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What Makes US Air's Structure So Bad?  
User currently offlineGsoflyer From United States of America, joined May 2001, 1093 posts, RR: 1
Posted (12 years 8 months 4 days ago) and read 1794 times:

I read and keep reading about how US Air is losing money like there is no tomorrow. And How their infrastructure cost is very high.

1) What makes their infrastructure costly?

2) If US Air is in throuble, why are they one of the airlines that pay their emplyees the most money?

3) What would happen to east coast travel is US Air went under? US Air serves alot of cities here. And alot of their flights are quite packed with business people from most of the destinations.

4) Why do they continue to use Fokker F100s when (again, from what I've read) they are one of the most costly planes to maintain in terms of both fuel efficiency and maintanence costs.

Anyone care to help me out?

13 replies: All unread, jump to last
 
User currently offlineExusair From United States of America, joined Sep 2000, 684 posts, RR: 0
Reply 1, posted (12 years 8 months 4 days ago) and read 1753 times:

When you look at their labor costs, it is spread out over seat miles flown by the carrier. Since USAirways is predominately an intra east coast carrier, they do not have a long haul route structure like UA or AA. Hence a high seat mile cost.

US does not contract out their operations, even in smaller cities. US employees work in every aspect of operations (below and above wing).

The Fokkers are paid for. They were the first to operate the type in the US. They are an efficient a/c but their fleet is crowded with 100 seat a/c types.

What would happen if US went under? One of the crown jewels of the operation is the USAir Express network of carriers. They are responsible for the deep penetration in the northeast and Mid-Atlantic states of the USAirways brand. This network would likely be picked up by competitors.

The hubs would likely be picked up by other majors. LGA, DCA, BOS operations would go to the highest bidders.

US failure would be a boon to carries like CO,DL and FL since these carriers have extensive operations along the eastern seaboard.


User currently offlineCiro From Brazil, joined Aug 1999, 662 posts, RR: 6
Reply 2, posted (12 years 8 months 3 days 23 hours ago) and read 1739 times:

Well let me try...

1. US Airways flies mainly short / medium haul flights, with aircraft that were designed to operate mainly in medium haul routes. The taking off burns alot more fuel and US Airways do it more frequently with these larger jets than other carriers. Also, their planes require more maintanance, due to the higher number of landings. Such costs are harder to be diluted.

Other major points regarding costs are the high-price rents in the East Coast, the operation of so many small hubs, the seniority of its employees and even the cooler weather, if compared to more Weastern regions, which increase facility bills and helps to shut-down airports during the Winter time.


2. I am not sure, but the higher wages are probably because of the seniority and union deals that were inhereted from past mergers.


3. US Airways´route network would probably be divided among other major carriers. I don´t think it would be such a big problem to be overcomed in the medium run. Fortunately, the Airline Industry is very flexible when there is a need to alocate supply to the market!

4. As long as I know, the Fokker F-100 is one of the best jets of its generation in terms of efficency. It is cheap to be bought, requires little maintanance and has low break-even points. It is the ideal working-horse for airlines which need high-frequency, short / medium haul flights. However, US Airways will certainly switch the F100´s, if economic studies prove the carrier can have higher rates of return, if it invest in another type of plane.


I hope that helps a bit!



The fastest way to become a millionaire in the airline business is to start as a billionaire.
User currently offlineKdca4life From United States of America, joined Sep 2001, 55 posts, RR: 0
Reply 3, posted (12 years 8 months 3 days 22 hours ago) and read 1698 times:

When you're flying a 737 from PIT to EWR, then you know you've got a problem. That kind of route is most efficiently flown by an RJ. Their scope clause keeps them from acquiring more, but I think they are working on this.

User currently offlineGsoflyer From United States of America, joined May 2001, 1093 posts, RR: 1
Reply 4, posted (12 years 8 months 3 days 21 hours ago) and read 1683 times:

OK,
Let me ask this, and I've wondered this from time to time.

