Crucial issues facing candidates for Allegheny County chief executive

Summary: This year, several Allegheny County elective offices are on the November ballot, including the office of chief executive.  Having served the maximum three consecutive four-year terms permitted under the Home Rule Charter, the current chief executive will leave office in January 2024.  As of this writing, eight candidates have announced their intention to run for chief executive.



As head of the executive branch, the powers and duties granted to the chief executive by the Allegheny County Charter include enforcing county ordinances and resolutions, representing (or designating a representative to do so) the county at meetings with the heads of other governments, appointing a county manager and solicitor (subject to County Council approval) and submitting a comprehensive fiscal plan to County Council.


The last time there was an open seat for the office of chief executive, the Allegheny Institute released a report (#11-01) that offered free market-based, commonsense solutions to issues facing county government.


Those included strengthening the charter, crafting a new reassessment policy, addressing problems at the Port Authority and Pittsburgh International Airport and being aggressive on privatization and outsourcing.


Twelve years later, while aspects of those issues may have changed, over all there is still plenty of work to do on each.


For example, there is a new terminal under construction at Pittsburgh International Airport.  But the number of passengers and flights remain below pre-pandemic levels.  The Airport Authority board, with all members appointed by the chief executive and confirmed by County Council, has—in the Institute’s view, unwisely—authorized the use of subsidies to airlines flying to and from the airport.


Bus and light-rail ridership are likewise below pre-pandemic levels.  However, the costs at the now renamed Pittsburgh Regional Transit (PRT) are still near the highest of transit agencies in the country. Low-performing routes have not been eliminated, smaller vehicles have not been utilized and there have been no layoffs while federal, state and county subsidies have not been reduced, thereby driving per passenger costs to extremely high levels.


The one substantial change was in the makeup of the board of directors.  A 2013 state law enlarged the board from nine to 11 members.  But it reduced the number appointed by the chief executive from nine to six (two are confirmed by County Council) and added five appointments by state officials.  Unfortunately, PRT workers are still legally able to strike and a four-year labor contract was recently approved.


There has not been a recent countywide property reassessment and the need for an update to the 2012 base year could not be clearer.  Appeals by property owners and taxing bodies, particularly school districts, are a regular and frequent occurrence.  There was a lawsuit over taxing body appeals, which was dismissed.  A lawsuit over the county’s common level ratio used in appeals is pending.


There are the very important issues of retaining and attracting population and jobs to the county, which candidates are almost certain to talk about at length.


Between the 2010 and 2020 Census, Allegheny County grew in population for the first time since the 1950s.  The 2020 Census count was 1,250,578, up 2.2 percent from the 2010 Census.


Of the 49 counties across the U.S. that reported a population of 1 million or more in the 2020 Census (including Allegheny County) 14 had population growth that exceeded 15 percent from 2010 to 2020.  Included in this group were five counties in Texas, two each in North Carolina and Florida, and one each in Arizona, Georgia, Nevada and Utah.  With the exception of one county in Washington, all are located in Right-to-Work states.


The most recent estimate by the Census Bureau puts Allegheny County’s July 1, 2021 population at 1,238,090, a decrease of 12,488 (1 percent) from the 2020 Census count.  Components of population change of a specific geographic area include natural increase (births minus deaths) along with net migration (net domestic migration plus net international migration). The Census Bureau shows that in the time frame these values were both negative at 4,711 and 7,820, respectively.


A recent study by the University of Pittsburgh’s Center for Social and Urban Research found that, among the nation’s largest counties, nearly 20 percent of the county’s population is 65 years of age or older, second only to Palm Beach County, Fla.


The December 2022 Pennsylvania Department of Labor and Industry news release on household employment (including county residents who are working, regardless of where the job is located, or residents looking for work) shows a labor force of 630,500 with 609,300 people employed and 21,200 people unemployed.  The resulting unemployment rate was 3.4 percent.


Compared to the pre-pandemic month of December 2019, the labor force is down almost 20,000 (3 percent) with fewer people employed and unemployed.  The unemployment rate has decreased from 3.9 percent.  But the declines in these components make it clear why that is the case.


Based on the U.S. Census Bureau’s data for County Business Patterns by Legal Form of Organization and Employment Size Class, in 2018 there were 33,732 establishments in Allegheny County with 705,835 employees. In 2020, the number of establishments fell by 297 (0.9 percent) and employees by 4,053 (0.6 percent).


What changes would candidates make to reverse the trends in population and jobs? To be sure a substantially more free market-oriented approach would be a break from the past and would improve the county’s long-term prospects.


In the next few years, the remainder of American Rescue Plan dollars will be spent, appointments to key authorities will be made, the lawsuit over the common level ratio may be decided and the Bus Rapid Transit and airport terminal projects will be complete.  If county government spending and employee headcount grow or the county takes on new functions beyond its core responsibilities, the prospect of a tax hike could be real notwithstanding the fact that the county’s millage rate of 4.73 has not changed since 2013.


This year’s operating budget tops $1 billion and there are 6,125 budgeted full-time employees in the government (1,444 are employees of County Council, the Court of Common Pleas and the row offices of district attorney, sheriff, treasurer and controller).


Over the coming months, the Allegheny Institute will publish occasional Policy Briefs on the key issues discussed in this Policy Brief and offer recommendations for candidates and the eventual winner for chief executive as the next administration prepares to take office.

PIT passenger growth slowed sharply in December and January

Summary: While last December’s and January’s passenger numbers at Pittsburgh International Airport (PIT) were very disappointing, there are signs that the national pace of travel picked up markedly in the last half of February.  This should bode well for a February pickup at PIT as well. Nonetheless, with the war in Ukraine having a major effect on fuel prices, and perhaps on consumer sentiment as well, the air travel industry is facing another round of headwinds and uncertainties. Early March national passenger data suggest some negative impact on travel is already happening.


PIT passenger count changes over the last year 

The number of passengers enplaning and deplaning at PIT fell in recently released January data (456,076) compared to the January 2019 level (654,886), a decline of 30.4 percent. In December 2021, the passenger count was 22.3 percent below December 2019. These two months follow a much better performance last November when the passenger count, compared to the November 2019 count, was down only 16.1 percent. This was the best recovery month to date following the near halting of air travel in April 2020 when PIT passengers totaled only 32,447 with virtually no international travelers.

Looking back at travel data for 2021, improvement in the monthly passenger count last year relative to the same month in 2019 was dramatic through November. Bear in mind that in January 2021 the number of passengers was still 66.4 percent under the January 2019 level. However, by June, the passenger level compared to 2019 had improved markedly from January to stand just 30 percent below June 2019. July continued the improvement as restrictions were being loosened further with the decline from July 2019 to a much lower 22.2 percent.

As noted earlier, gains continued through November with a passenger count reading of 16.1 percent below 2019 but momentum did not continue as December slipped back to a drop of 22.3 percent from the 2019 reading. In January the downward slide continued with the passenger count down 30.4 percent from 2019.

To be clear, the bigger shortfall in January 2022 compared to the December 2021 decline was not due to seasonal factors. The January 2022 count was lower compared to January 2019 thereby accounting for normal seasonal factor impacts. Clearly, the problems that caused December’s numbers relative to 2019 to perform much worse than November were still having an effect in January 2022. While the COVID variant no doubt affected January travel, it is not clear why December saw such a large drop.

Comparison to national air travel statistics

Official Department of Transportation statistics on air travel passenger counts lag several months; making direct comparisons to U.S. data for recent months not possible.  However, the Transportation Security Administration (TSA) reports daily the number of passengers entering airports at their security checkpoints. This number is a good and timely measure of the volume of air travel nationally. 

It does not match up perfectly with the monthly national enplanements and deplanements that are available much later because those stats include connecting passengers who do not pass through a checkpoint going from flight to flight at the same airport.  At many airports—such as Atlanta, Dallas-Fort Worth, Chicago, Denver and other large city airports—a huge proportion of travelers are connecting passengers.

But for smaller airports without major hub carriers such as PIT, the TSA checkpoint data are a reasonable proxy for national air travel and to use for comparison to passenger counts at PIT.   

How do the checkpoint data showing percent changes from the same month in 2019 compare to the PIT experience over the last year?  Interestingly, the pattern of improvement of TSA data and PIT passengers through the months of 2021 relative to 2019 was very similar through December.  The table compares the national and PIT performances in 2021 as measured by the percent change from the same month in 2019.

Throughout 2021, until December, PIT passenger gains improved almost in lockstep with the national increases in passengers. In December 2021, PIT’s performance fell behind the national numbers and in January, as the national count failed to sustain the improvements of earlier months, PIT experienced an even worse setback, dropping 30 percent below the 2019 figure. There are no obvious reasons for PIT’s pattern of tracking national performance to have suddenly disappeared.

