Pittsburgh's European Connection Will Cost the City $5 Million

(MoneyWatch)  The relatively new nonstop Delta (DAL) flight from Pittsburgh to Paris may very well be in trouble. It's not meeting its revenue targets, and that's going to cost the city a lot of money. Next year, Delta may simply pull out entirely. This shows that while cities may think they deserve transatlantic service, that's not always the case.

Pittsburgh International Airport used to be a thriving US Airways hub with nonstop service to Europe. When US Airways cut things down to size in Pittsburgh, the city wanted desperately to get its European flights back. So last year, it entered into a revenue guarantee agreement with Delta Air Lines. Delta would come in and fly to Paris and the state, along with the Allegheny Conference on Community Development, would cover any losses. If Delta thought the route had a chance of working on its own, then the guarantee was a no-brainer. Might as well give it a shot. (I should say that if they knew it was going to be bad, they should have just walked away.)

The subsidies will last until June 2011, two years into the service. For the first year, if the flight underperformed, Delta could be reimbursed with up to $5 million. It looks like they'll get the maximum. My guess is they'll have more money coming in year two.

So how bad was it? In the first 8 months of operation, they filled a mere 68 percent of seats. That's not horrendous, but it's far below the average loads that Delta has been running. Still, they say that the load factor isn't the issue, it's the revenue. I'd argue it's a combination of both.

The average fare was off 30 percent from what they had predicted. Decreases have been the norm all around the world thanks to the recession, but the pain of a 30 percent cut in average fare could have been softened by higher load factors. We're seeing that overall, airlines have been posting near record load factors, but not in Pittsburgh. That's really low.

About a fifth of all people flying to Europe took advantage of the flight, and that's not too bad. After all, if you're going beyond Paris, it's a single stop whether it's in Paris or somewhere in the US. And Paris is an awful airport. But they still could have done better.

This summer will likely decide the fate of the flight. If they are able to make marked gains, then Delta might think about keeping it around next year. More likely, however, is that Pittsburgh will go back to having no Transatlantic service. If that's the case, that should prove that's the way it should be.

[Photo via Flickr User adonis hunter / ahptical]