727LOVER
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US Airways CEO Calls For Deep Cost Cuts

Tue Jul 13, 2004 2:50 am

CEO warns that without the cuts, the airline may collapse next year

Airline may break even in 2nd quarter

http://money.cnn.com/2004/07/12/news/fortune500/us_airways.dj/
Love Trumps Hate
 
wgw2707
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RE: US Airways CEO Calls For Deep Cost Cuts

Tue Jul 13, 2004 6:27 am

Interesting article. It looks like if US Airways doesn't make profits next year, they're screwed. From the sound of it though, it appears that US Airways will be able to continue going until the end of this year, at the very least, which is at least partially good news.

The overall situation is worrisome however. Over the course of this summer, if no one posts a profit, that is bad news for the entire industry, especially struggling airlines such as US Airways. If US breaks even at the end of the summer, and other airlines post profits, however, that would be very good news. If that occurs, that means that US Airways has a chance to make a profit in 2005.

The problem right now throughout the industry is fares are too low and fuel is too expensive. It's a non-sustainable situation. Fares have got to be elevated by 10-15% or more in order to cover the increased expense. Right now, every airline, especially airlines such as US Airways, should review their entire fare structure and make sure that on routes where they have a monopoly, they're charging as much as possible.

If however the airlines do post profits this summer, that means that the slight decline in fuel prices from the peak a few months back combined with the increase in traffic and isolated fare increases means that the airlines are capable of making money in this environment, and if that is the case, then US should be alright. This market is really messed up however...makes one long for the good old days of the 1990s where just about everyone was making money, and the only ones loosing money were those victimized by conditions beyond their control (such as TWA) and those severely mismanaged (such as Reeve Aleutian and Tower Air).

-WGW2707
 
9844
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RE: US Airways CEO Calls For Deep Cost Cuts

Tue Jul 13, 2004 1:44 pm

You can pencil $35 - 40 dollar oil from now on. By 2010 over $40. Demand has passed production.
 
NIKV69
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RE: US Airways CEO Calls For Deep Cost Cuts

Tue Jul 13, 2004 6:44 pm

The fat lady is beginning to warm up and for US she may be singing next year.
Hey that guy with the private jet can bail us out! Why? HE CAN AFFORD IT!
 
haveric
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RE: US Airways CEO Calls For Deep Cost Cuts

Tue Jul 13, 2004 9:57 pm

thanks for the insightful post NIK -- you've only posted that same lame line about 300 other times  Sad
 
ltbewr
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RE: US Airways CEO Calls For Deep Cost Cuts

Tue Jul 13, 2004 11:42 pm

This past spring, there were several topics either questioning or predicting the demise or bankruptcy again of US. The consensus seemed that this fall would be the crunch time for them. For a number of months there has been considerable discussion of what they are doing or not doing to reduce costs and liabilities, as well as discussion of the competitive pressuress upon them such as the entry of WN into Philadelphia. Once again here we have the calls for more cuts at US, but is it real or the 'boy who cried wolf'. Of course the much higher and probably never substantually declining oil/fuel prices along with fixed labor costs and the inability to raise fares are the major problems for airlines today. There is also the deep fear of another terror attack in the USA that could destroy most of the airlines as we know them, with US among the weakest and most likely in any case to cease ops.
 
uswyjer
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RE: US Airways CEO Calls For Deep Cost Cuts

Tue Jul 13, 2004 11:47 pm

US is my favorite carrier and will be pretty put out of place if they go under, I go to school in Charlotte but live in Hartford, I've been able to avoid connections on my trips home and want to continue to enjoy that. Also I've never had a experience, and if there have been issues they have been handled professionally, they're a good group of people and I hope the best for the carrier. At least now under Lakefield, who is known to have better relations with the unions, the negotiations will hopefully go smoother. I may be new here, but please think twice before posting the usual "it's the final nail in the coffin" comment.
 
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jfklganyc
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RE: US Airways CEO Calls For Deep Cost Cuts

Wed Jul 14, 2004 12:38 am

This is a sad day. If it is true that US needs to post a profit by 2005 to stay in business--they are screwed.
How the hell are they going to post a profit by Jan? They are losing hundreds of millions right now. They are not even close! What's the plan here?
You can't keep raping your employees either! They need a freakin' plan!

