I will fight that. I will fight that zoning for Wal-Mart. If it is a Wal-Mart, I will fight unless and if and when they begin treating their workers the way they should be treated. One Wal-Mart mistake we made down at Delaware. We made that mistake.
I think it had a very bad impact on the small retailers in South Philadelphia. And I think it was in the wrong place. But I think we have to look at work conditions, the policies that these people adhere to and follow. They're a giant, they don't need Philadelphia. In fact, I heard a statement by one of them that "we're above government." I like for us to generate jobs. But I like us to generate jobs that pay and give benefits and treat people decently and companies that treat people in a humane way. This company does neither. 2561 3/12/03 - FY '04 OPERATING BUDGET That's not the type of company we need. Thank you.
Thank you. Thank you, Mr. Cuorato. I'd like to have Mr. Isdell come back for a second, if possible. This initial comment and question -- actually more of a comment. I don't need a response to it, but I just want to make it very clear. I think that Charlie Isdell and the people who work for him are doing a tremendous job at our airport and have been doing a tremendous job since the first day you started. And I'm talking about operations, snow removal, keeping that place running as late as possible in bad weather and opening it up as soon as possible when the weather starts to clear. My experience there on an operational basis and even constrained areas like parking and other things, you've really done a great job in making everything work as best as possible, considering all the constraints, considering the proximity of the runways, delays that are caused because we're sandwiched between New York and Washington. All those things that really kind of reflect on the 2562 3/12/03 - FY '04 OPERATING BUDGET airport as a whole, I think are generally very well handled and very well done. And I commend you for your job. I hope you stay there as long as possible. I just wanted to make sure that it was clear for the record.
My only concerns and my only questions and criticisms has been as a result of, not at your operations at the airport, not of your people doing the day-to-day jobs there, but what I believe happens from the 2nd floor which is I believe a meddling in that airport, the use of that airport as some type of political play thing and it gets bandied based on political consideration more than operational consideration. And when I raise my voice regarding contract awards, vending contracts, other types of professional services, it is the result of decisions made on the 2nd floor, not made down at One Terminal Road. And I want to make clear that the record is clear on that also. Also I raised some issues in the past relative to US Air. And I want to just explore it a little bit, and that's why I want Charlie here from 2563 3/12/03 - FY '04 OPERATING BUDGET an operation standpoint. And Jim, you can also answer this question as it relates just the overall philosophy of this economic engine which is so important to the City of Philadelphia. And we know how important it is, and we don't really need to go through all the economic issues relating to that. I raised some issues relative to US Air and I recognized that years when this airport wasn't really on the map, we needed some ability to get a hub in there to have the investment opportunities and capabilities necessary to grow the airport and to make it into the world class airport it is today. But part of that problem has been, despite 911 and despite the economic problems that US Air and other airlines are having, the question is whether or not having almost exclusivity at a particular facility makes sense as it relates to the flying public. And not only the flying public, but how it relates to our commerce and ability to do commerce because our City depends so much on the airport. I mean, when I raised issues of route availability and pricing, I still can't figure out airline pricing. I can't figure out why it costs 500 to $600 to fly from one hub in Philadelphia to 2564 3/12/03 - FY '04 OPERATING BUDGET another hub Pittsburgh -- I mean, by the time the plane levels off, it's starting to descend into the airport. It's 500 to $600 to fly to between two different hubs. And when I raised issues about gate presence, a particular airline, not necessarily to demean or to damage US Air, but to simply talk about how we utilize this facility in the best way possible. Are we losing business to BWI and to Lehigh County? Are we losing business to Atlantic City? How do we create an environment there that allows US Air to thrive and to come back while at the same time opening up opportunities on the domestic side for some type of price competition and some type of competition in general. Because I believe that despite the fact that I think US Air is a great corporate citizen, I want them to be successful and I want them to stay here; I do think sometimes it's just by nature because "We're the only one here, you're going take these flights when we have them at this price and that's just tough. If you don't like it, you can go somewhere else," but there's really not that many places else to go. I just would like you to comment a 2565 3/12/03 - FY '04 OPERATING BUDGET little bit on the domestic side on what we can do to kind of make this airport more competitive from a price standpoint and from route availability standpoint. And in the worse case scenario, which we all hope never happens, US air does not make it, what do we do to try to replace that entity or to supplement that entity with carriers that are competitive, give good service, give good route choices, and give good prices? I just kind of want in a general philosophical discussion what you think about the future of our airport and where we're going and what constraints and problems we need to deal with.
