USA320Pilot
Veteran
- May 18, 2003
- 8,175
- 1,539
3 Legacy Airlines, 3 Strong Investment Rationales
US Airways Investment Rationale
US Airways is much smaller than United and Delta, but has been able to compete very effectively in spite of its small size. US Airways does not have the global scale needed to draw as many high-paying business customers as its larger competitors. However, the airline makes up for that through extreme discipline on the cost side. For example, US Airways has some of the lowest labor costs in the industry. In addition, the company does not engage in fuel hedging, which insulated it from this year's wild swings in petroleum markets.
Even more importantly, US Airways has made a commitment to concentrate its resources in the markets where it is strongest: Philadelphia, Charlotte, Phoenix, and Washington (Reagan Airport). By the middle of this year, 99% of US Airways capacity will begin or end at one of these four airports. This focus has allowed the company to post very strong revenue results in recent quarters. In December, US Airways reported a PRASM gain of 11%, far outstripping United (one of the few other carriers to report this figure on a monthly basis). Furthermore, US Airways has been one of the few airlines able to go head to head against Southwest (LUV) and win. Southwest is drastically scaling back its Philadelphia schedule this year, thus ceding a monopoly position to US Airways on several additional routes. This should further bolster revenue performance this year.
Lastly, as noted above, US Airways finally completed a long-sought slot swap agreement with Delta. The company will gain 42 slot pairs at Reagan airport, allowing it to consolidate its focus city operation there. US Airways had long been serving LaGuardia with tiny regional aircraft that were unprofitable under current jet fuel prices. By eliminating that service over the course of the next six months, and replacing it with more profitable routes from Washington, US Airways should achieve additional profit improvement this year. (The company also got a nice cash incentive of $66 million from Delta to bolster the balance sheet.)
Click here to read the entire story.
US Airways Investment Rationale
US Airways is much smaller than United and Delta, but has been able to compete very effectively in spite of its small size. US Airways does not have the global scale needed to draw as many high-paying business customers as its larger competitors. However, the airline makes up for that through extreme discipline on the cost side. For example, US Airways has some of the lowest labor costs in the industry. In addition, the company does not engage in fuel hedging, which insulated it from this year's wild swings in petroleum markets.
Even more importantly, US Airways has made a commitment to concentrate its resources in the markets where it is strongest: Philadelphia, Charlotte, Phoenix, and Washington (Reagan Airport). By the middle of this year, 99% of US Airways capacity will begin or end at one of these four airports. This focus has allowed the company to post very strong revenue results in recent quarters. In December, US Airways reported a PRASM gain of 11%, far outstripping United (one of the few other carriers to report this figure on a monthly basis). Furthermore, US Airways has been one of the few airlines able to go head to head against Southwest (LUV) and win. Southwest is drastically scaling back its Philadelphia schedule this year, thus ceding a monopoly position to US Airways on several additional routes. This should further bolster revenue performance this year.
Lastly, as noted above, US Airways finally completed a long-sought slot swap agreement with Delta. The company will gain 42 slot pairs at Reagan airport, allowing it to consolidate its focus city operation there. US Airways had long been serving LaGuardia with tiny regional aircraft that were unprofitable under current jet fuel prices. By eliminating that service over the course of the next six months, and replacing it with more profitable routes from Washington, US Airways should achieve additional profit improvement this year. (The company also got a nice cash incentive of $66 million from Delta to bolster the balance sheet.)
Click here to read the entire story.