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US Airways & Restructuring?s  
User currently offlineB764 From United States of America, joined Nov 2001, 753 posts, RR: 1
Posted (12 years 2 months 3 weeks 6 hours ago) and read 1721 times:

Read in the Charlotte Observer today that management & the pilots have seem to come up with a plan both agree on. Highlights are the 26.5% pay-cut for pilots, the ability to fly more regional jets, a reduction of planes from 307 currently to 275, 1-3% pay raises thru 2008, a seat on the companies board and stock swaps.

A lot has been made about US's high seat miles cost. Can someone explain? With all these wage reductions by airline employees will this allow them to lower their seat miles cost? What is needed to bring it down so they can compete with the other airlines? Will this mean lower fares? Even though they can get more regional jets, how quick can they acquire them so they contribute to the bottom line? They are going to get rid of 32 jets. Any speculation as to which ones are on the way out? As wages go up, what will keep US Airways from facing these situations in the future as the employees seek compensation for making sacrifices now?

I for one would like to see US Airways succeed such as Continental. Whether Mr. Siegel is a Gordon Bethune I can't tell. Living in Charlotte and having a view on US Airways is difficult. One of the largest employers, our local economy already in trouble, non-stop service, but extremely high fares are all issues here. I would only hope with the addition of regional jets and such, that fares would come down.

10 replies: All unread, jump to last
 
User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4506 posts, RR: 34
Reply 1, posted (12 years 2 months 3 weeks 5 hours ago) and read 1706 times:

Have the pilots and management actually signed off on any plan? The latest one has the pilots granting about 80 percent of what management wants ($465 million savings, management wanted $600 million) plus a substantial stock equity stake. Management should probably sign. They won't get anything any better.

My own sense is that even with the pilots and F/A's on board, and even if the IAM agrees to something (which is not at all clear at this point), US Airways is still doomed. It's difficult to see their CASM coming down from 13 cents, I think it is now, to 9 or 9.5, it seems to me, solely on labor contracts. All of the Cartel carriers need to get to that level for long-term survival. They have a much shorter trip to get there than US has. It's not surprising that Continental, with its 9.5-cent CASM, is the only Cartel carrier to have reported a profit at any point this year.

I don't think Siegel is defaulting on MD-80 lease payments as a stunt to lay groundwork for a Chapter 11 filing. US Airways has burned through over $220 million of the $561 million they had in late March, and the fleet is mortgaged to the hilt. He's genuinely trying just to keep the carrier alive.

Also, the ATSB has probably given US's loan-guarantee filing conditional approval for political reasons. It will put off US's demise by 6-8 months or so, well past the 2002 elections. (Remember, the cash burn rate will soar during the winter) There are lots of Republican congresspeople and senators to protect--Sue Myrick and would-be Senator Liddy Dole among them--so Bush doesn't want a major carrier going down before the election.

US Airways, at anything more than a 9.5-cent CASM, can no longer make money on its existing route system with mostly narrowbodies. Siegel recognizes this as well as anyone else--that's why he wants a fleet of RJ's that's bigger than the airline's mainline fleet. But is an airline that consists mostly of its regional affliliates' RJ's really a viable airline? And would its unions allow it to get there? Almost certainly not.

Charlotte and Philadelphia have little to worry about when US goes Chapter 7, which it will before the end of 2003. Both of their hubs have strong O & D markets; PHL has sheer size, and CLT has its good financial services sector. These operations will have a chance of making money for other Cartel carriers, with their lower cost structures. PIT will almost certainly lose Cartel-network hub status.

Jim



Need a new airline paint scheme? Better call Saul! (Bass that is)
User currently offlineDelta777 From United States of America, joined Mar 2000, 658 posts, RR: 0
Reply 2, posted (12 years 2 months 3 weeks 5 hours ago) and read 1676 times:

US Airways is NOT going to go down, I know they will recover and I think most of the planes that are going to leave US will be B737s.

D E L T A 7 7 7


User currently offlineUsairways85 From United States of America, joined Nov 2001, 3413 posts, RR: 7
Reply 3, posted (12 years 2 months 3 weeks 5 hours ago) and read 1674 times:

how can usairways leave the 737's right now, they have 54 734 and 85 733. they will have a get a large amount of rj's to replace these aircraft since they aren't taking many deliveries of mainline aircraft. they need to have aircraft to take their routes before they start retiring the planes, and as of right now who knows when the first deliveries will be of the new rj's

User currently offlineDelta777 From United States of America, joined Mar 2000, 658 posts, RR: 0
Reply 4, posted (12 years 2 months 3 weeks 1 hour ago) and read 1643 times:

I don`t mean all of them... maybe they would get rid of some Dash 8s?

User currently offline762er From United States of America, joined Feb 2001, 542 posts, RR: 1
Reply 5, posted (12 years 2 months 3 weeks 1 hour ago) and read 1641 times:

DCA-ROCguy: How do you know so much detail about US Airway's financial status? Where do you get these exact numbers for how much cash US has on hand and has gone through in the month of March? Usually share holders would have this financial info, but from your tone I don't think you'd be caught dead with US Airways stock. I'm dying to know where I can find these financial reports? I also thought you might find it interesting to know that PIT on average brings in more cash than both CLT and PHL. This stat will make PIT more attractive to other carriers should US go under.