I have a couple thoughts. One is that one of our main impediments to getting some viable competition in airport for a long time was simply the fact that we did not have any free gates. What gates we had, which was a relatively small number, about 63, 65 gates, were almost all exclusively leased long-term to a small group of signatory airlines on a lease that was signed back in the '70s. We have significantly increased our gate capacity at the airport. We added 38 gates in 2001. 2566 3/12/03 - FY '04 OPERATING BUDGET We just added additional gates in Terminal D in 2002. The international gates we're going to add next month will give us 13 additional. So that's one thing that we definitely needed to do. And we also are in a process right now, and it's been a multi-year process, but we're looking at what happens when the existing 32-year agreement expires on June 30th of 2006. In most cases, similar long-term leases that have expired over the last few years, and a number of them have at major airports, have been replaced with shorter-term and non-exclusive type leases. That's not going to solve your problem overnight, obviously, but we are moving in that direction and we clearly moved in that direction with the amendment to the long-term lease that was put together with Council support for the two new terminals because those two new terminals are not leased exclusively to US Airways. We have a lot more flexibility to take gates back and to get other airlines on gates based on usage primarily. The other thing that always comes to my mind when we talk about viability is what do we want to be as an airport into the future to serve our 2567 3/12/03 - FY '04 OPERATING BUDGET community in the ways that you have just described, by providing some reasonable fares and service to as many destinations as possible. And the model that we tend to look at is Atlanta, which has over the past 5 to 10 years grown in to be the busiest airport in the world. And Atlanta obviously has a strong hub presence from Delta Airlines, one of the strongest of the major carriers financially, but they also have had healthy competition over a relatively long term now from AirTran Airways which started out as Value Jet.
Yes. And we have information, which I could provide to the Council and yourself, specifically showing some of the major airports in the top 20, which is where we are, and which ones are dominated and to what extent they're 2568 3/12/03 - FY '04 OPERATING BUDGET dominated by what airlines. Relatively speaking, having US Airways dominate Philadelphia, 65 percent of our activity, roughly, is not anywhere near as bad as some of the airports like Minneapolis St. Paul being dominated by Northwest; Charlotte and Pittsburgh, for example, being significantly much more dominated by US Airways than Philadelphia is. But the model that we'd like to follow is to have an airport that has the benefits of a hub which generally means a huge network of easy access domestically and internationally, certain amount of financial stability -- although that might seem almost ludicrous at the moment. But relative to the small carriers, traditionally the majors have had more staying power, which is important for us to be able to have a long-term capital program and be able to get commitments so that we can meet debt service on new construction. But to have a low-fare carrier like AirTran -- and AirTran is here and we're trying to nurture them in Philadelphia -- that really presents some viable competition over the long term and disciplines the fare structure of the major carriers in the, let's say, the top 5 to 10 2569 3/12/03 - FY '04 OPERATING BUDGET destinations that the two airlines would compete on. AirTran isn't there yet. They're currently occupying three gates in Terminal F. We're ready to move them. It's really up to them at this point when they're ready to move over to Terminal D where we just built the four new gates. We've provided some great amenities in Terminal D so that their passengers, a lot of whom are families making Florida-type vacation travel arrangements, that they will have a nice experience. We have our Please Touch Museum in Terminal D now, a brand-new, very nice facility. AirTran, although I haven't read it in the paper, they've indicated to us that they're going to announce flights to Boston from Philadelphia, which is one of our top designations at -- I think the fare was $59. That's the kind of thing that we need from an AirTran, but we also need the community and particularly the business community to use that service when it's made available. We had a negative experience with Pittsburgh. It's something we can't really explain. But AirTran back in 2001 came out with service to Pittsburgh in competition with US Airways at very 2570 3/12/03 - FY '04 OPERATING BUDGET low prices, but the business community, which has in many case contractual relationships either with travel agents or US Airways directly, did not really jump into that and support it. So after about a year, they pulled out of the Pittsburgh market. That's a very bad thing and we don't want that to happen again if they start this Boston service. Those are some of the things that we consider. So facilities, gates is part of it. And the one thing I didn't mention, which I'm sure is on the tip of your tongue is the airfield. Low-fare carriers to be viable need to be able to get in and out of an airport quickly. It has a major impact on their cost structure. And our airport traditionally is one of the most delayed in the country. We have an airfield that was designed probably not in the best way. And right now, we're facing major decisions about whether to continue to tweak the existing runway structure or build some new runways in a different configuration ultimately to get planes in on out of here more quickly in all kinds of weather, even low visibility. That's another long-term fix. It's not going to happen overnight, but I think we will be moving in that direction over 2571 3/12/03 - FY '04 OPERATING BUDGET the next year or two.
