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S.C. promotes air hub with $50M incentive


BY KYLE STOCK
Of The Post and Courier Staff

Hoping to help create jobs, South Carolina is dangling a $50 million carrot to any airline willing to establish a hub in Charleston or possibly elsewhere in the Palmetto State.

The money, which would be raised through a bond sale, would offset the cost of an airport expansion. To be eligible, a carrier would have to offer at least 20 departing flights a day year-round and at least 70 percent of its seats on jets that can carry 100 or more passengers.

At this point, none of the airlines serving any of the four largest airports in the state provide service at those levels. Most rely on smaller regional jets and offer fewer departures a day, including airlines such as Independence Air, a new carrier about to start service in Charleston.

Clare Morris, a spokeswoman for the state Commerce Department, and Will Folks, a spokesman for the governor's office, declined to say whether the state had any particular airline in mind when the legislation authorizing the bond sale was approved in the General Assembly and subsequently signed by Gov. Mark Sanford.

Michael Boyd, one of the country's leading airline consultants, said it was "illogical" for the state to consider building a major new terminal, unless it was in advance-stage negotiations with a carrier.

"An airport is not a hub, an airline creates a hub," Boyd said. "The thing to do is get the airline first and then do the airport."

Definitions of what constitutes a hub vary, but most airlines have between one to five airports through which they route most of their passengers.

By building a route system branching out from a centrally located airport, a carrier can more efficiently connect small and medium-sized communities that might not have enough passengers to support a number of different nonstop routes.

Some airlines have strayed from the hub approach, but they generally don't serve as many markets as traditional carriers.

The legislation authorizes the state Budget and Control Board to issue up to $50 million in general obligation bonds to construct, enlarge or renovate terminal facilities. The funds can also be used to buy land and equipment. The state will issue the money only if a carrier agrees to use the new facilities as a hub for five years, or until the debt on the project is paid off, whichever comes first.

Under the legislation, it will be left to the state Secretary of Commerce to recommend, based on any interested airline's financial health, whether the government should help finance any airport construction project.

Directors of the state's four largest airports -- in Charleston, Columbia, Greenville and Myrtle Beach -- said this week they had not heard about the legislation or any recent airline negotiations involving the Commerce Department or state lawmakers.

"I don't see anyone out there now that would qualify," said Garrett Jackson, executive director of the Greenville-Spartanburg airport.

The airport provision got through the Statehouse as part of an unrelated bill, S1075, creating incentives to revamp abandoned textile facilities.

Rep. Bobby Harrell, a Charleston Republican, tacked it onto the textile legislation April 28 -- 12 days after it passed the Senate -- in a meeting of the Ways and Means Committee, which he chairs. The amendment was rejected at first because it wasn't germane to the textile bill, but Harrell eventually got it attached.

Harrell said the amendment was passed to him by the Commerce Department, which was "thinking in terms of Charleston" when it drafted the legislation.

"When Commerce Department asks for something, we try to get them what they want," Harrell said. "I don't know that they were thinking of a particular airline, but they've always got a lot of stuff going on, so it would be best to talk to them about that."

Commerce officials, however, declined to provide specifics.

Sen. Phil Leventis, a Democrat from Sumter who sponsored the textile bill, remembers the amendment coming from the Commerce Department. But when asked whether the department was negotiating with an airline interested in developing a South Carolina hub, Leventis said, "I think they were hoping for something, but I can't be sure."

Sen. Robert Hayes, a Rock Hill Republican who also had his name on the bill, said he was not made aware of any ongoing state negotiations with airlines. Hayes did not question the need for the airport-hub amendment.

"I remember it being added in, and I'm sure if they added it, they must have had a reason," Hayes said.

The only airline that has a hub of sorts in the state is Hooters Air, launched out of Myrtle Beach in March 2003 with service to Atlanta, Baltimore and Newark. A new 14-gate, 300,000-square-foot terminal is being built in Myrtle Beach, in part to accommodate Hooters. The building will cost about $185 million, according to Bob Kemp, director of Horry County airports.

"I haven't heard about (the bill), but I would be very interested in it," Kemp said. "Hooter's is a very significant element of the expansion."

But with only 10 takeoffs a day, Hooters wouldn't qualify the Myrtle Beach airport for the state money.

Getting an airline hub would represent a big coup for the state.

South Carolina's relatively small population -- about half of either North Carolina or Georgia -- and the state's close proximity to other hub airports, such as those in Atlanta and Charlotte, would make it hard for a carrier to fill planes here.

Even the Charlotte metro area is too small to support a hub on population alone, according to consultant Boyd. US Airways' hub at the Charlotte airport stays viable because it draws a high share of business travelers.

"When I hear somebody say we're going to build a hub airport, I think, 'Why don't you build a seaport in Nebraska, that'll work well, too,' " Boyd said. "There are carriers that might want to do something, but usually they want to do it in a place where there's a lot of people, and there just aren't (enough) in South Carolina. ... And in the Carolinas, where are you going to connect people from?"

The list of hub projects that have crashed and burned since the airline industry was deregulated in 1978 is long.

Now-defunct Trans World Airlines, which declared bankruptcy three times from 1992 to 2001, shut down hubs in Kansas City and New York City along the way. Continental Airlines closed its Denver hub in the mid-1990s when it was struggling with bankruptcy. And in the past 10 years, American Airlines cut its losses on hubs in Raleigh-Durham, N.C., and Nashville, Tenn.

There are now about 30 hubs nationwide, but with competition tight in the beleaguered airline industry, most airlines have been trying to trim their operations rather than expand.

In the fall, US Airways announced plans to shut down most of its flights in and out of its Pittsburgh hub, a decision that would cut almost 17,000 jobs in the region, according to a study commissioned by the carrier. United Airlines is considering shutting down one of its five hubs as part of its bankruptcy realignment.

"It's not likely that anyone will open a new connecting hub of any size," Boyd said. "It costs too much and it's too much of a risk."


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