PJ
 
727LOVER
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RE: US Airways CEO Calls For Deep Cost Cuts

Wed Jul 14, 2004 2:09 am

Would the terms of the ATSB loan be voided if there is another terrorist attack against the airline industry?  Confused
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N670UW
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RE: US Airways CEO Calls For Deep Cost Cuts

Wed Jul 14, 2004 2:11 am

Would the terms of the ATSB loan be voided if there is another terrorist attack against the airline industry?

As of now, probably not. I imagine it would require a decision of Congress following the attack.



R
 
MidnightMike
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RE: US Airways CEO Calls For Deep Cost Cuts

Wed Jul 14, 2004 2:13 am


WGW2707

US Air can raise fares anytime they want, there is nothing stopping them from raising fares.
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Okie
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RE: US Airways CEO Calls For Deep Cost Cuts

Wed Jul 14, 2004 2:22 am

Well if you look at the link to the money.com page you will see another story about B6 & WN cutting ticket prices for the fall travel period.

That sounds like more salt in the wounds.

Okie
 
StevenUhl777
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RE: US Airways CEO Calls For Deep Cost Cuts

Wed Jul 14, 2004 2:29 am

I think 9844 is right...we might see oil at $35/barrell, but that will be the new cheap price, so to speak. I believe UAL has assumed this price range for the rest of the year when they report to the court, and when they were applying for the ATSB loan.

I hope things work out for US. I read on this website that Dr. Bronner would do it whatever it took to keep US going, but at what cost, and where would he draw the line?

And the winner for best actress is....REESE WITHERSPOON for 'Walk the Line'!!!!!!!!
 
ScottB
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RE: US Airways CEO Calls For Deep Cost Cuts

Wed Jul 14, 2004 4:39 am

Much of US Airways' predicament is entirely of its own doing, though! It appears that management's "strategy" is based primarily on getting the lowest pay rates in the industry -- below Southwest, jetBlue, AirTran, etc. -- to help balance out their high average seniority due to years of shrinking the airline. And the airline's management has pursued very questionable tactics in dealing with its unions.

For example, the company is trying to outsource the heavy maintenance of its Airbus narrowbodies, in what the mechanics view as a violation of their collective bargaining agreement. Given that the Airbus narrowbodies will, in future, be the vast majority of the fleet, it's clear that the company is trying to eliminate most of its mechanics from the payroll. Now, how likely is it that the mechanics would vote to grant concessions to a management team that doesn't even seem to be interested in honoring the terms of the existing contract? Similarly, it's been reported that the company has become more heavy-handed in its dealings with the flight attendants; again, how likely is it that employees who see a near-complete lack of respect by management will vote to grant concessions to that same management team?

What I find baffling as well is that US Airways management claims that it will find $700 million in annual cost savings/revenue improvements by restructuring contracts, streamlining operations (like depeaking PHL, strengthening focus operations at BOS/LGA/DCA), fare restructuring, etc. If they can improve the bottom line by nearly $200 million per quarter, I simply cannot see why this wasn't done six months or longer ago! "GoFares" have largely been a knee-jerk competitive response to WN in Philadelphia and Independence Air in Washington; where's the innovation here? If GoFares are the future of US Airways, why are they noticeably absent in PIT and CLT? Why hasn't US introduced GoFares on potential WN routes from PHL (CLE, BHM, BDL, BUF, ALB, JAN, STL, MCI, BNA, IND, SDF, CMH, OMA, ORF, JAX, SEA, etc.) in order to deter WN from adding service to those places in the future? Why is it that US is willing to sell a connecting itinerary from BDL, ALB, or BUF to MCO via PHL for $98 round-trip, and yet the lowest available BDL-PHL fare (on the same flights!) is $302 round-trip? Wouldn't it make more sense to sell BDL-PHL for $98 round-trip and simply not bother with eating losses between BDL and MCO?

At PHL, US Airways has 19 mainline departures scheduled between 1515 and 1550, with a whopping two scheduled between 1555 and 1725 (to BOS, which is hourly and PIT, which is a hub). There are 32 scheduled between 1730 and 1815, and then 5 between 1820 and 1950. Does this appear to be a de-peaked hub?

If the market opportunities for the focus cities at BOS, LGA, and DCA are so attractive, why hasn't US Airways moved to exploit them? If Independence thinks that it can make money with high-cost RJ's at reasonable fares from IAD, why can't US Airways prosper with slightly higher fares (on lower-CASM mainline jets) from DCA?

