SWA at PIT - The End of U.S. Airways?

A.P. Pittsburgh - First at Philadelphia International Airport, then at
Pittsburgh, there was relief and then unabashed joy over the arrival of
Southwest Airlines, an industry star that seems to lower fares and boost
travel wherever it lands.

It is bittersweet news for Pennsylvania, however, because it is bad news
for US Airways.

US Airways has a deep footprint in Pennsylvania - deeper than in any
other state - even after scaling back its presence here. Though
Pittsburgh lost its hub status, Philadelphia remains one of the
airline's two remaining hubs and the company employs more than 11,000
statewide.

Now, after putting pressure on US Airways in cities from Baltimore to
Albany, Southwest could finish off US Airways altogether through its
strategy of expansion in Pennsylvania, industry analysts say.

State officials continue to work with US Airways, under bankruptcy
protection for a second time, in an attempt to lower costs.
Even Wednesday, just hours before Pittsburgh International announced
Southwest was coming, airport officials were on the phone with US
Airways chief executive Bruce Lakefield trying to cut a deal.

The Rendell administration said it is premature to talk about the
collapse of US Airways, which recently won a favorable ruling in
bankruptcy court that the airline said would prevent immediate
liquidation.

"We are not giving up hope and we're pleased that others continue to
look here," said Kate Philips, spokeswoman for Gov. Ed Rendell.
"Whatever happens, we are hopeful that jobs in Pittsburgh and in the
state's airline industry as a whole will be maintained."

How the demise of US Airways would affect Pennsylvania, no one can say.
But the financial ties between the airline and the state as recently as
three years ago made the thought of its loss nearly unimaginable.

In 2001, the last year the company calculated economic impact, US
Airways spent more than $2 billion in Pennsylvania and employed 18,092.

But that presence has already fallen precipitously, to 11,614 employees
today, according to figures provided by the company.

Employment in Pittsburgh stands at 6,038 and in Philadelphia at 5,459,
said David Castelveter, a US Airways spokesman.

Southwest has grown rapidly in other markets it has entered, showing
what might happen as a result of its two-pronged attack on US Airways in
Pennsylvania.

"Being a hub was one of the best things that ever happened to us and
losing the hub was the best things that ever happened to us," said Mindy
Hamlin, spokeswoman for Raleigh-Durham International Airport.

At the height of Raleigh-Durham's operations as a hub in 1992, American
Airlines and its American Eagle unit offered over 200 daily departures
from the airport, more than a two-thirds of all daily departures.

American "dehubbed" the airport in the mid-1990s, and Southwest showed
up four years later.

Passenger numbers have fallen at the airport from 9.9 million to 7.9
million. But origination and destination passengers, those who live in
or travel directly to the region, have risen nearly 100 percent to more
than 7.4 million.

That means more people are flying to and from the region, not just
passing through.

"We discovered an incredibly strong market, partly because it was a
period of growth for us, but other airlines recognized what was already
here," Hamlin said.

Southwest showed up at Baltimore/Washington International Airport in
1993 when US Airways had a 40.4 percent market share, according to
spokesman Jonathan Dean. The airport then had 9 million passengers
annually.
Southwest surpassed US Airways before the decade ended, and contributed
to a more than doubling of traffic by 2003 to nearly 20 million
passengers, Dean said.

"Southwest is not only the largest airline serving this airport, but
they do have a significant employee presence, from the pilot and crew
base to marketing professionals, maintenance and passenger service
employees," he said.
Southwest said it now employs about 2,900 people at BWI.

Pennsylvania has a significant demand for air service and other airlines
will likely fill any gaps that arise, said Michael Allen, an industry
analyst with Back Aviation Solutions of New Haven, Conn.

Early indications show Southwest, in Philadelphia, has repeated growth
patterns it has achieved elsewhere in the country.

After beginning service May 9 with 14 flights to six cities, the airline
is now offering 41 flights to 16 cities.

But US Airways' sizable support network in Pennsylvania - and what might
happen to it - is a big concern.

In Nashville, a one-time American hub, Southwest arrived in 1986 with
eight flights to two cities. Southwest now offers 86 nonstop flights to
27 cities from Nashville. The region suffered job losses with the loss
of hub status, though not nearly as many jobs as Pennsylvania could lose
if US Airways does not survive.

Pittsburgh alone provides jobs for about 2,000 mechanics, clerks,
cleaners and baggage handlers. It is not clear how many of those jobs
would be replaced even if other airlines bump up service.

Southwest appears to be methodically targeting US Airways, but part of
the reason it has done so is that both run "shorter stage lengths,"
competing for same markets, Allen said.

Southwest, however, has been able to fly cheaper, in part, because it
shops out tasks not directly related to its core business.

Built for $1 billion, largely to the specifications of US Airways,
Pittsburgh International began preparing for the worst in 2002 when the
airline first sought bankruptcy protection, said Kent George, the
airport authority's executive director.

The airport began transforming itself from a hub operation to a facility
geared toward handling more direct flights.

"If they go belly up, we will never have 500 departures again from a hub
carrier and there will not be 11,500 employees here from a hub carrier,"
George said.

The authority is now working to create new jobs at the airport to
replace the ones that may disappear if US Airways does not survive.

Some employees are already preparing for the worst.

Pilot Lou Bailey, who lives in a suburb of Pittsburgh, flies four days
out of the week for US Airways and spends the other three studying to be
a nurse.

"If the money were equal, I'd rather be flying," he said.

Bailey is also preparing a resume that he will send to Southwest
Airlines