Note that national air travel also had a setback in January, dropping 22.5 percent below the 2019 reading. No doubt the COVID Omicron variant played a significant role in the decline. PIT passengers fell in January in tandem with the national setback. But PIT numbers did not reflect any recovery that was greater than the national drop in December.

On a more positive note, TSA data show a significant upturn in travel in February with a shortfall of 15.6 percent compared to 2019 with a daily average of 1.73 million people going through check points (January daily average was 1.48 million).  Even more encouraging, February showed much stronger gains in the second half of the month with travel from Feb. 18 to Feb. 28 averaging 1.99 million—only 10 percent below the 2019 level.

These national data are somewhat encouraging for PIT, at least for the February count. With a return to travel as robust as the late February figures show, there is reason to believe that PIT passenger counts will see marked gains compared to the December and January experience as well. Unfortunately, March is likely to pose a new set of difficulties for air travel.

The reality is that non-hub airports must rely on the local market for travelers, whether local residents flying out or visitors coming to the region for business, family or tourist reasons.  In a region with little population or employment growth, the prospects for air travel passenger growth will be much weaker than for areas that are growing rapidly, such as Nashville, Austin or Raleigh, for example.      

PIT has been incredibly and uniquely fortunate to have had access to a large sum of gaming tax revenue—as provided by the state Legislature—and to have natural gas reserves on the property that are accessible through fracking that generates additional revenue. And in recent years, it received a special dollop of federal funds from COVID stimulus spending.

But what of the future? The war in Ukraine and its impact on fuel costs and the economy and demand for air travel, especially international travel, could be substantial over the coming months. At the same time, with the effects of COVID waning, there is reason to expect an increasing willingness to fly.

In short, the future for travel in the near term is facing a combination of unusual and hard to assess factors.  At the same time, the fundamentals for passenger growth near term and long term at PIT are not very encouraging compared to many other areas of the country.

Troubles at Pittsburgh International Airport

Summary: Pittsburgh International Airport (PIT) had a very bad year in 2020 in terms of passenger traffic and aircraft operations—takeoffs and landings.  PIT is owned and operated by the Allegheny County Airport Authority (ACAA).


Passenger count and other airport activity in 2020

Since the Covid-19 pandemic started to spread widely in early March, the 10 months from March through December saw the total passenger count fall 73 percent with domestic down 72.3 percent and international down 94.5 percent compared to the same period in 2019. For the year as a whole, including January and February, domestic passengers were down 62.1 percent and international passengers were down 83.8 percent from the 2019 totals. All airport activity and financial data are taken from ACAA website.

April was the hardest hit month for travel as massive restrictions were placed on the economy to slow the spread of the virus. Only 32,413 domestic passengers enplaned and deplaned, a 96 percent collapse from April 2019. Traffic picked up slightly through October reaching 306,491 but remained 65 percent behind 2019.  The count then fell, reaching only 240,211 in December, 70 percent below the year-earlier figure.  International travel was essentially nonexistent from mid-March through December.

The decline in passengers using the airport was accompanied by a big drop in aircraft operations during the 10 months. The biggest drops from the same month in 2019 occurred in April and May with declines of 62.9 and 64.4 percent.  In December, aircraft operations remained 43.5 percent behind the year-ago number and for 2020 overall operations were down 38 percent from 2019’s total.

Unfortunately, the ongoing rapid spread of Covid-19 poses an ongoing obstacle to the return of pre-pandemic passenger levels and aircraft operations. Indeed, the changes in the way business is conducted with more internet usage and work from home point to a very slow return to the earlier patterns of air travel.  It could take several years. And 2021 will very probably see only modest improvement from the second half of 2020 passenger counts. 

While passenger counts were falling dramatically, the level of cargo handling at the airport held up well in 2020. For the year cargo was down only 4.8 percent from 2019 and posted a small gain in December. In April, May and June, when passenger counts were off over 85 percent from the same period in 2019, cargo was down only 75 percent. August was the worst month with a drop of 14.5 percent before rebounding through the rest of the year. Cargo obviously was not subject to the same restrictions—mandated or self-imposed passenger travel.

Mail handled at the airport rose significantly in 2020 climbing 9.9 percent over the 2019 level. Double-digit percent gains were posted in several months hard hit by Covid.  December saw a jump of 62 percent compared to December 2019.  As yet, there is no explanation for the big rise in mail activity. Although an increase in cyber-shopping could be a possible explanation.

Estimating revenue impact of activity slowdown

The declines in air travel passengers and aircraft operations are certain to have a significant direct and substantial impact on airport revenues. The following figures show the 2019 actual operating revenue by major category (taken from the 2019 Comprehensive Annual Financial Report (CAFR)) and, in parentheses, the amount the Airport Authority had budgeted for 2020. All figures are rounded to the nearest thousand. These figures will be used below to estimate impacts on 2020 revenue.  

For 2019 landing and terminal fees, $59,555,000 (2020 budget $56,578,000); other aeronautical, $8,908,000 ($8,716,000); parking, $41,631,000 ($44,087,000); rental car, $12,510,000 ($14,250,000); terminal concessions, $10,707,000 ($10,927,000); hotel and utility sales, $8,939,000 ($7,900,000) and Allegheny County Airport, $2,812,000 ($2,865,000).

In addition, PIT imposes a passenger facility charge and a customer facility charge. The passenger facility charge is a ticket surcharge allowed by the FAA that is used to pay for projects involving safety, security, capacity and noise reduction.  The charge is set at $4.50 per ticket. The customer facility charge is a state-approved add-on fee for rental car transactions at the airport. In 2020 the charge was $6 per day for up to seven days. It was $5.50 in 2019.

Auditors assign the revenue from these fees to the category of non-operating revenue. In 2019, facility charges amounted to $28,516,000, reflecting the passengers using PIT. By way of comparison, in 2014, these charges produced $20,544,000. Thus, this revenue rose 39 percent during the five years. It was not due to such a large increase in passengers and likely reflects higher rates charged. Two other providers of substantial revenue in 2019 were state gaming at $12,400,000 and royalties from natural gas production on airport property at $10,122,000.

As of this writing, there are no monthly data publicly available for any revenue categories for 2020 and the CAFR for 2020 is unlikely to be available before April.

While the actual extent of revenue declines from 2019 or shortfalls relative to budgeted amounts for 2020 will not be known for a few months, it is reasonable to estimate what happened to them based on passenger and operations declines. 

One way to approximate passenger-related revenue declines would simply apply the percentage drop in passengers to the revenue expected in the 2020 budget. Of course, to the degree that lease agreements with vendors have fixed or minimum payments the estimates of revenue shortfalls from expected will be too large and merely point to huge losses for the vendors whose incomes are based on activity at the airport.

Parking, rental car, hotel, passenger facility and concessions revenue would be most affected by the passenger count drop. Landing and terminal fees would be impacted by the reduction in aircraft operations. Total passenger count was down 62.7 percent for the year and aircraft operations were down 38 percent.

For example, applying the passenger drop to parking revenue of $44.1 million implies a loss of $27.6 million; for rental car fees, $8.9 million; for terminal concessions, $6.9 million; for hotel and other, $4.9 million.  Note that the percentage decline in passengers was from the 2019 level. Assuming the budget forecast assumed some growth in passengers, the calculations of revenue loss are just slightly lower than they would have been using a higher expected count.

For aeronautical related revenues, the losses would likely track with the 38 percent reduction in flight operations and lead to a decline from expected amounting to $21.5 million. All told, the operating revenue loss could be close to $70 million.  How much was defrayed by contractual agreements will not be known until the audited financial data are made available.  

In non-operating revenue, the passenger and customer facility charges would fall $17.9 million short of expected. Presumably, the gaming tax money was paid in full at $12.4 million.  How the gas royalty payments fared in 2020 are not known to the public.  But a repeat of 2019’s $10.1 million should be a reasonable approximation. If President Biden proceeds with the fracking ban as many in his party want, the royalty payments will diminish as new wells are prohibited and old wells produce less gas.

Finally, note that the federal government provided $36 million to the Airport Authority in the CARES stimulus program funds. According to Elaine Chao, the then-secretary of Transportation, the money would be used to maintain salary and benefits (WTAE-TV, June 2020). Evidently it was used for employee pay since there were no announced layoffs at PIT.

What private company could see a prolonged 63 percent decline in its business and not be forced to make staffing level cuts?