Is it cheaper for an airline to have RJs and make more flights across medium/short haul routes? Or, is it cheaper to use larger planes and fewer flights?

The reason I ask is, US Air does alot of F100 and 737 flying from areas less than 200 miles from it's hubs (RDU/GSO/CAE/CHS from CLT for just a few examples). So, would it be cheaper to run many RJs or Turbo-Props to these destinations, but run them mroe frequently?

Any opinions?


User currently offlineContinentalEWR From United States of America, joined May 2000, 3762 posts, RR: 13
Reply 5, posted (12 years 8 months 3 days 20 hours ago) and read 1659 times:

The above analysis is very good. To make a long story very short, US Airways has never addressed its stubbornly high operating costs. For several years, the carrier was being groomed for a merger or a takeover that never materialized. Prior to that, it never harmonized labor rules across Piedmont, PSA, Allegheny, and the original US Air. It operated a hodge-podge fleet, though new, consisted of too many aircraft types with varying rules, like the DC9, MD80, B737-200/300/400, 757, 767, A319, A320, A321, A330, F100, F28, and Boeing 727!

The 727, 737-200, DC9-30, and MD80 fleets are now gone.

60% of US Airways' flights are short duration in markets that make little money, connecting places like Syracuse, Hartford, and Bangor with a gateway to the West Coast and Europe, such as PIT, PHL, and CLT. US Airways has many flights that operate transcontinental, but it is not a truly national carrier.

It operates from some of the most expensive airports in the nation, which prior to the recession and 9/11 were chronically clogged, like LGA, BOS, and DCA.

Poor management.

ContinentalEWR


User currently offlineJohn From United States of America, joined Sep 1999, 1374 posts, RR: 5
Reply 6, posted (12 years 8 months 3 days 20 hours ago) and read 1654 times:

The F100s, 40 of them, will be parked effective with the April 8th schedule change, along with the remaining MD80 fleet, 31 aircraft. With remaining Airbus deliveries deferred, well, I think everyone gets the picture. USAirways is rightsizing (shrinking) very dramatically. Kinda brings me back to 1991..dejavu...If the RJ issue can ever be resolved, I'd like to know where the 60 planes for mainline operations will come from? They don't build these planes on an overnight assembly line. I'm sure Mr. Wolf has something up his sleeve. It should be an interesting year, but the losses are staggering! As a USAirways employee, hanging on by a thread, I don't, at this point, have much confidence in the future of my career.

User currently offlineGsoflyer From United States of America, joined May 2001, 1093 posts, RR: 1
Reply 7, posted (12 years 8 months 3 days 20 hours ago) and read 1641 times:

OK,

Last question  Smile

This is the first time I have heard of the April 9th schedule change. If they are parking the F100s, what happens to the cities they served? Are they supposed to be losing US Air flights totally or will they be getting different jets for jet service?


User currently offlineAA_Cam From , joined Dec 1969, posts, RR:
Reply 8, posted (12 years 8 months 3 days 20 hours ago) and read 1630 times:

The question you were asking before, depends on teh spacific aircraft being used, and thier efficency and cost of oporation, it also depends on how much and when people are willing to buy airline tickets.

Hope i helped
Cam


User currently offlineHoffa From , joined Dec 1969, posts, RR:
Reply 9, posted (12 years 8 months 3 days 19 hours ago) and read 1624 times:


It operates from some of the most expensive airports in the nation, which prior to the recession and 9/11 were chronically clogged, like LGA, BOS, and DCA.

Poor management.


I really have to disagree with you there. These airports are chronically clogged for a reason, namely people and more importantly business people and politicians are willing to pay for the privilege of using them, and using them frequently and consistently.

U's real strength is the point to point, niche flying they do rather than pure hub and spoke connections that most other airlines use exclusively. Example: From DCA (prior to 9/11) U flew to: MCI, BDL, HSV, IND, MSY, PBI, PVD, RDU, TPA, CRW, CAE, DAY, JAX, TYS, SDF, BNA, ORF, ALB, ABE, BWI, BHM, BUF, BTV, GSO, GSP, MHT, MGW, HVN, PWM, ROC, SAV, SYR, RIC, ROA, SBY, and HPN, ATL, CMH in addition to PIT/CLT/PHL and the hourly shuttle to BOS and LGA. No other airline even comes close.

