How US Airways' Charlotte Hub Became Deregulation's Big Winner

CHARLOTTE, N.C. ( TheStreet) -- This should be the peak of Jerry Orr's career.

The longtime director of Charlotte Douglas International Airport this year saw American ( AAMRQ.PK) and US Airways ( LCC) propose a merger that would seem to guarantee the future of the airport he has built. Now he is building 4,000 new parking spaces and planning a fifth runway. This week, as a side note, Southwest ( LUV), which Orr had long sought as a tenant, arrived at the airport, although it came because of its merger with AirTran, which already was here, rather than as a result of any particular recruitment brilliance.

Most important is the merger, not only because it would make Charlotte the second biggest hub in terms of daily departures for the world's biggest airline, but also because it would mean that a merger between Delta ( DAL) and US Airways, which US Airways once sought, is likely to never occur. Such a merger would have cemented Charlotte's role as an Atlanta subordinate.

The rise of Charlotte Douglas during Orr's tenure as director, which began in 1989, shows that deregulation produced winners not only among airlines, but also among airports. Unlike most major hubs, Charlotte is not a particularly large city with a large number of local passengers. Rather, it became the greatest airport success story of deregulation for three reasons. Piedmont started 80 miles away and was acquired by US Air in 1987. A world with three global U.S. airlines has just two major Southeast hubs -- Charlotte and Atlanta. Also, Orr kept costs low -- lower than any major airport in the country. "We advertise low costs all day, every day," he said in an interview on Monday.

At 72, Orr should be coasting along, collecting kudos for remarkable success as he approaches retirement. Instead, his airport has been thrust into a political battle, something he long sought to avoid.

The battle is over whether the city will continue to run the airport, as it has for decades, or whether a regional authority will take over. That puts the airport in the middle of historic conflicts - between Charlotte and Raleigh, between Democrats and Republicans, between Charlotte and surrounding counties. It is a change for a facility long viewed as efficient, successful and above being the subject of squabbling between interest groups.

On Monday, at an event celebrating Southwest's first flights to the city, Dave Ridley, Southwest senior vice president for business development, seemed to speak for the airline industry as he praised Orr, noting: "This is a man whose reputation precedes him. He understands the importance of running an efficient low cost airport." Onetime US Airways CEO Stephen Wolf once described Orr as one of the country's two best airport directors. Asked the other one's identity, Wolf said there was no one, but he wanted various others to believe it was them.

In the 1990s, Orr benchmarked against Pittsburgh International, then US Airways' largest hub. In the late 1980s, Pittsburgh underwent a $900 million expansion that produced a beautiful airport, but also created a more costly place to operate. Orr just tried to keep costs down. "We understood deregulation," he said. Eventually, US Airways cut Pittsburgh flying by 90% while growing in Charlotte.

When the competition with Pittsburgh ended, Orr adapted to a new benchmark --- Atlanta. "In any competition, you have to win one battle and then move on to the next," he said. To ensure Charlotte's standing, Orr had to maintain its position as the principal alternative to Atlanta. He built a fourth runway, expanded terminals, creating a spacious international terminal, and still kept costs low.

"If we can have a cost half of what the competition has, and we can produce a good product, we can win," he said.

Like other Charlotte leaders, Orr was troubled when US Airways sought to merge with Delta in 2006. But he had confidence, even then, that Charlotte could retain its standing. If that merger had occurred, "Somebody else would have taken over the hub," he said. "You don't think (American and United ( UAL)) would cede the whole Southeast to Delta, do you?"

Orr recalled that Charlotte might have become an American hub two decades ago. Before the USAir/Piedmont merger, he said, American inquired about buying Piedmont. "Everything goes round and round," he said. "You just have to stand in one place and be patient -- the same deal will come back. Some people think deals never come back -- that's wrong."

It is widely accepted that Orr will soon retire. That is to say that it is widely accepted by everyone except for Orr. Asked if there was anything left for him to accomplish, Orr responded: "A bunch of things -- the list goes on and on." He mentioned completion of an intermodal terminal, a new international terminal, the fifth runway and a business complex around the airport, like the one at Alliance Airport in Fort Worth. "It won't take long," he said.

-- Written by Ted Reed in Charlotte, N.C.

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