Airport traffic dips due to U.S. recession, cost-cutting by USAir Growth stalls at BWI

THE BALTIMORE SUN

For a decade, the volume of passenger traffic at Baltimore-Washington International Airport rose steadily. It seemed as though the good times would never stop.

But late last year the party ended -- and it's unlikely to resume any time soon.

BWI still is feeling the effects of the nationwide recession, and of cost-cutting moves by its major carrier, USAir. Passenger traffic, which declined by 1.1 percent in 1990, probably will fall again this year. The only bright spot: a significant increase in international boardings.

As the airport enters the height of the tourist season, there are signs that the recession is over. But BWI might not resume its growth for another year or more.

BWI's performance is very much connected with that of USAir, which accounted for about three-quarters of the airport's flights in 1990. With nine times the market share of American, which is the airport's No. 2 carrier, USAir dwarfs the competition.

So it should come as no surprise that as USAir goes, so goes BWI. And USAir is in deep financial distress. It ran up losses in the last two quarters of 1989. In 1990 -- as recession, war in the Persian Gulf and soaring fuel prices sent passengers scurrying for cover -- it lost money every quarter, ending the year $454.5 million in the red. During the first six months of this year, USAir continued to bleed, losing $225.5 million.

Obviously, something had to be done. And a big part of that something occurred at BWI in May.

USAir dropped 47 of its 251 daily flights at BWI, a reduction of almost 20 percent. Of those cuts, 25 were jets and 22 were commuter flights. Obviously, even if economic conditions improve, such a big cut in flights could limit traffic growth at BWI.

Airport officials are not discouraged, however. For one thing, traffic volume is holding up fairly well, an indication that passengers are shifting to other airlines or that USAir jets are leaving with more seats filled.

USAir "took a big chunk when they dropped 20 percent of their flights, but they didn't drop 20 percent of their traffic," said Jay Hierholzer, BWI's head of marketing.

In May, despite the 20 percent cut by USAir, overall passenger traffic at BWI declined by only 2.8 percent. That decline could even be viewed as an improvement, since during the first four months of the year traffic had been falling more sharply -- 4.4 percent. June totals are not yet in, but Mr. Hierholzer said that preliminary figures are slightly below the May totals.

Mr. Hierholzer takes a philosophical approach to the decline in passenger traffic. Noting that traffic shot from fewer than 4 million passengers in 1982 to a peak of 10.4 million in 1989, he said, "We were building year after year on double-digit growth. You can only do so many years of double-digits. We knew there'd be a slowdown."

He also maintained that BWI has fared well, compared with most other U.S. airports.

"Philadelphia was down almost 10 percent in May," he said, and Washington National was down 3.3 percent that month. Dulles International near Washington showed a healthy 7.6 percent gain, however.

The brightest spot for BWI in this tide of negative statistics has RTC been the performance of the international airlines. During the first five months of the year, international traffic has risen by a third over the same period a year ago.

Icelandair, which had curtailed service to BWI several years ago, returned last summer with service to Iceland and connecting flights to Europe. The biggest boost came about the same time from KLM Royal Dutch Airlines' inauguration of service to Amsterdam. In January, USAir began flying to Montreal and Ottawa.

And just last month, Ladeco Chilean Airlines made BWI a stop on flights to Santiago, Chile; Buenos Aires, Argentina; and Montevideo, Uruguay. The thrice-weekly service gives Baltimore its first South American service.

While loss of domestic traffic is disturbing, the cross-border flights are helping to validate the word "International" in the airport's name. It's more than a matter of mere status. International connections are considered a very important tool for economic development officials trying to sell Maryland as a place for foreigners to do business.

International flights also mean millions of dollars in tourism revenue for the local economy. One study, Mr. Hierholzer said, showed that daily non-stop service between a U.S city and London means $240 million for the local economy annually. The figure for a flight to Tokyo is $700 million a year, he said.

All things considered, he said that he is content with the airport's performance. "Given USAir's short-term financial condition, I am happy with the way we're coming through the year," he said.

Still, questions remain as to how USAir's financial condition will continue to affect BWI.

As a result of the May cuts in flights, BWI is no longer as dependent on USAir. Before the cuts, the airline operated almost three-quarters of the flights from BWI. Now the figure is just about two-thirds. Other airlines have begun to fill the void by adding flights, although the additions come up far short of the 47 flights that USAir cut.

Two-thirds is still a very large fraction, leaving the fate of BWI and USAir very much intertwined.

USAir says that the new traffic pattern at BWI will allow the airline to increase its efficiency by allowing it to fill each plane closer to its capacity. The airline's biggest hurdle may be in persuading customers that they no longer will experience the late flights, lost baggage and other service problems that arose with annoying frequency after USAir's merger with Piedmont.

Mr. Hierholzer believes USAir is doing a much better job of providing good customer service, an area in which the airline admits it was having problems. If USAir can convince travelers that service has indeed improved, business travel should start coming back this fall, he said.

USAir dismisses the service problems as "ancient history." The airline's new ad campaigns are based on the idea of good customer service, with the slogan "USAir begins with you."

And USAir has had some things to crow about of late. In May, the airline ranked first among major carriers for fewest complaints from passengers. The airline also reported that for the most recent 12-month reporting period, it ranked second among the 12 major airlines in on-time performance.

"During the merger we were at the bottom of the list," said Susan Young, a USAir spokeswoman. "We've steadily worked our way up."

Nor should anyone count USAir out because of its financial problems, she maintained.

"The $454 million lost last year is nothing to sneeze at," she said, but she insisted that USAir will survive. "That's not to say this is not a tough economic year. But the 'B' word, as in bankruptcy, is not in our vocabulary."

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