How in this industry do we attempt to attract or to reach out to low-cost airlines or to any other airlines, that we have gates available or that we would like to talk to them about coming in it? Do we initiate it? Do they initiate it?
We make sales calls literally. We do put together, with some of the professional services contracts that we have, packages. There is a real specialty consulting area that has to do with analyzing markets for airlines. A lot of the people who work in that industry are former airline planners and schedulers. We have a really good one on board right now who's helped us to get the service to Ireland. You need to put together a package that shows the benefits of our market and the great things that we have in Philadelphia. But also, you really need to show the airlines that they can make money if they fly certain routes. That could be done in a very scientific way. The sales calls are the follow-up that we do. And we have within the last year we've had visits with every one of the viable low-fare 2572 3/12/03 - FY '04 OPERATING BUDGET carriers; frontier, Jet Blue, Southwest and AirTran, in fact. You need to keep your face in front of them just like in any other competitive industry. There are other airports out there vying for their service. But the real proof of the pudding is if they don't make money in a market, they're not going to stay in the market, especially these days. We have a great market here, a tremendous population mass around a single airport, very different from New York, very different from Washington. So it's both an opportunity to bring service here because they know that there is an origination-destination market here. They don't have to support service substantially with connecting traffic. The connecting traffic here is sort of the icing on top of very nice cake that we provide. But the downside of us being the only major airport in this metropolitan area is the congestion that we experience. So, again, those are my thoughts.
When the amendment to the leases was accomplished, I guess, freeing up or making the gates a little more free or less exclusive than they've been, what are the standards 2573 3/12/03 - FY '04 OPERATING BUDGET for usage that allows US Air or any airline -- US Air in this case -- to retain exclusive control of a gate? What are the benchmarks they have to meet on usage that would allow them to keep that gate under their control?
The preferential agreements that we've entered into for Terminal F and International Terminal and the new gates at Terminal D require a minium of four aircraft turnarounds per day.
B and C are the ones that are being negotiated will end when?
So B and C is the bulk that are in the process of starting to renegotiate for 2006?
So that the gates that were given a different designation are the ones in F and D, correct? 2574 3/12/03 - FY '04 OPERATING BUDGET
The new gates and the overseas terminal are the amended model?
So as long as they're moving four flights out of there a day, they can control that gate exclusively?
Yes. And one of your worst case scenarios is to have an airline -- for example, TWA which monopolizing gates but not using them effectively. It's basically a piece of real estate where you're not maximizing your investment and your not maximizing your return. So what we like to do is be able to monitor gate usage. And we actually are, as part of our capital program right now, we're installing a system as part of the new International Terminal that will eventually spread through the other terminals that enables us to monitor gate usage. Currently, that's done by a self-reporting by the airlines. So all we know, for the most part, is that for all the gates that US Airways has, they did X number of flights per day. We want to be able to monitor specific use of each gate so that we can target areas where we feel like our asset isn't 2575 3/12/03 - FY '04 OPERATING BUDGET being maximized.
These are four moves a day over what period of time? When would they theoretically hit the point where they would have to -- the consideration could be given to taking the gate from them? So it's four moves a day over a 30-day period?
In terminal F, it's a six-month review. Every six months, we look at US Airway's schedule and we look at their usage over the previous six months and we make allocations to them accordingly. And we have the right to take gates back if they're being under-utilized.
Would it seem natural that US Air playing the numbers game based on the scenario or constraints that we've placed on it in the amended version and self-reporting, wouldn't really be too thrilled about having additional competition and would either -- not miscount, not misrepresent, but count in a way that keeps those four moves a day over a six-month period in play. So that in though in effect there may be one or two gates that aren't being utilized hardly at all that they still can meet those goals or 2576 3/12/03 - FY '04 OPERATING BUDGET benchmarks to control the gate? To keep out -- if I'm providing a service, I don't necessarily want my competitor in the gate next door to me. I think it's a natural -- It doesn't make US Air evil, it just makes them competitive and trying to figure out within the contract that they're living under now how they maintain controlling as many gates as possible even though the traffic isn't going through it.
