I'd strongly advise you to NOT purchase "cheap" US Airways stock; the bankruptcy restructuring plan includes the cancellation of ALL
pre-bankruptcy US Airways shares. This means that all those $0.11 shares will be worth $0.00 whether US Airways successfully emerges or liquidates.
You're right, most of the traditional network carriers DID stick it to the passengers in uncompetitive markets (I don't say "second-tier" because they've gouged hub market passengers while keeping fares more reasonable to places like BHM
, for example). And Jim has been critical of that practice as well (the amusing Cosa Nostra references come to mind). But I think it's perfectly understandable that he'd enjoy seeing US Airways get its come-uppance; after all, the airline expected him and other people in upstate NY to suck it up for well over a decade. And as the saying goes, payback is a b____. I think it's even more infuriating for folks in upstate NY that USAir's purchase of Piedmont was aimed more at eliminating competition in the Northeast (remember PI
's hub at SYR
) than at providing enhanced service. And US Airways continued to finance a broken business model on the backs of travelers in the East. They were unable/unwilling to fix their cost structure, which meant withdrawal from markets where they simply could not compete and higher fares in the markets they still controlled.
It's not that the LCC's business model doesn't need high prices; it's that their business model is built around charging low to moderate prices. They actually sell (as a percentage) a lot more "full-fare" tickets than the network carriers, simply because the price of that "full-fare" ticket is so reasonable. If I want to fly from Dallas to Houston today, WN
wants $91 for the airfare. If I want to fly from Boston to Philadelphia today, US wants $385 for the airfare. Even on a route where WN
faces little or no competition (like FLL
), they keep fares reasonable.
US Airways might be better able to compete if they manage to emerge from bankruptcy with a significantly lowered cost structure. But they're still going to be stuck with an inefficient route network and ASM costs above the LCC's, even if CASM drops to 9-9.5 cents.