Airport expenses

There are no publicly available data for spending at the airport for 2020. It is reasonable to assume that operating expenses were close to the revised budget amount of $104.6 million included in the recently published 2021 budget (available on the authority’s website). The original 2020 budget called for $108.36 million. (There is a question about the 2020 budget expense projection. There are two figures for total operating expenses in the 2020 budget document$108.36 million on page 2 and $114.4 million on page 5). 

It is very interesting that the 2021 budget shows only projected expenditures.  There are no budget projections for operating or non-operating revenue. It is an odd budget indeed that has no estimates of revenue. The Airport Authority plans an increase in operating expenses from a revised 2020 budget figure of $104.59 million to $109.95 million in 2021.

By category, wages and benefits will rise $1.3 million from $42.3 million, suggesting no major staffing level changes are anticipated and, certainly, no layoffs. Professional services outlays are budgeted to jump from $22.6 million to $27.5 million.  That’s a hefty 22 percent rise. But no explanation is provided for the big jump.

The budget goes into great detail regarding capital projects which are projected to rise $2.6 million to $49.9 million.  The budget also details the sources of funding to cover the capital projects. 

It would appear that the Airport Authority knows it will need a lot more federal funding help in 2021.  To the extent that vendors have been very hard hit by the plunge in passengers and need a lot of financial help to stay in business, ACAA could be looking at a very weak flow of revenue compared to spending for many months.  However, the board did find money for a big raise and bonus for the authority’s CEO.

Overly optimistic ventures of bringing in more carriers through subsidy enticements failed to generate sustained passenger traffic as hoped or predicted. In fact, passenger counts have not risen as fast as nationally over the last few years and PIT remains stuck as the 47th busiest airport as of 2019 (Bureau of Transportation Statistics, Airport Rankings) while other comparably sized airports have moved up in the rankings.

The reality is that the region PIT serves has not been growing in step with the nation or other regions in terms of population and jobs. Absent a major hub carrier, passenger traffic at PIT is driven by the size and vibrancy of the local economy.  Subsidizing people to travel out of the region makes no sense.  Subsidizing business travel is inefficient and wasteful if the region has a business climate and political views that are inimical to business startups, operations and growth. In a successful business climate, subsidies should not be needed.

The board of the Allegheny County Airport Authority must take a hard look at the realities that exist and take steps to prepare for unpleasant contingencies that are in store if the pandemic’s lasting effects produce a major long-term loss in air travel.  And it certainly needs to rethink subsidies altogether.

Passenger counts in 2019 have weakened abruptly at Pittsburgh International

Summary:  After posting very strong growth between August 2016 and August 2017, with further good gains from August 2017 to August 2018, passenger counts, especially for international passengers, at Pittsburgh International (PIT) have slowed dramatically through August of this year, the latest monthly data available from the Airport Authority.


In August 2019 the international passenger count fell an astonishing 37.3 percent compared to the same month in 2018 despite the heavily touted arrival of British Airways (BA) in April. Note that changes comparing data to the same month a year earlier are methodologically necessary because of significant seasonal variations in international passengers for which summer counts typically dwarf those in the winter months.

Although international passengers make up only 3 percent of total passengers, the 37 percent drop, combined with a tiny domestic increase, resulted in a decline in total passengers in August, albeit small, at 0.7 percent.  Year-to-date the August domestic count is up 2.2 percent compared to the 5.9 percent increase posted a year earlier. 

The year-to-date international count in August was down 21.9 percent—a major reversal from the 15.8 percent increase for the first eight months last year. International passenger counts have fallen every month this year compared to 2018 except in April when they rose with the advent of BA flights. However, during each of the last three months of available data, June through August, international passenger boardings and deplanements have plunged by more than 30 percent from their 12-month earlier readings.

This abrupt slowing is not due to an overall weakening nationally. Nationwide, domestic enplanements through August are up year-to-date by 4.1 percent, down slightly from 2018 but stronger than 2017. Meanwhile, international enplanements through August are up 4.4 percent which is actually much better than 2018’s 2.6 percent.

Thus, the PIT passenger count weakening must be attributable to other factors, especially the huge drop in international passengers.  Virtually all the international gains at PIT made in 2017 and 2018 are gone. The August 2019 count of 25,951 is down almost 16,000 from a year ago and stands just above the 2016 reading.

Note that PIT releases data for combined enplanements and deplanements. Keep in mind that while these two counts might vary slightly in the very short term at an airport, over a month or year they will be virtually the same as FAA data shows. Thus, using either enplanements or combined data will yield identical percentage changes. 

Bear in mind too that while much was being made of PIT’s success in recent years, the success at PIT was not unique. For example, in 2015 PIT was ranked as the 47th-largest airport in the United States measured by enplanements. In 2018 it had moved up to 45th –a good result. However, over the same three years, Cleveland moved from 46th to 44th and Cincinnati climbed from 53rd to 48th.  And just as impressive, Nashville jumped from 35th to 31st.  In short, good growth was occurring at several mid-sized airports.   

It is also important to remember that nationally there were 890 million enplanements in 2018.  Thus, Atlanta, the biggest airport, with 51.9 million enplanements accounted for only 5.8 percent of the national total. The top 20 airports account for 52 percent of all enplanements with all above 20 million. PIT with 4.7 million in 2018 was only 0.53 percent of total. Of course, most of the top airports are hubs and a large share of their passengers are connecting. Still, the local area economic impact of an airport, in terms of direct employment and income, will depend on total passengers. When USAirways dropped PIT as a hub and flights were cut dramatically, several thousand employees at the airport lost jobs in the years following.

The important question is what happened at PIT that caused the big drop in international passengers, especially in light of all the great hoopla surrounding the coming of British Airways. Through December of last year, the international passenger count posted gains year-over-year and had done so in all but a couple of months during 2018, ending the year with a nice annual pickup of 13.5 percent.

But in January of this year things started to go sour with a near 17 percent drop from the level in January 2018. As noted earlier, 12-month changes in international travel at PIT have been down each month in 2019, except for April. The declines in January through March most likely reflect the cessation of WOW Air service in January as that carrier succumbed to financial pressure. WOW was also a recipient of a PIT subsidy.

The big declines since May are no doubt due to Delta’s ending its flights to Paris. Once the months of Delta’s seasonal flights have passed this year, the monthly year-over-year passenger declines should become smaller. But what has been revealed is that the British Airways flights are not carrying nearly as many people over the June through August period as Delta apparently was. 

Whether their passenger count in the offseason will be enough to make up for the Delta loss remains to be seen.  But it probably won’t since international travel volume drops substantially after the summer season. Keep in mind too that BA is receiving $3 million dollars from PIT over two years to operate four weekly flights—an additional factor in the net benefits calculation of having BA at PIT. As was noted in previous Policy Briefs (Vol. 18, No. 31, Vol. 19, No.14), British Airways does not get subsidies to operate in Florida airports, Los Angeles, New York or any high-volume U.S. airport. And it operates in 26 U.S. airports currently.

Also not known at this point is how many Pittsburgh-to-London or other European destination passengers BA has siphoned off from other carriers such as American Airlines’ one-stop service to London. And because the data are not available it is unknown what percentage of passengers on the BA flights are local citizens and how many are foreign visitors.

These percentages are important to know since the regional economic impact projections presented by BA depend heavily on the number of foreign visitors brought by the carrier—projections the Institute has shown to be overly optimistic. Besides that, the British Airways impact calculation does not look at net benefits in that it ignores the dollars leaving the region through BA ticket purchases and expenditures by regional residents abroad.

The apparent slowing of domestic gains in 2019 compared to both the two previous years and nationally could be the result of several factors. If that trend continues over the next several months, the Allegheny Institute will analyze possible causes and likely effects. For now, suffice to say that the sizable gains in 2017 and 2018 have made it more difficult to continue exceptionally fast growth. Moreover, the seven-county Pittsburgh metropolitan area is still losing population, the labor force has shown no net increase since the early 2000s and jobs gains are slowing. All of which make it hard for local demand for air travel to keep growing at very strong rates.

Pittsburgh International Airport domestic passenger count: 2008-2018

Summary: Pittsburgh International Airport (PIT) officials have been using subsidies to lure airlines in an effort to boost passenger counts.  While passenger numbers are up at PIT, they are more likely the result of an improving national economy than subsidizing airlines.  This Brief will look at how PIT fared with passenger counts and flights over the last decade when compared to similarly-sized airports.


