Horizon looks gray for fliers
- Jeanie Senior
- Portland Tribune - News
• PDX gets some new international routes, but the airline industry continues to plummet
The hoopla at Portland International Airport on Monday offered a dash of brightness against the clouds gathering over the airline industry as Lufthansa German Airlines restored legitimacy to the 'international' in PDX's name.
Lufthansa inaugurated its nonstop service between Portland and Frankfurt, Germany, as local politicians, airport officials and corporate boosters delivered chirpy expressions of optimism.
Except for flights to Canada, PDX hasn't had daily international passenger service since 2001, when Delta Air Lines discontinued its direct service between Portland and Asia.
There will be another celebration in May, when Mexicana Airlines will begin nonstop flights between Portland and Guadalajara on Thursdays, Fridays and Saturdays.
Monday's festivities and the celebration next month were planned, however, before the war in Iraq compounded the impact of the worldwide economic downturn and the industry's financial troubles.
Standard & Poor's airline analyst Jim Corridore calls it the worst crisis in the industry's history and says it's difficult to look ahead and imagine what changes will ultimately resolve it.
Corridore doesn't sound too hopeful about the fate of the traditional airlines. 'If things stay as bad as they are right now, if the war goes on six months É certainly none of the (U.S.) carriers can survive, other than Southwest, Jet Blue and AirTrans,' he said, listing three discount carriers.
Southwest Airlines, the second-largest PDX carrier with a 17.5 percent share of the Portland market, is the only profitable major airline in the United States.
Seattle-based Alaska Air Group, whose Alaska Airlines and Horizon Air services dominate PDX's passenger count Ñ the two airlines carried almost 39 percent of the airport's passengers in the 12 months that ended in February Ñ has fared better than the rest of the industry, Corridore said.
He also noted, however, that the company's financial health has worsened over the last year; Alaska recently had to do a major debt offering when its cash balance fell to an uncomfortably low level.
United Airlines, the fourth-largest carrier at Portland International Airport and the world's second-largest airline, already is in the midst of Chapter 11 bankruptcy proceedings that could end in liquidation. Hawaiian Airlines, which in February added once-a-week seasonal service between PDX and Maui to its existing PDX-to-Honolulu schedule, filed for bankruptcy reorganization on March 21.
US Airways, which doesn't serve Portland, also has filed for reorganization under Chapter 11, and the parent company of American Airlines, the airport's sixth-biggest carrier, is expected to seek bankruptcy protection as early as this week.
Because of the war, Alaska Airlines has had to grapple with another complication. About 165 of the airline's 1,300 pilots are military reservists, and 47 of them have been called up for six months to two years of active duty. Another 40 pilots are on what spokesman Jack Walsh called intermittent leave, required to serve about one week a month.
'So far we have not had any flight cancellations due to crew,' Walsh said. 'But it throws an extra wrench in scheduling.'
The addition of Lufthansa and Mexicana service is expected to bolster the regional economy, but the two airlines' expansion into the market comes with a price.
The Port of Portland, which owns and operates the airport, signed a 'risk mitigation agreement' with Lufthansa that amounts to a $1.9 million benefits package; it waives landing, terminal and inspection fees for a year and also promises that the port will spend $500,000 advertising and promoting the new service. Mexicana's agreement is valued at $615,000, including a $123,000 marketing commitment.
Local businesses added a further enticement for Lufthansa: They put together a 'travel bank,' pledging to spend $10.8 million on Lufthansa's new service over the first year.
The port also spent $1 million remodeling the airport to make it more user-friendly to international travelers. The renovations will allow arriving Lufthansa passengers to board a shuttle bus Ñ leased by the port for $150,000 a year Ñ to the baggage claim area after they deal with federal inspectors.
Should either airline pull out of PDX before the one-year period expires, Port of Portland spokesman Steve Johnson said, 'they wouldn't be required to pay the fees waived to that point; the port would cover the cost.'