Of course, I know what you're saying is true in a business model, but the fact is that in the years that I've been at the airport, US Airways has repeatedly told us that they would like to have more gates, that they really don't have enough gates. We believe that they are -- our own audits have indicated that they're turning over gates between 7 and 8 times a day, which is very high for a major carrier. It's kind of up in the range that southwest does. And southwest is the best at turning a gate. I think one of the issues that we deal with is the notion that you're describing where obviously a major hub tenant is not encouraged to bring in competition for itself has to do with the 2577 3/12/03 - FY '04 OPERATING BUDGET construction of new gates, which in their opinion are not always needed if they don't need them. But we've been very successful. And I have to give particularly Dennis Bouey a lot of credit for this when he put together the deal in 1998 for the two new terminals. He did it in such a way that we were able to get this flexibility into the language of the leases. But also since then, there was an accept bond terminal for an expansion of Terminal E. Frankly, that was something US Airways did not want to support initially. It was clearly to build gates to bring in competition for them, but we used the leverage that we had in knowing that they had a desire to finish building the International Terminal and we were successful in getting their support for a bond issue. So you do have to be aggressive whenever you see the opportunity and work with your tenants to, at times, force them to enable you, the landlord, to have competition under one roof.
Just let me move quickly for a moment if I can to the Overseas Terminal. When it opens, how many new gates are going to be there?
Thirteen new international 2578 3/12/03 - FY '04 OPERATING BUDGET gates.
And how many will US Air control under amended contract giving us more flexibility?
And the other three are slated for anyone in particular, or they're flexible?
Not at this time. We've got to get the gates open. We've got to show that the building works, I think, and then you'll find that the foreign flight carriers will be --
Yes. And a single international gate is a significant commodity to have.
One of the things that happened today -- and I've experienced this in the past and I, again, want to in bringing this up commend Mr. Cuorato and the staff at the Commerce Department on the ceremony we had today at the Naval Shipyard with Rotim (ph), the railcar manufacturing that's going to be a significant benefit and 2579 3/12/03 - FY '04 OPERATING BUDGET addition to Philadelphia and to the naval base. One of the things I discussed with Mr. Kim who is the president of the company today at lunch was I asked him how he got to Philadelphia. And he flew in from Seoul to Chicago, from Chicago to New York, and then took a train down to Philadelphia. And I've had this discussion with other business people, international business people, especially in Ireland which is what raised one of the issues that raised in the Ireland discussions, one of the strongest economies in Europe in the last decade or more, great opportunities from a historical standpoint in having business relationships with Philadelphia, you can't get here from there. You can't get from the Pacific Rim or Central America or Eastern Europe or Western Africa where we have opportunities to really do business and to attract new residents because a lot of times we understand immigration patterns are based on where you can fly direct to. And I also understand from a business component, direct flight is a godsend when it comes to doing business in the area you're going to. Is there any discussion, consideration, or investigation into what our opportunities are in 2580 3/12/03 - FY '04 OPERATING BUDGET doing international business here in Philadelphia and then going out and attracting a carrier that can get people from where we're doing business with direct to Philadelphia without having to go through New York and Chicago? It really does seem that we're missing the boat sometimes. And again, I don't want to go back and pick on US Air, but the fact of the matter is that US Air flies internationally to locations that are great for business and for tourism, but not the kind and size of business we're trying to create or the type of immigration patterns we may be trying to create. I mean, flying to Berlin, flying to London, flying to Paris, it's a terrific opportunity to have daily flights to those cities, but when you're trying to get from anywhere in the Pacific here, it's a nightmare. And you really can't develop business opportunities in South America or Central America if you can't get here direct. Have we determined what our opportunities are from an international business perspective and then tried to match up those three gates or other gates with direct flights to and from those countries? 2581 3/12/03 - FY '04 OPERATING BUDGET
I would say not specifically as you've just described it. One thing that has happened in the last several months is that with the US Airways United cochairing arrangement, there's been a significant number of co-chairing applications submitted to the US Department of Transportation for US Airways to fly what essentially would be one-stop flights to some of the destinations you're talking about on the Pacific Rim, which is something we have not had before. You could, theoretically, if you were going to go to a place like Australia or Tokyo, Hong Kong, you would might have to fly US Airways to the West Coast and then change airlines. With the co-chairing with United, you do have some additional global opportunities there. As far as linking some of the business opportunities that you see around the globe that may either already be -- the seeds have already sown or perhaps haven't even started yet, I think that is an area that we'd like to work more closely with the Commerce Director and Innovation Philadelphia to find what some of those markets might be that we should be concentrating on. And then it is a bit of a challenge sometimes to figure 2582 3/12/03 - FY '04 OPERATING BUDGET out which carrier is the one that can serve the market. And then, as I said, you have to convince them that they can make money. What we have here that's been successful on the flights we've done to Europe and the flights we've done to the Caribbean, is you have this base of passengers that fills two-thirds of a plane and they can fill up the rest of the plane with some connecting traffic that US Airways brings in from other domestic cities. We have to put together packages like that for the designations that you're talking about. And if you have some in mind, I would be very interested in trying to pursue those.
