The Airport Authority’s due diligence crisis

The Airport Authority’s due diligence crisis

Word that discount carrier WOW Airlines is slashing its fleet of jets nearly in half and laying off more than 100 employees in a major restructuring yet again raise serious questions about how the Allegheny County Airport Authority is operating.

WOW is three-quarters of the way through a two-year deal at Pittsburgh International Airport (PIT) that pays it a total of $800,000, public money coming from those hardly discerning almsgivers at the state Department of Community and Economic Development.

But touted as a major coup for the airport, the airline now is struggling to survive.

Spurned by one potential rescuer (Icelandair) but thrown a life line by another (Frontier Airlines parent Indigo Partners), WOW has slashed its Airbus fleet from 20 to 11 and will lay off 111 employees.

Bookings have been halted past mid-January. Which raises questions about PIT being part of WOW’s future plans. One traveler tells the Post-Gazette that his mid-January flight was canceled and that rebooking was not an option. WOW, in a statement, said contractors and short-term staff “will not be renewed for the time-being.”

It sounds as if the bell is tolling for WOW in Pittsburgh, if not a number of other markets. If not for WOW itself.

Which makes the pronouncements of November 2016, when the WOW deal was announced, all the more embarrassing.

Christina Cassotis, the Airport Authority’s CEO, called the deal an “investment that will pay off.”

Question: If WOW permanently suspends Pittsburgh services, is there a clawback provision in the contract that, if all of that $800,000 already has been given, pro-rates what WOW must return to the public kitty?

That appears not to have been the case with OneJet, involuntarily sent by creditors into Chapter 7 liquidation. Pre-bankruptcy, the Airport Authority was forced to file a lawsuit in an attempt to recover the lion’s share of its $1 million gift.

Back to November 2016. An airline consultant told the P-G that such subsidies are a way “to bring (airlines) along and mitigate their risk.”

By exposing the public to a risk that only these airlines should bear. The risk to the public be damned, right?

Said a travel agent of the WOW deal, quoted then in the same story: “This is magical.”

Sorry, but as the predictable failures of publicly subsidized air travel and cargo service at PIT are exposed, airline by airline, that “magic” is primarily smoke and mirrors and government-enabled hocus-pocus.

Which brings us back to the Airport Authority and Cassotis and questions repeatedly posed and worth asking anew. To wit:

The authority board gave Cassotis plenary power to grant these airlines subsidies of any amount. Where’s the check and balance?

Oh, of course, silly us – until recently at least three members of the authority had been investors in at least one of the subsidized failures (OneJet). And two of those board members have been named in a lawsuit filed by OneJet investors.

What a convoluted and conflicted mess.

And what kind of due diligence is done to thoroughly vet subsidized airlines for their financial wherewithal? The vetting of OneJet was a bad joke. What kind of vetting did WOW get? Surely a discount carrier that is expanding rapidly should be scrutinized extra carefully, yes?

What’s the process? Who’s does the vetting? Is there a process? Is there any vetting? Or does the authority CEO simply keep a giant rubber stamp hanging from a desk lamp to get the job done?

Said Cassotis in November 2016 of the WOW deal: “This is huge. … And I promise it’s just the beginning.”

More’s the pity. And all the more reason for the state Attorney General’s Office, which, by statute, has auditing power over the Airport Authority, to step in.

As embarrassing as these failures have been, it would be even more embarrassing to do nothing about them.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).