Note to Philly: Airport Costs, Not US Airways Merger, Threaten Hub

The Philadelphia hub is profitable. US Airways uses it largely to connect passengers between 26 international destinations, mostly in Europe, and 88 U.S. destinations. American's JFK operation is far different, barely a hub at all. It serves about two dozen international destinations, primarily London Heathrow, and a few dozen domestic destinations. A high percentage of its passengers originate locally.

Over the past decade, American has failed in efforts to build a significant hub at JFK. Competition is intense at JFK, because Delta and JetBlue (JBLU) also operate hubs and because the congested airport offers little opportunity to expand. US Airways has repeatedly said that it is profitable primarily because it operates 99% of all of its flights at airports where it is the dominant carrier. In a merger, that would still be Philadelphia, not JFK.

It is unclear what exactly US Airways would do if it operated both hubs, but it seems just as likely that Philadelphia would gain service, as more American passengers are pushed through this profitable hub, as it does that Philadelphia would lose service. The Philadelphia Inquirer reported Wednesday that Mayor Michael Nutter's administration supports a potential merger, believing that it would bring more business and new travel options to the airport, including the possibility of nonstop flights to China and Japan.

Regarding Pittsburgh, it is true that US Airways has significantly downsized in Pittsburgh. The effort began long before the 2005 merger with America West. One problem was that Pittsburgh competed with multiple area hubs including Chicago and Detroit, which survive, and Cincinnati and Cleveland, which barely survive. Another problem with Pittsburgh is that airport costs rose to unsustainable levels as the airport built too much infrastructure. This should be a warning to Philadelphia, given the proposed expansion project.

"The airlines serving the Philadelphia International Airport, including US Airways, anticipate that the entire project will cost about $10.5 billion, which is far higher than the airport's assessment that the project cost is closer to $6.4 billion," US Airways said late Tuesday, in a prepared statement. "We do not oppose expanding PHL's facilities but as we've stated before we are concerned that escalating costs at the airport will potentially damage the future viability of our hub operation there." The project costs would, in the end, be paid largely by US Airways passengers.