'Hare International Airport has had to lay off personnel and cut back elsewhere to cope with industry upheaval, said Monique Bond, spokeswoman for the aviation department in Chicago, where United is based.

"But United, American and all of our (O'Hare) tenants are current on their leases," Bond said. She declined to discuss any negotiations, however, between the aviation department and bankrupt United.

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