Earlier Policy Briefs discussed efforts of PIT officials to increase airport usage in terms of their penchant to use subsidies to lure airlines that failed miserably (WOW Air, OneJet, Qatar cargo) and how the airport has fared with its efforts to increase passenger counts (it has not kept pace with similarly sized airports).  With the U.S. Department of Transportation (DOT) releasing the 2018 data for domestic passengers, flights and load factors, this Brief will look at how PIT fared with these metrics over the last decade.

The data covers origination passengers—the starting point of a trip —and destination passengers –the farthest point of travel from the origin of a trip of 75 miles or more (as per DOT criteria).  PIT lost its hub status well over a decade ago when USAirways (now American) greatly downsized operations at the facility. Now PIT is primarily an origination and destination (O&D) airport.

PIT is ranked 47th in the country based on enplanements.  For comparison purposes in this Policy Brief, the data will include 14 other similarly-sized airports ranked from 37th to 52nd by enplanements.  These international airports represent the following cities:  Cincinnati; Cleveland; Columbus; Fort Myers, Fla.; Indianapolis; Kahului, Hawaii; Kansas City; Milwaukee; Raleigh; Sacramento; San Antonio; San Jose; San Juan, Puerto Rico and Santa Ana, Calif.

Since international activity has not yet been updated through the end of 2018, the data examined covers only domestic activity at the airports in the sample.

In 2008 total domestic O&D passenger count at PIT was just over 8.4 million.  Ten years later, in 2018, the total had grown by 7 percent to 8.98 million.  For all airports (1,229) across the country O&D passengers grew by 19.4 percent during same time. Within the similar-sized airport sample O&D passenger growth ranged from a high of 39 percent in San Jose to a low of -35.38 percent at Cincinnati’s international airport.  PIT’s growth ranked 11th among the 15 international airports in the sample with the bottom four—San Juan, Milwaukee, Cleveland and Cincinnati—suffering losses.

Of particular interest is that the number of O&D flights at all 1,229 airports across the nation declined by 10.4 percent over the decade.  From 2008, just before the recession took hold, through 2015 there was a steady decline in the number of flights being offered nationwide (18.76 million to 16.12 million). Over the last three years there has been a slight rebound to reach 16.8 million in 2018.

Of the 15 airports examined only two had increases in the number of flights between 2008 and 2018: Kahului (up 13.4 percent) and San Jose (up 9.9 percent).  The other 13 airports all suffered declines over the decade ranging from a drop of 4 percent (Santa Ana) to a loss of 60.6 percent (Cincinnati).

In 2008 the number of flights at PIT stood at 127,569 but fell to 99,680 in 2014.  The number of flights began to climb afterwards, reaching 114,845 in 2018. It’s an improvement but still shy of the pre-recession level.  The net decade drop in flights at PIT was the seventh worse at 9.9 percent but still better than eight others that experienced declines over the 10-year period.

The final metric examined is the “load factor.”  Load factor is defined by the airline industry as the ratio of passenger miles flown to the number of seat miles available—a measure of how full the flights are in terms of percentages.

For originating flights, the load factor for all 1,229 airports across the country was 84.46 in 2018, up nearly 5.9 percent from the 2008 level of 79.74.  This makes sense considering that the number of O&D passengers across the country has increased while the number of flights has decreased.  In the 15-airport sample San Juan had the highest load factor in 2018 (87.13).  However, its growth was the lowest at just 1.4 percent given that the load factor in 2008 was already high (85.95, also the highest in this sample for that year).

The smallest load factor in 2018 was posted by the flights from Kansas City at 80.29, up from 74.13 10 years earlier—a growth of 8.3 percent.  PIT’s load factor for originating flights in 2018 came in at 82.78.  It was 78.97 in 2008, an increase of 4.8 percent—the 11th best increase in originating airport load factor and the 9th highest load factor in this sample of 15 airports.

As noted in a previous Brief (Vol. 18, No. 17) which looked at a shorter time frame, 2015-2017, PIT’s gains in flights and passenger counts did not keep pace with the other 14 similarly-sized airports.  Taking a longer-term view of 10 years (2008-2018) shows much the same pattern.  The near 7 percent rise in PIT’s domestic O&D ranked 11th while the change in number of flights was 7th best even though it represented a significant decline.  PIT’s 2018 load factor of 82.78 was 9th best but the increase was only 11th best.

Yet the cheerleaders for the airport and the authority that owns it continue to claim major successes—successes that are, in fact, very modest in the context of similarly sized airports.  They continue to double down by subsidizing new carriers to come to PIT such as British Airways, WOW, OneJet, Via Airlines and Condor Airlines.  WOW and OneJet have ceased operations altogether, not just at PIT.  British Airways, Condor and Via are flying, although British Airways just recently started operations and its announcement of intentions to begin flights last year coincided with the elimination of Delta’s route to Paris (a formerly subsidized route, Policy Brief Vol. 18, No. 31). Via has already cut back service from four flights a week (to Birmingham, Ala.) to two after just two weeks of flying from PIT. The Airport Authority is embarking on a reconstruction at the terminal at a cost of at least $1.1 billion (it will probably end up much higher) to accommodate a demand they project will materialize.

The demand for air travel depends far more on growth of the local population and the strength of the economy than on luring airlines with subsidies.  As the national economy has picked up steam so has national air travel—including at PIT.

Still, if local officials want to boost demand for air travel, they need to concentrate on helping improve the regional economy rather than trying to artificially stimulate demand through subsidizing carriers so they can offer cheaper fares than they otherwise would need to cover costs.

WOW, what a turn of events at PIT

Summary: Bad news continues to come for Pittsburgh International Airport in 2018—from airlines not meeting expectations or others canceling flights or ceasing operations.  The common thread for these events is the presence of subsidies which were offered that distort the marketplace.


Pittsburgh International Airport (PIT) is having a very tough run.  At the end of November the Allegheny County Airport Authority announced that Qatar Airways’ cargo flights from PIT failed to generate their projected levels of cargo carried and thus obligated PIT to pay a “support fee” to the airline.  Then it was announced that WOW Airlines, another airline collecting PIT subsidies, is not offering flights to Iceland and from there to Europe after mid-January 2019.  This comes on top of the news just a few months ago that PIT is suing OneJet to recoup a loan. Shortly after that suit was filed, OneJet suspended all flights.  Then Delta announced it was cancelling its seasonal flights to Paris.  It’s fair to say that PIT has been hit with a run of very bad news during the second half of 2018.

We weighed in on the OneJet saga (Policy Brief Vol. 18, No. 32) and the decision of Delta to stop its seasonal flight to Paris (Policy Briefs Vol. 18, Nos.31 and 41) which occurred shortly after the Airport Authority announced it was giving a $3 million subsidy to British Airways to provide service to London beginning in the spring of 2019.

The Qatar Airways case is a bit different in that instead of receiving a subsidy to transport passengers to destinations previously unserved by other airlines—the Airport Authority’s justification for subsidizing OneJet, WOW, British Airways, Condor, etc.—Qatar was subsidized to carry cargo.  Before Qatar began operating at PIT in October 2017, the announcement of the added cargo service was accompanied by the usual enthusiasm and the promise of turning PIT into a logistics center.  News coverage of Qatar’s cargo service even mentioned that it might aid in attracting Amazon to the region.  Evidently, it was not a factor since Amazon is not coming to Pittsburgh.

Consider this:  in terms of cargo tonnage, PIT is ranked as the 53rd largest airport in the country by the Federal Aviation Administration, based on landed weight in 2017 (470.1 million pounds—roughly 235,000 tons).  Ten years earlier, in 2007, the airport ranked as the 48th busiest with 492.2 million pounds (246,100 tons) of landed cargo.  While things may be looking up2017’s landed cargo weight was 4 percent better than in 2016it still has not caught up to where it was before the last recession.

The Airport Authority took a gamble on Qatar Airways being able to boost PIT as a cargo center and lost.  From the news report in September 2017 it was claimed that Qatar planned to transport 200 tons of cargo to and from Pittsburgh each week from Doha to Luxembourg to Atlanta and then Pittsburgh.  Bear in mind that at the 2017 tonnage level, PIT averaged over 4,500 tons of landed cargo per week. So at the planned 200 tons per week Qatar would account for about 4 percent of PIT cargo handled.

Under the arrangement the authority was obligated to pay Qatar a “support fee” of $744,000 every six months if the carrier failed to average 480 tons of cargo per month—about half the planned 200 tons per week. It never came close to 480 tons. The authority paid the airline two installments for a total of $1.48 million for the year.  According to recent news, the best month for the airline netted only 180 tons (October 2018) and before that 163 tons (October 2017).  In June 2018 only 99 tons were carried with a further drop to only 61 tons in September.  The route was even changed to go through Chicago instead of Atlanta and two sales agents were hired to boost cargo totals and it still was not enough.