It's not just the cost of fuel and poor yields that are the problem; Continental has faced the same conditions with substantially more direct competition from LCC's and fairly heavy debt load, and yet seems to have not taken the "beatings will continue until morale improves" approach with its organized labor groups. They've had no qualms about attacking employee pay and retirement and yet have been perfectly willing to honor tens of millions of dollars in severance and retirement packages for upper management. What kind of message does that send?

"I read on this website that Dr. Bronner would do it whatever it took to keep US going..."

Don't believe everything you read on the web. He's also said that he'd be willing to shut the whole thing down without getting the concessions that management has requested. Twelve months ago, most analysts believed the network carriers would finally show a profit this year. Bronner's not going to continue throwing money into a pit in the hope that he might someday recover his investment. Remember that he has other ways of recouping at least part of his capital investment in UAIR -- leases that the company kept post-bankruptcy and income from the ATSB-guaranteed loans.
 
Lono
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RE: US Airways CEO Calls For Deep Cost Cuts

Wed Jul 14, 2004 5:11 am

I remember news like this before the end of EA....
Many said EA could never go under....
US has been very inefficient for many years (Worst of the legacies anyway)... The came out of bankruptcy protection too soon and when they came out they were still the most expensive of the legacies ....
I hope they make it... but we have seen this before...
Wally Bird Ruled the Skys!
 
transPac
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RE: US Airways CEO Calls For Deep Cost Cuts

Wed Jul 14, 2004 3:43 pm

While I'm going to miss their slick livery more than their service (not the best experiences, sorry), it's still sad to see any proud legacy go under. The management system at US has been a cancer that has mutated almost every other part of the company. Either they will defeat it and be a stronger carrier at the end of next year or it will completley consume them, as it appears to be doing now. The most alarming thing is, the same cancer is present in varying degrees at DL, UA and AA as well. US is simply a more severe case of a very similar problem. I hope US pulls through and becomes a revitalized carrier, like Continental has. I know CO isn't a model airline either but they lived to fight another decade and have made comparative leaps and bounds. Best wishes to US and their employees, and for that matter all the legacy carriers!
 
NIKV69
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RE: US Airways CEO Calls For Deep Cost Cuts

Wed Jul 14, 2004 9:05 pm

Haveric,

I see you are still bitter at the fact US is in a downward spiral. This will take probably another year before they finally go under since they are grasping at straws to stay alive and prolong the inevitable. I still see US as a second rate carrier with mediocre service and fleet that can't possibly compete with B6 and WN as well as CO and the rest. Good luck the rest of the way.
Hey that guy with the private jet can bail us out! Why? HE CAN AFFORD IT!
 
haveric
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RE: US Airways CEO Calls For Deep Cost Cuts

Thu Jul 15, 2004 1:12 am

NO, it's that I'm bitter about the armchair experts on this website who have predicted the demise of US Airways about 100x since 2001. Unfortunately, none of them ever admit they are wrong. Rather, they just push back their "expert prediction" by a few months as US continues to surive.

IIRC, NIK -- you told people not to book tickets on US this summer, as they wouldn't even survive a few months of competition with WN at PHL. I didn't see you admit you were wrong, did I???
 
masseybrown
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RE: US Airways CEO Calls For Deep Cost Cuts

Thu Jul 15, 2004 1:45 am

The old management was crying last December that without cuts in 60-90 days it was all over. The new management started saying the same thing in March and reiterating it regularly. Now here comes August and fall schedule time, and STILL nothing happens.

Management is training the unions not to believe anything they say. Very bad policy.
 
NIKV69
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RE: US Airways CEO Calls For Deep Cost Cuts

Thu Jul 15, 2004 9:12 pm

Haveric,

First of all, the summer has just got under way there and the effect of WN being in Philly is not going to be felt right away. I have not predicted their demise since 2001, just this year when it has become painfully clear that WN and B6 is going to set the pace for the next 10 years in the sky. With carriers like AA and CO surviving as well. US is barely surviving and is just operating under losses day in and day out with no way to pay their debt or compete with the fares, service or equipment of the other carriers. The days of US charging unbelievably high fares is over. Face it.
Hey that guy with the private jet can bail us out! Why? HE CAN AFFORD IT!