User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4506 posts, RR: 34
Reply 6, posted (12 years 2 months 3 weeks ago) and read 1620 times:

DCA-ROCguy: How do you know so much detail about US Airway's financial status? Where do you get these exact numbers for how much cash US has on hand and has gone through in the month of March? Usually share holders would have this financial info, but from your tone I don't think you'd be caught dead with US Airways stock. I'm dying to know where I can find these financial reports? I also thought you might find it interesting to know that PIT on average brings in more cash than both CLT and PHL. This stat will make PIT more attractive to other carriers should US go under.

All of these numbers are reported in a) US Airways press releases, and b) in articles from various aviation-related publications, and US Airways-city local newspapers, which are linked to this site's news page.

PIT might well bring in the most cash, but it doesn't any of the other five Cartel-network carriers' route systems. Remember, when US Airways goes under, DOJ will only allow it to be sold piecemeal--they sent a very clear message by dissing UA-US. Besides, the other Cartel carriers are in such bad financial shape post 9-11 that none of them could likely afford, or would want, US whole.

Also, there is an excess of Cartel-network mainline seat capacity in the USA right now. The traffic no longer exists to support the current capacity of 9.5-13-cent CASM seats. That capacity must drop, or the CASMs of the carriers must drop, in order for those carriers to be viable in the long term. In the short term, capacity must drop, until these carriers resolve their fundamental cost problems (most of which are related to labor cost structure and fleet complexity).

US Airways' departure from this life will offer a convenient way for the Cartel to accomplish part of this short-term task on the East Coast. PHL would fit NW's route structure nicely, and CLT would fit UA',s AA's, or CO's nicely. Both of these airports already support more higher-yield transatlantic capacity than does PIT. They could easily absorb PIT's traffic.

PIT, no matter how well it does for US (and given US' condition, it would be hard to imagine that anything other than the shuttles and regional routes are really profitable at their cost structure), is a goner in the post-US world. It's sad, because of the job disruption and relocations it will involve, and because of PIT's proud aviation history. But the economics of the broader industry suggest that's the way it will go.

Also, after US' demise, the low-fare carriers will expand in the Northeast to fill demand. Their broad success in this region indicates that demand for 7-7.5 cent CASM seat capacity is doing just fine. Expect WN to enter ROC, SYR, RIC, and probably GSO, DAY, CAE, quickly upon US's demise. Just like they bought Morris Air, and just like they jumped into CA with both feet a decade ago.

Jim



Need a new airline paint scheme? Better call Saul! (Bass that is)
User currently offlineFlashmeister From United States of America, joined Apr 2000, 2900 posts, RR: 6
Reply 7, posted (12 years 2 months 3 weeks ago) and read 1615 times:
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PIT may be making money, but I doubt that it would make sense for another major carrier to come in, for these reasons:

- First, no carrier needs PIT for coverage. CO, UA, AA, DL, NW have no use for PIT because they have hubs close by.
- Second, even if there was an airline that would move a hub, you'd have to make a case that it would be cash-positive considering costs of moving a hub, alienating a FF base, and convincing US' FF members to switch to your carrier
- Third, if a vacuum develops in PIT, watch for WN, ala MDW. Would you really want to compete with that?

These days, most network carriers are playing it safe and not making too many bold moves. I have no doubt that PIT will see service, but it will be from the AirTran, jetBlue, Frontier sector. Its days as a large network hub will, at least now, be over.


User currently offlineTzMSP From United States of America, joined Jul 2002, 137 posts, RR: 6
Reply 8, posted (12 years 2 months 2 weeks 6 days 23 hours ago) and read 1598 times:

B764:

Is there any hope that fares may fall in CLT now that ATA has entered the market, with non-stop service to MDW on its new 737-800s? According to my sources, the flights are selling quickly... Any word?

tzMSP


User currently offlineB764 From United States of America, joined Nov 2001, 753 posts, RR: 1
Reply 9, posted (12 years 2 months 2 weeks 6 days 15 hours ago) and read 1560 times:

ATA has helped. US Airways and other cartel carriers are matching ATA's fares to competing destinations. This is great to hear. I guess people are willing to make one stop on their journey than pay a ridiculous fare on US Airways. I hope ATA does well. Maybe that would convince Frontier to come to CLT.

User currently offlineFlyPNS1 From United States of America, joined Nov 1999, 6618 posts, RR: 24
Reply 10, posted (12 years 2 months 2 weeks 6 days 7 hours ago) and read 1486 times:

The TA with the pilots is being sent to the pilots right now for a vote. The big question is whether the pilots will accept it? Most of the concessions I think will go over ok...the only one that many see as a hang-up is the furlough issue. The pilots wanted a no-furlough clause however the current TA does not contain one meaning US could furlough more pilots in the future.

How low does U's CASM have to be to survive??? I think that depends on what kind of alliance they can get into. If U manages to codeshare with UAL and join Star the additional revenue would allow U to operate with a slightly higher CASM.

In addition to labor concessions, another way U can reduce CASM is to do a better job matching capacity to demand. This explains why we see U finally pulling mainline off routes like CLT-AVL where LF's were in the 30's. RJ's will also help in this matter (though of course RJ's do have a higher CASM).

Of course, it's still in doubt whether U can pull all this off in such a short amount of time. As Jim mentioned, the upcoming winter could be brutal in terms of money loss.


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