While Qatar is still operating at PIT, presumably without the subsidy, there have been news reports stating “that could potentially change if another deal is reached between Qatar and the authority.”

The authority still has dreams of being a logistics center—but at what cost?  The other, non-subsidized cargo haulers such as FedEx and UPS are at PIT and offering service because the market is strong enough they can do so profitably and without subsidies.  How will they react if Qatar is given additional subsidies to compete with them?  Will they ask for subsidies as well? The Airport Authority may have painted itself into a corner in their attempt to manipulate the market.

WOW Airlines’ decision to stop offering flights past mid-January was not a surprise but speaks to the lack of real demand for flights to Europe.

WOW has already stopped flying out of Cleveland and Cincinnati, with service lasting only from May to October from the latter, and will cease operating out of St. Louis in January, again after a brief stay of just eight months.

According to a Cleveland news report, WOW’s statement noted that the routes did not perform as well as hoped and that load factors were not achieving target levels.  Similar reasoning was used when pulling out of St. Louis while high cost and low profits were reasons for leaving Cincinnati.

WOW committed to Cleveland in August 2017, shortly after committing to PIT (June 2017).  Both airports subsidized the airline.  Cleveland offered $1 million over two years while PIT offered $800,000 over two years. St. Louis also offered $800,000 over two years but due its short time in that city, WOW failed to qualify for the agreed-upon subsidy.  News concerning the cessation of Cincinnati flights did not mention whether subsidies had been given to the carrier.

In Cleveland, WOW competed head-to-head with Icelandair with bad results.  According to another Cleveland news article, Icelandair was in talks to purchase WOW but those talks failed and the merger was called off in late November, just before WOW announced it was cancelling service at PIT. The article notes that with the failed merger, WOW’s “future is up in the air.”

So after an aggressive expansion campaign in 2017, and collecting taxpayer subsidies, WOW’s future is very much in doubt at the end of 2018.  It seems unlikely the airline with resume flights at PIT anytime soon—if ever.

Propping up business enterprises with public funds is not only a high-risk practice but it represents interference in the marketplace and begets ever more subsidies undermining the role of markets. This is especially egregious in the effort by PIT to artificially create travel to certain destinations by underwriting the cost of the fares.

It is folly on its face. Because to be truly successful in terms of sustaining adequate passengers loads for the flights, the subsidies would have to go on forever given that the real underlying demand is not there.   Perhaps the Airport Authority will learn a valuable lesson from 2018’s embarrassing failures and all the money that it has wasted.

The Airport’s Misguided $3 Million Subsidy to British Airways

Summary: On July 25, Pittsburgh International Airport (PIT) officials announced that British Airways would begin nonstop flights from Pittsburgh to London’s Heathrow airport. $3 million in subsidy is being provided to the airline to offer service at PIT.  This Policy Brief describes the deep flaws in the subsidy of British Airways.


British Airways is set to begin flights in April 2019 with one flight per day on Tuesdays, Wednesdays, Fridays and Saturdays. Flights will arrive at 8:15 p.m. and depart at 9:50 p.m. PIT will become the 27th U.S. destination for the carrier and is by far the smallest airport in terms of enplaned passengers (ranked 47th in the U.S. in 2017).

To get the airline to resume operations at PIT after a long hiatus the Airport Authority will pay British Airways $1.5 million each year for two years. This after handing WOW Air $800,000 to fly to Iceland and on to Europe and $500,000 to Condor for seasonal flights to Germany. Note, too, that American Airlines offers one-stop service to London through Philadelphia and Charlotte with several flights to choose from each day. Those airports are American Airlines hubs and can gather travelers from many cities to fill planes flying to Heathrow. Then, too, American is already posting fares at PIT to match the British Airways fares for next April.

The obvious question—will the British Airways service create new passengers at the airport or take them away from existing flights, some of which are receiving airport subsidies? According to the British Airways spokesperson, there is pent-up demand for travel to Europe. If that’s the case, why are subsidies necessary and why haven’t U.S. airlines jumped at the chance to offer nonstop flights to serve the pent-up demand?  Something does not add up here.

Indeed, the only possible justifiable reason to subsidize any carrier is to create demand by foreigners to fly to PIT. Subsidizing passengers to fly out of the country on a foreign carrier to spend money as tourists abroad is folly.

And that leads to the worst part of the airport’s presentation announcing the subsidy arrangement with British Airways. Airport executives said the authority estimates there will be a $57 million economic impact resulting from the British Airways presence.  To be clear, the economic impact estimates were provided in a study prepared by the EDR Group of Boston.

Apparently, most of the estimated impacts in the EDR study are based on assumptions about non-U.S. passengers using the flights. The study does not provide figures for spending on baggage handling, gate services, or purchases of fuel, food and beverages. EDR assumes 40,562 arriving and departing passengers annually on 234 roundtrips (81 percent occupancy).  Presumably those figures are from British Airways. Of those, 29 percent (11,763) are assumed to be from the United Kingdom or other Europeans whose destination is PIT and are not connecting to another city. How the 29 percent figure was determined is not explained.

Spending by the UK/European visitors in the Pittsburgh region seems to account for the bulk of the economic impact of the carrier’s flights. All told, the study predicts the 234 yearly roundtrips will lead to 564 added jobs in the 10-county Southwestern Pennsylvania region with average worker income of $37,776 and a total labor income boost of $21,306,000. This will be accompanied by a value-added increase of $33,879,000 according to the study. The $57 million economic impact figure quoted by airport executives is for gross sales and not net value produced.

Before evaluating the study estimates in more detail, it is important to note three large potential differences in economic impact depending on passenger count assumptions. Obviously, the total of 40,562 passengers matters because it will determine the amount of services needed at the airport. The assumption of 29 percent (11,763) non-U.S. passengers is critical because that drives the bulk of the local economic impact. And third, the British Airways passenger count assumptions do not factor in the percentage of travelers that would have flown other airlines to and from England or Europe.

Note that most of the projected new jobs in the study will be at restaurants and hotels as a result of the increase in foreign visitors to the region. Bear in mind, however, that 11,763 visitors to the region over 365 days is an average of only 33 per day.  Even if they stay seven days on average that represents only 82,000 hotel or other accommodation room nights. The city alone has around 2.6 million room nights available per year and the rest of the region likely has at least half that many. Thus, UK/European visitor stays would make up only two percent or so of the region’s available room nights.

And in that regard, it is highly improbable that a two percent uptick in room nights would create a commensurate number of new hospitality jobs. Indeed, stats from “The Economic Impact of Travel and Tourism in Pennsylvania 2016”, prepared by Tourism Economics a division of the Oxford Economics Company, show that for Allegheny County in 2016, on average, $143,297 was spent by tourists/travelers for each job in the tourism related industries. If that figure is still anywhere close to the present ratio, the 11,763 visitors would have to spend over $80 million, or $7,000, each to produce 564 new jobs.

What’s more, most newly created jobs resulting from these foreign travelers would likely be low-paid hotel room attendants and restaurant wait staff for which pay levels are about $23,000, a far cry from the $37,776 pay level used in the EDR report. The figure EDR used for average worker pay would include salaries of managers, sales reps, engineers, security, repairmen, etc. It seems extremely unlikely that additional staff in these higher paid categories would be needed to handle an average of 224 people per night—assuming seven-day stays per visitor—at all the hotels in the 10-county region or even if they are concentrated in Allegheny County hotels.

And it gets worse. There is no estimate of how many of the 28,800 local passengers will be additional travelers to the UK/Europe or will be passengers that would have traveled on other airlines such as the already subsidized and very inexpensive WOW Air or from folks who would have flown one stop on American through Philadelphia or Charlotte—or United through Newark or Dulles. But it is almost certain that a large percentage will be passengers that would have taken other carriers. Likewise, it is not known how many Europeans will use British Airways instead of American or some other airline to come to Pittsburgh. If as few as half of Pennsylvania travelers to Heathrow are net new passengers and half of UK visitors are net new travelers that would mean the net effect of British Airways flights would be 15,000 more locals headed to London with 5,900 additional UK or other Europeans coming to the Pittsburgh area. Other assumptions about the ratio of new additional to total passengers could be made but this one will serve to illustrate the point.

