Sigh. Where do I start?
"how much will be gained by losing US. US does not in no means dominate the United States skies. If I'm correct, they only have about a 5% market share."
Probably closer to 7 or 8% in terms of RPM's or ASM's, and a bit higher for passengers since US's stage length is lower than the industry average. But that is largely immaterial. The exit of US Airways from the market is probably not sufficient to cure the ills of the other legacy carriers. But it would certainly help the other legacy carriers with significant market overlap -- Delta, Continental, and American. It helps Northwest a bit less, and United's gains in the WAS market would be tempered by the loss of revenue from the US codeshare.
The question isn't really "which one" has to go out of business -- but rather how much consolidation there will have to be among the legacy carriers. Whether that happens due to mergers or liquidations is, of course, unknown. But given the limited financial resources of the legacies and the poor record of mergers in the industry, it looks like one or more liquidations will be the likely course. As the weakest and smallest of the "Big Six" legacies, it looks most probable that US will be the first to go.
"Who in his right mind wouldn't pick up some of US flights. They control routes that would even make a prime TWA or Pan Am jealous. The Northeast and Caribbean flights they have would make any airline CEO cry if they were given a chance to own them."
Of course some of the routes will be picked up. But neither PHL
, nor PIT
would be a hub. CLT
's air service would probably be a lot more like RDU
's after a US liquidation. No one is going to build a hub at PHL
with Southwest having 100+ daily flights (likely in the wake of US shutting down) But US's capacity would, for the most part, go unreplaced. ATL
, and CVG
would all be able to handle the passengers who used to fly US. You'd see some point-to-point at LGA
added to replace US's flights, but that's about it. I doubt another legacy would take over the Shuttle these days given that it no longer is profitable.
And I strongly doubt that the Northeast and Caribbean flights will continue to be terribly attractive as the LCC's continue to expand into those markets as well.
"US, like all legacy carriers, had thought itself to be immune from LCC. That was until 9-11."
Bzzzzzt. Wrong. Read this:
As discussed in greater detail in "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the
dramatic expansion of low fare competitive service in many of
USAir's markets in the eastern U.S. during the first quarter of
1994 and USAir's competitive response in February 1994 by reducing
its fares up to 70 percent in those markets and other affected
markets in order to preserve its market share led the Company to
announce that it expected to experience greater losses in 1994 than
it experienced in 1993.
USAir believes that Southwest, Continental or other low cost
carriers with a significant cost advantage over USAir likely will
expand their operations to additional markets. For example, in
December 1993, Southwest completed its acquisition of Morris Air,
a regional air carrier with operations concentrated in the western
U.S. This acquisition could enable Southwest to divert resources
to expand its operations in the eastern U.S. Furthermore, media
reports indicate that Southwest has entered into a long-term
agreement for the use of four additional gates at BWI
, where it
currently operates from two gates. On March 4, 1994, Continental
further escalated prospective competition by announcing that it
will further reduce operations at its Denver, Colorado hub and
establish a flight crew base at Greensboro, North Carolina. These
measures are likely to increase losses at USAir because they could
enable Continental, which has significantly lower costs than USAir,
to expand further its high frequency, low fare service described
above in additional short-haul markets served by USAir with
substantial detriment to USAir. In addition, other low cost
carriers may enter other USAir markets. For example, America West
Airlines ("America West") announced on February 15, 1994 that it
will commence service on April 18, 1994 between Columbus, Ohio
where it operates a hub and Philadelphia, where USAir has a hub
operation. Other carriers, including some of the larger carriers,
have also indicated their intent to develop similar low-fare short-
These statements were all written eleven years ago -- in USAir Group's 1993 annual report. And even then, low-cost carrier expansion (Southwest, Continental Lite) was causing losses at US. Management knew
that LCC expansion would cause problems -- but they never had an effective strategy to repond. It was obvious by the time Southwest entered Florida and added BWI
(1995-1996) that they'd have an ever-increasing impact on the East Coast. Metrojet was a joke.
"But then comes the second problem, fuel. Fuel prices galloped to record highs..."
Nope. Record-high fuel prices are a relatively recent event; i.e. in the past year. And the low energy prices of the late 1990's were an anomaly resulting from lowered demand in Asia after the financial crises there. Everyone has to buy fuel, though the LCC's have been the only ones with effective hedging strategies. Most of the LCC's were under no pressure to raise prices since they had planned better for potentially high oil prices.
"Well, if fuel prices were so high, and fares were so low, legacy carriers naturally started to bleed money..."
Nope. US Airways was already losing money in 1999. The company posted operating losses of over $100 million in each of the last two quarters of 1999 and lost money in all quarters of 2000 save the second. The company was already starting to bleed money even before 9/11; this is why they were the first legacy carrier forced to seek bankruptcy protection.
"At about this time, US was in a crises. They had to act fast, or they would join many other greats in the graveyard. So they took a risk. They decided to do what many thought would be impossible. They would become a LCC."
False. US Airways did not plan to "become a LCC" in its first reorganization. The business plan upon emergence from the first Chapter 11 was basically the same as the old one -- just with fewer mainline aircraft and more RJ
's. Southwest's entry into PHL
and the continued expansion of other LCC's in the East deep-sixed that half-assed plan. GoFares in PHL
were a blatant response to Southwest's fares and choice of non-stop markets given how they matched Southwest exactly on price and destinations. Go ahead and try to find a PHL
GoFare for tomorrow -- it's at least $350 each way.
"They have lowered their cost dramatically, they have gone through a massive expansion (after a MASSIVE downsizing), and is in the current process of implementing low fares systemwide (and no, DL
was not the first to do this)."
The only costs they have lowered "dramatically" have been their non-management labor costs. The company's non-labor, non-fuel operating costs were down a measly 1% in the fourth quarter of 2004 versus 2003. There is no "massive expansion" coming aside from, yep, you guessed it, more RJ
's. Management's guidance is that mainline ASM's will increase by 3-4% this year over 2004.
Let me ask you a question. Delta tested SimpliFares at CVG
starting in mid-August of 2004 and rolled them out across a far larger system in about 4.5 months. If Delta can offer rationalized fares systemwide within a few months, why has it taken US Airways this long to "implement low fares systemwide?" Delta's management (like America West's) gets credit here for taking action, not talking action. "Systemwide GoFares" are still just talk.
"Plain and simple, whether you love them or not, US has accomplished some amazing feats."
Pretty much the only amazing feats I can see are hammering the employees with three rounds of concessions without taking a strike and sticking the taxpayer with billions of dollars in underfunded pensions.
"I am convinced that no other airline employee's in history have give up so much for the good of the airline as US employee's have."
That doesn't matter a bit. If management can't run the airline effectively even with the lowest pay rates in the industry, US Airways does need to go out of business.