PhillyDeals: Proposed airline merger divides Pa.

A planned merging of American Airlines and US Airways could be a boon for Philadelphia but might cost jobs in Pittsburgh. Where does a top state official stand?
A planned merging of American Airlines and US Airways could be a boon for Philadelphia but might cost jobs in Pittsburgh. Where does a top state official stand? (MATT ROURKE / AP)
Posted: November 04, 2013

American Airlines has been trying to move in with US Airways so that, as one big airline, it can make more money (or lose less) than the two have been collecting as separate, formerly bankrupt companies.

The people who run Philadelphia say this is good for us. Mayor Nutter says the airline workforce here would greatly benefit. Rob Wonderling, president of the Greater Philadelphia Chamber of Commerce, expects "more nonstop flights to more markets" through Philly. At a pro-merger rally in Washington in September, Rep. Patrick Meehan (R., Pa.), a former federal prosecutor, pronounced the combination fair. Rep. Chaka Fattah (D., Pa.) said it "would strengthen Philadelphia as an international city."

Pittsburgh, on the other hand, is worried. The city is home to a US Airways maintenance facility, which the combined airlines might close as they cut costs. US Airways won't promise to keep it open. And US Airways' "failure to deliver on its promises" in previous mergers would make it hard to trust even if it did promise, Rich Fitzgerald, executive of Allegheny County, told the city's business weekly last summer. He has repeated the complaint to state Attorney General Kathleen Kane.

Kane lined up with Pittsburgh, and President Obama's Justice Department, to oppose the merger.

"She is not favoring one city over another," Kane's spokesman, Joe Peters, told me. "She is making a decision as attorney general of all the people."

Peters, for instance, had consumers in mind. "New fees, change fees, baggage fees" might follow the merger, he warned.

To prevent that, we'll spend legal fees. Though that might lead to bankruptcy fees, again, if you believe the airlines.

"The second reason is protecting jobs," Peters told me. "There has been a history of closure in these mergers." And "a history of broken promises," he added, echoing Fitzgerald's complaint.

But Philadelphia business and political leaders, as well as national airline union leaders, say the deal means more jobs and better service.

How did Kane weigh Philadelphia's benefit projections against Pittsburgh's cost worries?

"The attorneys general in other states and the U.S. Department of Justice have done a great deal of analysis and engaged experts in the field, and all of that went into the position of Attorney General Kane," Peters said.

I asked Peters to share this analysis with readers. No way, he said: That's "attorney work product."

That might do for prosecutors. But it's an odd way to justify public policy.

At least show your work.

Luxury bet

An arm of Pennsylvania state government is buying hundreds of Philadelphia luxury apartments, at more than $400,000 apiece.

Lowe Enterprises of Los Angeles agreed last week to spend $105 million to buy the 227-unit Granary development at 20th and Callowhill Streets. The project cost Pearl Properties about $80 million to build, including 10,000 square feet of retail space.

Lowe didn't name its client, but it was easy to connect the dots, as Lowe announced in September it was opening an office in Philadelphia to buy properties for the Pennsylvania State Employees' Retirement System. SERS spokeswoman Pamela J. Hile confirmed SERS was an investor in the property.

SERS says it buys real estate when prices are poised to go up. The pension system and its buyer expect high-end Philly apartments will get more expensive.

Should prove a profitable deal - for Lowe, at least: The firm collected $2.9 million in SERS fees in 2012.


JoeD@phillynews.com

215-854-5194

@PhillyJoeD

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