If 5,900 is a better measure of the net additional UK/Europeans visiting Southwestern Pennsylvania, then the impact on the economy will be far lower than even a realistic estimate of the impact of 11,763 visitors, which the EDR estimate clearly was not.   Consider, too—assuming foreign visitors to Southwestern Pennsylvania spend about the same as local travelers spend abroad—that the outflow of dollars from the region to foreign-owned enterprises caused by 28,800 local travelers flying to London and perhaps visiting other European destinations will be far greater than the inflow of money associated with 11,763 foreign visitors to the region.  Using the EDR estimate of 29 percent of the passengers to be UK/Europe residents—which seems high—then U.S. residents make up 71 percent, a ratio of almost 2.5 to one. Thus, spending by Pennsylvania travelers would be 2.5 times greater than foreign British Airways travelers to the Pittsburgh region. That is not a win for the region. Indeed, it is just the opposite. Moreover, if the percentage of UK/European travelers turns out to be only 20 percent of total, the ratio of U.S. spending abroad to foreign spending in the region rises to four to one. And so forth if the percentage of foreign passengers is even lower.

Then too, the money spent by local residents to fly on British Airways will end up in that airline’s bank account.  And for that matter so will all the fares purchased by UK/European passengers. Using British Airways’ estimate of 28,800 Southwestern Pennsylvanians (and maybe some from out of the area) who will pay a low-side estimate of $1,000 or more for the trip means British Airways will collect $28,800,000 in fare revenue from area residents. And those dollars are leaving the region even before the travelers land in England. Note that British Airways’ basic economy fares at $716 will be available but these fares are accompanied by fees for luggage. And, the passengers cannot select their seats and must board last. Prices are significantly higher for other seat classes. The $1,000 figure is used for demonstration purposes as an estimate of average fares but the actual average is likely to be significantly higher and the regional outflow of dollars higher as well.

Even if half the passengers would have flown other airlines absent the arrival of British Airways, the British carrier would still collect $28,800,000 in fare revenue. And if average fares for the other carriers are close to British Airways, they would lose almost $15 million in revenue. Obviously, any reductions in U.S. airline revenue will lower the economic benefits of the arrival of British Airways.

The fact that PIT is not a major hub and that the area is not world famous as a tourist destination—certainly not a on a scale such as Orlando, Miami, Las Vegas, Tampa, Phoenix or even New Orleans—makes it harder to induce UK/Europeans to fly to PIT as tourists.

All these factors make the airport’s $3 million misguided taxpayer investment unlikely to ever pay for itself unless British companies with significant investment and potential employment that otherwise would not have located facilities in the region decide to place operations in Southwestern Pennsylvania.  And in the meantime, with the most probable effects of the subsidy being to damage competitors while increasing the net outflow of resources from the region, it is hard to see any upside to handing over tax dollars to the airline.

A Comparative Analysis of Pittsburgh International Airport Passenger Data

Summary: From 2015 to 2017 flights and passenger counts rose at Pittsburgh International Airport. While the numbers are certainly much improved, are they better than the performance at similarly sized airports? This Brief finds the Pittsburgh gains to be about average relative to the study group and well short of the best performers.


A Policy Brief from earlier this year looked at the passenger data from the U.S. Department of Transportation and compared the performance of Pittsburgh International Airport (PIT) to that of similarly sized airports around the country.

But when that Brief was published data for domestic passengers in 2017 covered only through October.  The data for domestic passengers have been finalized for 2017 which enables a full-year comparison.  Domestic travelers account for the vast majority (98 percent in 2016) of airline passengers at PIT and will be the focus of this Brief.

The data cover origination passengers—the starting point of a trip—and destination passengers—the farthest point of travel from the origin of a trip of 75 miles or more (as per U.S. Department of Transportation criteria).

Based on information as of October, it was noted that passenger count at PIT had moved higher. The full year of data did not change that finding.  Predictably, local officials are touting the recent gain. However, as shall be shown in this Brief, some perspective on the latest uptick in passengers is called for.

In 2015 the number of domestic origination and destination passengers (O&D) using PIT was just above 7.61 million.  The count for 2017 was 8.34 million, an increase over the two years of 9.7 percent.  Bear in mind that PIT’s 8.34 million O&D passengers represent a mere 0.56 percent of the national figure of 1.483 billion.  PIT’s percentage growth over the two year period is better than the total for all airports (6.55 percent).

Interestingly, the two year gain at the major airports (the busiest 30) was only 5.5 percent with the remaining airports posting a nearly 9 percent higher count. The extent of concentration of airline flight O&D is demonstrated by the fact that the 30 highest passenger count airports account for 69 percent of all domestic O&D passengers. Nonetheless, faster growth appears to be happening at the smaller airports, perhaps because there is more capacity for additional flights. Note that PIT ranked as the 48th busiest airport in terms of enplanements (2016).

Of the 15 similarly sized airports—those ranking 38th through 52nd in the Federal Aviation Administration’s ranking by 2016 enplaned passengers—Cincinnati experienced the biggest jump in O&D at 25 percent, and ranked 52nd,  followed by San Jose (up 23.4 percent, ranked 40th) and Raleigh (up 14 percent, ranked 39th).  PIT’s 2015 to 2017 increase ranks ninth best in this group of 15 comparable airports.  San Juan, Puerto Rico (down 3.4 percent, 43rd) Santa Ana, California (up 3.8 percent, 41st) and Fort Meyers, Florida (up 4.9 percent, 45th) recorded the weakest two-year performances. Of course San Juan was beset by problems with the 2017 hurricane season that undoubtedly reduced air travel sharply. The average growth rate for the 15-airport sample is 10.5 percent.

Another metric of airport performance is the number of O&D flights at each airport.  PIT’s supporters point to a rise in number of flights being offered, but again how does that stand up to the activity at similarly sized airports?

From 2015 through 2017 the number of O&D flights at PIT rose by 2.8 percent.  For the 15-airport sample the average growth rate to O&D flights is four percent.  For all airports around the country that growth was more subdued at just 1.4 percent.  At the major airports the gain was a bit better at 1.5 percent while the remaining airports had O&D flight growth of just 1.3 percent.  In the group of 15 comparison airports, PIT’s growth in flights ranks ninth.  At the top is San Jose (25.4 percent) and Sacramento (12 percent, 42nd) while San Juan (-13 percent) and Milwaukee (-3 percent, 51st) sit at the bottom with drops in traffic. In fact five airports from this group had either no gains or declines.

An important measure of airline productivity is the “load factor.”  Load factor is defined by the airline industry as the ratio of passenger miles flown to the number of seat miles available.  For originating flights across all airports the load factor for 2017 was 84.57—down slightly from the 2015 level of 84.98.  For airports ranked in the top 30, the origination load factor in 2017 was 85.43, down from 85.79 in 2015 while for the remainder the factor was 81.99 down from 82.46.

In 2015 PIT had the lowest origination load factor of the 15 airports in the comparison group at 79.07. In 2017 the load factor at PIT edged up to 81.2, placing its ranking at third worst just ahead of Cincinnati (81.07) and Columbus (80.37).  San Juan had the highest load factor in both 2015 (89.19) and 2017 (90.97), while the average for the comparison group stood at 82.51 in 2015 and 83.14 in 2017.

Destination load factors are about the same as origination load factors, as one would expect.  The load factor for PIT’s destination flights stands at 81.24 up 2.4 percent from 79.31 in 2015.    While this percentage rise is respectable, the load factor remains low compared to the all airport total of 84.57 and the ratio of 85.55 posted at major airports.  PIT’s 2017 load factor was better than Columbus (81.07) but trailed the rest of the airports in the sample. The sample average in 2017 was 82.78 for destination flights.

The relatively low load factor at PIT for both O&D flights points to substantially more unfilled seats than the national average as well as 2.4 percent more unfilled seats than the comparison group average. This relatively low load factor is almost certainly a consideration in decisions about adding flights. If underserved markets for Pittsburgh area travelers can be ferreted out, there might be further expansion.  Otherwise gains in passenger counts will depend heavily on growth in the population age groups that have high propensities to travel by air and on the growth of employment and incomes in the airport’s service area.

However, as has been documented, officials in charge of PIT don’t necessarily rely on market forces alone to help airlines make decisions.  For example, a late January news article noted that in 2017 PIT paid out $3.4 million in incentives to offer passenger service to five destinations and cargo service by a Middle Eastern carrier.  OneJet also received a million dollars to begin service over the next two years and Allegiant Air has begun service to Charleston, S.C. with a “small marketing” incentive.  Unfortunately, six months into the cargo flights things are not going well and the airport may be on the hook for $1.5 million in wasted subsidies—a glaring example of how ignoring market forces and looking for headline grabbing announcements can be misguided and very costly.

More unfortunately, there seems to be no sign of ending carrier subsidies.  Subsidy-happy airport officials must have warmly welcomed the Legislature’s indefinite extension of the $12 million per year in gaming money that was about to come to an end.

