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.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV