USAir's new strategy

October 08, 1995

IT'S BEEN A turbulent passage for USAir, the country's sixth largest airline and the dominant carrier at Baltimore-Washington International Airport. Over the past five years, USAir racked up $5 billion in red ink. But now, with skies brightening for all airlines, USAir is back in the black. And suddenly it is engaged in merger talks.

Airline giants United and American Airlines are in discussion with USAir -- for good reason. Each lacks a strong north-south presence on the East Coast. USAir would provide a good fit and help fill seats on their transatlantic flights.

But is it for real? USAir has serious labor problems. It is the highest-cost airline because unions have balked at wage concessions. The airline's unions would not agree to $2.5 billion in givebacks in negotiations this year.

USAir's high labor expenses present difficulties for either union-owned United or American, which is already struggling with labor costs far above the industry average. But there's another possibility: USAir could be using the merger threat to pressure its unions. This might be a strategic ploy.

If there is a merger, how will it impact BWI? USAir controls 50 percent of the market here. But in recent years, the airline has not been overly aggressive in promoting BWI and boosting its fortunes. In fact, it is now trying to turn its hub in Philadelphia into an international base, instead of Baltimore.

Still, a merger could hurt the airport if flights were shifted elsewhere. BWI officials note that three-quarters of the airport's customers are from the region; only a quarter are in transit, shuttling from one flight to another as part of the hub system. Marginal flights might be dropped, but the local demand for air routes is so strong that some other airline is sure to enter the market if USAir's new partner dropped popular flights.

The success of Southwest Airlines at BWI is proof that a dominant air carrier would be foolish to cut back service here. The local market is too inviting for competitors to ignore.

This year, 13 million passengers will use BWI. Twenty years ago, the airport served two million customers. This remarkable growth could soar further once an international terminal is completed, along with direct light-rail service from that terminal to downtown Baltimore and points north. A USAir merger poses a hazard for BWI, but one it should be able to handle.

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