Note to Philly: Airport Costs, Not US Airways Merger, Threaten Hub
CHARLOTTE, N.C. ( TheStreet) -- Last month, the North Scottsdale Chamber of Commerce released a study detailing the ways in which the proposed merger between US Airways (LCC) and AMR (AAMRQ.PK) would be bad for the Phoenix economy.
On Tuesday, it was the African-American Chamber of Commerce of Pennsylvania, New Jersey and Delaware proclaiming that the merger would also have a negative impact on the Philadelphia economy. This chamber, in a prepared statement, said the merger "threatens the viability of Philadelphia International Airport in the midst of an expansion plan." It has initiated a "Protect Our Hub" media campaign, which in some ways recalls the nativistic "Keep Delta(DAL) My Delta" campaign that played a key role in crippling an earlier US Airways merger attempt.
In both cases, particularly in Phoenix, concerns that a merger could potentially lead to service and employment reductions seem legitimate. The North Scottsdale chamber's study suggested that Phoenix could lose thousands of jobs and millions of dollars in tax revenue. Although the numbers are impossible to quantify, it is a fact of life that a city that loses a headquarters in a merger also loses jobs.
Phoenix service levels could also diminish. Some experts suggest that for some flights, connections in Dallas, the second largest single-airline hub in the world with about 750 daily departures, would make more sense than connections in Phoenix, where US Airways has 260 daily departures.
Nevertheless, regarding Philadelphia, the AACC appears to draw false conclusions from its merger review. One is that the proposed merger relates to US Airways' opposition to an expensive airport improvement project that includes terminal expansion and new runway. Another is that the hub could go away. In a posting on its Web site, the chamber proclaimed: "It is unlikely American Airlines or US Airways would maintain its PHL hub because of its close proximity to American's hub at New York's JFK airport. It happened to Pittsburgh and it can happen to us."
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.