The bottom line:  PIT’s flights and passenger counts have risen in recent years.  But other airports of similar size have seen more improvement than PIT in key gauges of activity. Plus there has been a significant rise of air travel nationally that has benefitted most commercial airports.  In short, the airport needs to be a little less self-congratulatory about its better numbers.

Passenger Count Grows at Pittsburgh International Airport

Summary: In late January, Pittsburgh International Airport (PIT) released passenger numbers for 2017.  Total passengers enplaned and deplaned at PIT last year reached 8.988 million—8.16 percent growth over 2016’s 8.31 million.  While those in charge of PIT are busy congratulating themselves, perhaps some perspective is in order.


PIT’s passenger count reached the highest level since 2007 when it reached 9.822 million. PIT’s troubles over the years have been documented by Institute Policy Briefs, from the high debt levels incurred to build the current terminal to the financial struggles of US Airways and its dramatically reduced activity at PIT. Rising passenger counts since 2013 are surely welcome news.

2017’s jump of over 8 percent compared to 2016 is the largest yearly gain this century.  But is this significant rise unique to PIT or are other airports seeing similar boosts in passenger totals?  Using U.S. Department of Transportation (DOT) data, PIT’s performance can be compared with other similarly sized airports.

DOT airline passenger data for 2017 are available only through October.  So for purposes of comparison to 2016, all airport data, including PIT data, will use cumulative passenger counts through October of both years.  Also this Brief will look only at domestic activity, that is, only those travelling within the country. Since DOT international data are available only through July 2017 and international passengers at PIT only accounted for 0.6 percent (23,762 of 3.89 million) of total enplaned passengers in 2016, the most meaningful comparison of air travel at PIT to other airports is the domestic passenger count.

For all U.S. airports the number of domestic passengers enplaning in 2017 grew by 2.76 percent over 2016 levels.  However, it is noteworthy that at major U.S. airports—those ranked in the top 30 in terms of enplanements—passenger count rose only 1.94 percent in 2017.  For all other airports the gain was higher at 4.65 percent.  Thus, the nation’s largest airports grew at a slower rate than the smaller ones, perhaps because they are already at or near capacity.  Note that PIT ranks as the nation’s 48th-busiest airport in terms of enplanements and accounted for 3.87 million of 720 million, or 0.54 percent of 2016 domestic enplanements in the U.S.

Looking at airports close to PIT in size, those ranked from 40th busiest (San Jose) to 52nd busiest (Cincinnati), only two had a decrease in enplaned passengers—Santa Ana, California—John Wayne-Orange County (down 1.5 percent) and San Juan’s Luis Munoz International Airport (considered a domestic airport, down 1.1 percent).  Cincinnati had the largest passenger count increase in 2017 with a jump of 16.1 percent followed by San Jose (13.8 percent) and Cleveland (9.2 percent).  PIT’s 7 percent rise, going from 3.23 million through October 2016 to 3.45 million through October 2017, was the fourth best just above Sacramento (6.4 percent).  Thus, PIT’s performance in 2017 was a nice improvement but well below the gains posted at Cincinnati and San Jose.

Another brag item mentioned by PIT officials is the number of flights that have been added.  Again DOT data for domestic flights (year-to-date through October 2016 vs. year-to-date through October 2017) provides some perspective.  Flights at PIT rose 3.2 percent during the period, increasing from 43,624 flights through October 2016 to 45,028 through October 2017.

For all airports in the country the number of domestic flights was virtually unchanged (down 0.2 percent).  Flights at the top 30 airports fell slightly more (down 0.3 percent). For the remaining airports the combined total flights were virtually unchanged.

Again, looking at the airports ranked from 40th to 52nd, the largest gain in domestic flights occurred at San Jose’s airport (14.1 percent).  Five airports had losses with San Juan having the greatest decline (7.7 percent) which is no doubt related to a very active 2017 hurricane season in the Atlantic (the number of flights for September and October were cut by a quarter).  PIT’s increase of 3.22 percent is the 5th largest rise of the 13 airports in this list—again not bad.  But the notion that PIT is a world beater in obtaining flights ignores the fact that other comparable airports are doing just as well and some are doing it better.

Interestingly, one brag item for PIT is the number of international flights offered.  As mentioned above the DOT data for international flights is available only through July 2017.  Through July 2017 PIT had 1,070 international flights, a decrease of 7.75 percent from the 1,160 international flights taken through July 2016.  However it is up 40 percent over 2015’s number (through July).

To be sure, the increase in both flights and passengers at PIT is encouraging for an airport that has had little to cheer about this century, especially in the context of a being in a regional market with no population growth and mediocre job gains.

One final metric to consider is what the airline industry calls the “load factor.”  Load factor is the ratio of passenger miles flown to the number of seat miles available.  For all airports in the country in 2017 (through October) the load factor was 84.53.  For the 30 largest airports it was 85.30.  For the remainder of airports the load factor was 82.35. Neither of these load factors changed much from 2016.

The load factor at PIT in 2017 (through October) was 81.09 percent—a slight decline from 2016 (81.38) despite the pickup in enplaned passengers. Of the airports ranked by size from 40th through 52nd, PIT’s load factor was the second lowest of the group, above Cincinnati (80.92) and just below Columbus (81.11).  The highest load factor was San Juan (90.33) followed by Kahului, Hawaii (87.13) and then Santa Ana, California (84.52).  With PIT’s load factor ranking amongst the lowest of its peer group, there would appear to be a weakening incentive to add more flights.

Finally, consider the amount of money Allegheny County’s Airport Authority has given to airlines to offer flights at PIT.  A late January news article noted that in 2017 the authority paid out nearly $3.4 million in incentives to airlines to offer passenger service to five destinations and cargo service to the Middle East. On top of that, OneJet also received a million dollars to begin service to 10 new destinations over two years.

The authority’s CEO shrugs off criticism of doling out money to airlines saying it’s the cost of doing business in the industry.  And that’s a sad commentary about the industry as other airports play the same game.  For example Delta will receive a subsidy to fly from Indianapolis to Paris (as it does from PIT for a similar flight) and WOW Air, also a recipient of PIT subsidies, will begin service from Cincinnati and Cleveland this May thanks to taxpayer money.  But the question remains: how are subsidies that, in effect, lower passenger ticket prices or lower shipper costs compared to what they would be without the subsidy, good for taxpayers? It is like subsidies to sports stadiums that enrich owners and make tickets more affordable than they otherwise would be.  This is very poor public policy.

While PIT and county officials are pleased with the uptick in both passengers and flights offered, is it a sign that these subsidies are working?  How much of the increase in passengers at PIT is due to a general rise in air travel demand and how much to the subsidized added service?  Since the majority of comparable airports also had increases in enplaned passengers, it is quite likely a growing national economy that is spurring air travel that gets much of the credit for 2017’s gain.  Once the subsidies are gone (if they ever are), will the subsidized flights disappear as well?  Airlines are not in business to lose money and low or falling load factors accompanied by the end of subsidies could and probably will lead to some reductions in service.

Local demand for air travel depends on the size and income of the population. As we have been saying for years, once the Pittsburgh region’s economy and population starts to grow appreciably and people have the disposable income to fly, the demand for travel at PIT will increase without subsidies and the airlines will respond accordingly.

Will Airport Reconfiguration Justify the $1.1 Billion Cost?

Summary: The Allegheny County Airport Authority has announced plans to reconfigure the terminal system at Pittsburgh International Airport.  The estimated cost is $1.1 billion.  But is this expensive project justified given the current, or even projected, demand for air travel?  And will the authority be able to finance the project? This Brief explains the difficulties the plan faces.


In mid-September the Allegheny County Airport Authority released a proposal to reconfigure the terminals of Pittsburgh International Airport (PIT) at a cost of $1.1 billion.  The plan includes a new landside terminal that will be connected to the current airside terminal, a new parking garage and new infrastructure to reconfigure the property.  Needless to say local officials argue the project is necessary to update the facility

Authority officials stress that no local taxpayer money will be used and that it will not have to increase landing or other fees charged to airlines servicing PIT.  Instead, to repay the bonds issued to fund the project, the authority will rely on savings from the reconfiguration, specifically the savings from maintenance costs from the old landside terminal, revenue from airport parking, concession and retail sales, a passenger facility charge and grants (federal and state tax dollars), along with royalties from Marcellus Shale gas extraction on airport property.

A reality fact-check 

The current terminal system was built over 25 years ago to the specifications of US Airways, then one of the largest airlines in the nation.  It was constructed to accommodate more than 30 million passengers expected from US Airways growth at the Pittsburgh hub. Today, after bankruptcy filings and mergers, US Airways is gone, having acquired American Airlines and adopting that venerable name. PIT never saw the passenger level projections that were used to justify the much larger terminal.