I think this is a great airport, I think we have opportunities in the City to make the City more international than it is. Certainly, New York is what it its because it's New York. But I think cities like Boston and Chicago and other cities have really done a better job than we have in making themselves more international in flavor and in business attraction and some other things. And I think, again, there's a big market outside of this country that I think we're beginning to tap in -- just today in bringing a company the 2583 3/12/03 - FY '04 OPERATING BUDGET size of Rotim to Philadelphia. I just think we can utilize our airport as a resource to do that and to facilitate those relationships back and forth. The Ireland flights are tremendous. Hopefully, that seasonable business, basically tourism business, will be able to at some point in time be able to carry business opportunities also into Shannon and Dublin where people don't have to -- they can do business in Philadelphia without having to take an hour and a half train from New York from JFK down.
We need to put people in those seats so that the service grows.
I guess the question is, what comes first, the chicken or the egg? We don't do business with these places, don't have direct flights there. Is it cause and effect or is it component parts put together to make it attractive to both come here, use the air service, and to do business in Philadelphia?
We do believe, too, that the new management team at US Airways recognizes the value of this hub and its potential for international growth. Mr. Segal has said repeatedly that he would like to model once he's out of 2584 3/12/03 - FY '04 OPERATING BUDGET bankruptcy -- and of course we've got all the international economics to contend with right now. But once they're past that point, he was instrumental in the development of Newark as a continental international hub that now clearly rivals JFK, and he would like to use some of that experience and he has some ideas about some new international destinations for Philadelphia that we are pursuing with him.
Great. Thank you very much. Thanks for the dialog. I appreciate your insight. And again, please keep up the good work.
Thank you. Are there any other questions from Members of the Committee? Any comments? (No response.)
Seeing no one, I thank you. Thank you for your patience. Thank you for your testimony. The Civic Center is next. Good afternoon. Thank you for your patience. Please proceed with your testimony. 2585 3/12/03 - FY '04 OPERATING BUDGET
President Verna, Honorable Members of City Council, good afternoon. I am James L. Coleman, Jr., the Executive Director of the Philadelphia Civic Center. As I have indicated in prior testimony, the Civic Center has not been used for conventions, trade shows, athletic events or the like since shortly after the Pennsylvania Convention Center opened. It is currently set up as a sound stage and has been the location of many films which the Philadelphia Film Office works so diligently to bring to our City. This time last year I advised you that the Film Office was about to close a deal on a TV pilot which, if successful, would result in the whole series being shot at the Civic Center and around Philadelphia. That pilot was "Hack," and the series shown on prime time television on a weekend evening has been very successful. The series enjoys the highest ratings ever for CBS in that time slot. Although we will not know for sure for another month or so, we're very optimistic that series will be renewed. While the Film Office is working on a number of other projects, it is confident of also 2586 3/12/03 - FY '04 OPERATING BUDGET landing at least one other full-length film in the very near future. In fact, that film to be produced by Lee Daniels is almost a done deal. When I wrote this it was almost a done deal. It may have been done by now.
That's a full length film. Lee Daniels is a native Philadelphian, and I might say parenthetically his father was a police officer who died in the line of duty. And he produced "Monster's Ball," which won best actress Oscar for Halle Berry. Today, I'm here to address the Civic Center's Fiscal Year 2004 Operating Budget request. The total request is for $271,427 which is $15,937 less than the current appropriation of $287,364 and $1,569 less than the Fiscal Year '03 estimated obligations. This request breaks down to $124,000 to $128,000 for personnel service; $123,649 for purchase of services and $23,650 for materials and supplies. That concludes my testimony, and I will pleased to answer any questions that you might have 2587 3/12/03 - FY '04 OPERATING BUDGET at this time.
Thank you. How many employees are at the Civic Center?
The committee will stand in recess until Monday, March the 17th at 9:30 a.m. Thank you. (Council adjourned at 4:25 p.m.) - - - 2588 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of March 12, 2003, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE OF THE WHOLE ___________________________ Lisa C. Bradley, RPR and Notary Public