Regarding the F100's---they allow US to make a presence in markets where other airlines are flying props or RJ's by offering a true 2-class service in a real plane. Markets like Erie, PA or TRI for example.





User currently offlineJohn From United States of America, joined Sep 1999, 1374 posts, RR: 5
Reply 10, posted (12 years 8 months 3 days 18 hours ago) and read 1592 times:

Just for your information, ERI and TRI are now Express markets.

User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4506 posts, RR: 33
Reply 11, posted (12 years 8 months 3 days 18 hours ago) and read 1589 times:

Some more thoughts on US's high operating costs:

US Airways, through mergers as noted above, became the dominant regional carrier in the Northeast during the 1980's and 1990's. They didn't address their excessively high labor costs and hodgepodge fleet because *they didn't have to.* The other five Cartel carriers didn't want the markets they served--Rochester, Syracuse, Providence, and the numerous small markets like Binghamton, Tri Cities, Asheville and Burlington.

As noted above, it's expensive to operate in the Northeast if you don't sit on your costs constantly and ruthlessly. But US Airways developed monopolies on many routes, and could gouge mercilessly. If people wanted to fly, US Airways and USX were their choice. If they didn't like it, screw them.

1980's CEO Edwin Colodny and early 1990's CEO Seth Schofield both came up through the comfy, high-cost Allegheny-USAir culture. They didn't have the guts to spend and rationalize the fleet in the late 1980's when the economy and yields were good. They didn't have the guts to confront their unions about the new economic situation that came with deregulation. So the untenably high cost structure remained into the 1990's.

But the laws of economics were invading the Northeast while Colodny and Schofield had their heads in the sand, or more accurately, up their poop chutes. Southwest opened a hub at BWI in 1993....ValuJet and then AirTran blossomed at Atlanta.....and this new creature called JetBlue came out of the woodwork in 2000.

People wanted low fares and quality service, and these carriers offered them. They started taking market share from US Airways. Steve Wolf's 1997 concessionary pacts, and Airbus order, were too little too late. The other five Cartel carriers have large networks in less costly parts of the country to operate, and their CSM's aren't anywhere near as stratospheric as US's. So they will survive in the new deregulation-molded economic order.

US Airways, whose service quality and coverage of the Northeast leaves the rest of the Cartel (except CO) in the dust, is a terminal case. The unions and management are equally determined to destroy the airline, and the airline will die. Within two years.

What will happen to the cities? AirTran, JetBlue, and Southwest are moving strongly into the medium-size cities already. They see the handwriting on the wall. AirTran's new ROC-BWI service in March is only an indication of things to come. I don't think the Cartel will try to take much of US's market share in these markets. Their cost structures won't allow a high enough profit margin.

The small cities will lose much of their air service, but United and Continental will probably replace some of it. UA and CO have well-developed hubs in the Northeast. DL will probably cover the Southeast. As noted above, the nonstop commuter routes to DCA, LGA, and BOS will be profitably operated by someone else.

Jim



Need a new airline paint scheme? Better call Saul! (Bass that is)
User currently offlineJetBlueRules From , joined Dec 1969, posts, RR:
Reply 12, posted (12 years 8 months 3 days 14 hours ago) and read 1554 times:

Read my post under "The Futur of CLT"

By the way: Ed Colodny, Stephen Wolf & Rakesh Gangwal are all incredible jackasses.

jetBlueRules Big thumbs up


User currently offlineHoffa From , joined Dec 1969, posts, RR:
Reply 13, posted (12 years 8 months 3 days 8 hours ago) and read 1519 times:

Surely U must be making a killing on those "captive market" areas like Salisbury, MD; Manassas, VA, etc?

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