In fact, the highest passenger count at PIT was only 19.9 million (2001) while it was still a major US Airways hub.  News reports note that the new facility will be able to handle about 18 million passengers.  Whether or not the 18 million figure is ever reached, the traffic will almost certainly be exclusively origination and destination passengers, as there appears to be little prospect of any airline putting a significant hub operation at PIT.

Since the 2001 peak passenger count, and as the fortunes of US Airways tumbled into bankruptcy and downsizing, annual passenger totals fell through the next several years   dropping to 8 million passengers in 2009.  From 2010 through 2016 the passenger counts ranged between 7.88 million in 2013 and 8.31 million in 2016, with an average of 8.1 million thus far this decade.  The projected total for 2017 is about 8.39 million—slightly above the 2016 level, but still well below the 2007 level.  The harsh reality is that PIT’s slide has lowered its ranking to 48th among U.S. airports in terms of enplanements.

With PIT relying on origination and destination travelers, passenger growth will depend heavily on two factors: the gains in population and expansion of the economy, especially income and employment. Availability of very cheap flights and more non-stop destinations can induce higher demand. However, the effect is limited as shown by the recent experience at PIT.

While the area’s population decline is not as dramatic as it was through 1990, it is still slipping.  The seven-county Pittsburgh metro area’s 2016 estimated population count was 2.342 million—down from 2.356 million in the 2010 census which was down from  2.431 million at the beginning of the millennium. There is little or no indication that the metro area is on the verge of a substantial upturn in population growth.

Further, payroll data shows the area’s employment gains have been very anemic over a long period.  In 2000 average monthly non-farm jobs stood at 1,159,800. By 2016 that number had managed to rise a scant one percent to 1,172,000 jobs.  National growth during this period was 9.4 percent, far from strong, but the period did encompass the massive recession of 2008-2010. In Allegheny County personal income per capita expanded by a mere 2 percent per year between 2007 and 2015, not much, if any, after adjusting for inflation. Thus, the area’s economy has exhibited very slow gains over a long period and surely can offer no optimism that it will suddenly start to rise rapidly driving up demand for air travel.

Much has been made about PIT’s ability to attract low-cost airlines such as Frontier, Condor, WOW and Spirit.  This is offered up as proof that the demand for air travel from PIT is growing.  But it is worth noting that several of these carriers were lured here with subsidies in hopes of stimulating demand.

Frontier Airlines, after only one year, has already announced a reduction in the number of destinations from five cities to just two, and their flights will be seasonal and limited to just a couple of days per week.  Will other low-cost carriers face the Frontier problem, especially those with subsidies when the subsidies expire? Clearly, added competition and carriers have done little to produce an appreciable rise in passengers.

How does PIT expect to pay for the $1.1 billion retrofitting? 

News reports say the authority will use savings from closing the current landside terminal, estimated to be about $23 million.  The most talked about savings would be realized from the elimination of the tram between the airside and landside terminals, people-movers, elevators and escalators, all of which are coming to the end of their useful lives.  The thought is that instead of replacing or repairing these items, it would be more appropriate to build a new landside terminal.  As one aviation consultant was quoted as saying, “You’re going to spend $1.1 billion to save $23 million?  What Wall Street person would ever make that decision?”

Using a standard repayment formula, $1.1 billion in 30 year bonds at 5.5 percent interest, would require annual debt service of about $75 million per year.  With $23 million in expected annual savings from abandoning the current landside terminal leaves around $52 million the authority will have to find to make the full payment.  At the end of 2016 PIT had long-term principal and interest obligations of $209 million through 2031. A 2017 debt service payment of $62.1 million is due followed by a payment of $57 million in 2018. After that payments fall substantially and by 2022 roughly 80 percent of the $209 million in principal and interest will be paid with the remainder to be completed by 2031. And this assumes no additional borrowing, other than for the planned reconfiguration.

Beginning in 2019, the debt service payment decline will, assuming all revenues remain in place and no unexpected expenditures arise, free up  $40 million or so that could be applied to new debt. That number would rise to around $60 million in 2031.

But there are a couple of questions with the scenario implicit in the plans for financing the reconfiguration.  One, how will the net operating revenue and expenses balance move over the next 30 years?  The terminal concourses that are to remain in place and related other infrastructure are almost 30 years old.  Maintenance of those structures or their replacement will be very expensive. Other costs will also rise over the three decades. Will revenues from operations and fees keep pace?  Where are the long term costs and revenue forecasts?

Two, there can be, and are likely to be, troubles with the special non-operating revenue sources listed by the authority as their sources to cover the project cost: gaming money, gas royalties and the passenger facility charge.

When the state’s gaming law was signed in 2004, it included a payout of $150 million to the authority to help with the airport debt. The money was to be paid in equal installments over 12 years starting in 2007.  However, as Policy Brief, Vol. 9, No. 62 explained, the County Executive claimed the authority owed the county $42.5 million and arranged to intercept that amount off the top, leaving $107.5 million for PIT.  According to the latest authority comprehensive annual financial report (2016 CAFR), these payments to PIT began in 2010 with a $14.6 million payment.

From 2011 through 2016, the annual payments have totaled $89 million.  This leaves just $18.5 million of the original $150 million gaming money to be received in the next two years. Therefore, gaming tax dollars will not be available to pay off any new debt. Not unless the Legislature and governor agree to renew the gaming money appropriation for PIT. And given the state’s dire budget problems and other program funding needs, this does not seem likely, especially since the $150 million set aside for PIT was not at all popular with some legislators when that deal was made.  Other parts of the state will want that money allocated to them.

Then, too, revenue forecasts from gas royalties are problematic. When the authority executed an agreement to begin unconventional gas drilling on its property, it received a $46.3 million upfront payment. The authority decided to realize that as non-operating revenue over a five-year period, ending February 2018 (roughly $9.26 million per year).  Thus the bulk of that money has already been received. In 2016, the authority began receiving royalty payments from gas being extracted from the property—$3.2 million.  Obviously, royalties will have to be much greater than $3.2 million to play much of a role in servicing a billion dollar debt.

With more drilling taking place and greater production possibly forthcoming, royalty payments could increase. However, with the price of natural gas suppressed as new supplies are being tapped in Pennsylvania and elsewhere, royalties might not rise as hoped.  Moreover, since the likely term of the construction bonds will be 30 years, it is very probable that aging wells will have become less productive and whether new wells will find other pockets on the property to refresh the gas flow is unknown.

Another non-operating revenue stream mentioned as a funding source is the passenger facility charge (PFC).  This is a charge allowed by the Federal Aviation Administration (FAA) and is currently capped at $4.50 and charged to “qualified … enplaning passengers by airports to finance eligible airport-related projects that preserve or enhance safety, capacity or security of the national transportation system; fund noise mitigation at the airport; or furnish opportunities for enhanced competition between or among air carriers.”

The FAA has to approve the projects on which the PFC can be spent and this could present a problem. Obviously, reducing capacity from 30 million to 18 million passengers is not enhancing capacity. And the planned reconfiguring seems to do little to enhance national transportation security, reduce noise or furnish opportunities for enhanced competition.

According to the CAFR, the authority collected $168 million in the PFCs from 2007 to 2016—an average of $16.8 million per year—with $16.3 million collected in 2016.  Among the FAA approved projects on which this money can be spent is an allowance for “reimbursement for pre-application projects (to be applied to debt service).”  Thus the PFC has been helpful in lowering the old debt from terminal construction.  But will the FAA approve using the PFC revenues for the reconfiguration plan? That will need to be taken care of immediately if it has not already.

Surely, the experience with the failure of the massive spending undertaken for the current terminal configuration to produce a self-funding facility would lead planners to be cautious about claims for huge new projects.  Some reasonable sounding projections of the next 20 years of operations revenue and spending including maintenance and replacement costs for aging equipment and infrastructure along with forecasts of non-operating revenue and debt service loads should be an absolute must. Stakeholders and the taxpayers ought to see exactly what the project portends in terms of financial viability.  It is unlikely that the commonwealth will be prepared to come with another bailout. Indeed, that should not even be contemplated given the amount of money it has provided for roads and access to the airport already.

In sum, a very close, objective, look at what passenger traffic, airport revenues and expenses are likely to be in the future is a prerequisite for proceeding with the reconfiguration plan. The region does not need another big failure to go along with the overly expensive, downsized North Shore Connector project or taxpayer funded stadiums that have yet to deliver promised economic payoffs.