Bloomberg: US Airways Talks With Potential Bidders, CEO Says

[chipmunn]

US Airways Talks With Potential Bidders, CEO Says
New York, Nov. 13 (Bloomberg) -- US Airways Group Inc., which filed for bankruptcy protection in August, has talked with private equity firms interested in bidding for an ownership stake in the airline, Chief Executive Officer David Siegel said.
The Retirement Systems of Alabama state pension fund, which offered $240 million for a 38 percent stake in the seventh-largest U.S. airline, still is the front-runner, he told reporters after speaking in New York to the Wings Club, an aviation advocacy group.
Siegel wouldn''t identify the companies US Airways talked to or say whether any bids have been made. The bid deadline in the bankruptcy process is Friday. Siegel declined to comment on whether Texas Pacific Group, which offered $200 million and was outbid by the Alabama fund, might return with another offer.
US Airways won approval last week for $500 million in financing from the Alabama fund, led by David Bronner, for its bankruptcy reorganization. The carrier filed for Chapter 11 protection from creditors after losses caused by last year''s Sept. 11 terrorist attacks, the U.S. recession and the collapse of a proposed sale to United Airlines parent UAL Corp. In this year''s first nine months, US Airways had losses of $852 million.
As part of the Arlington, Virginia-based carrier''s plan to restructure more than $10.7 billion of debt and return to profitability, US Airways has eliminated more than 2,300 jobs and is trying to cut annual costs by as much as $1.6 billion.
There may be more employee layoffs, Siegel said today. He declined to elaborate.
We can''t control the revenue environment, Siegel said. The only thing we can do to survive is to size our cost structure responsibly. That''s what we''re doing.
US Airways may replace larger aircraft with smaller so-called regional jets if the air-travel slump keeps up or a war with Iraq occurs, Siegel said. For now, the carrier intends to keep its fleet at 279 larger planes, he said. Siegel said he doesn''t expect an airline-industry recovery until 2004.

 

[AOG-N-IT]

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On 11/14/2002 1:56:34 AM N628AU wrote:

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No, it cannot be controlled, but it can be primed. America West simplified their fare structure and as a result have greatly improved both boardings and revenue. We continue to use the same revenue model of fly leisure travellers well below cost, then bellyache that yields are poor and business travellers are not flying. The old cost models do not work, and it is painfully obvious the revenue models are just as broken if not more. Take $200 R/T coast to coast fares and pitch them right in the trash with the $2400 fares. The former does not work for us, and the latter does not work for our customers. Go with something like $350, $500, $750, and $1000 depending on what restrictions you wish to place and time of purchase. This should raise overall yields, which is whole name of the game isn't it?
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Not a likely scenario!! That would take projective and adaptive thinking.

It's painfully clear that CUT CUT CUT or Take Take Take is all this company knows how to do anymore. The Employee's are thought of , as the root of all evil...but in the same token always the parachute to break the fall of those that are failing to lead us in an intelligent fashion and direction.

It's also painfully obvious that WE as an airline are not getting any appreciable value from this so-called Talent Pool of Bonus Babies we are harboring at the remainder of our collective expense.

Face it!! We have a One Trick Pony here...and it's just a matter of time before that Pony ends up in the glue pot!! The only thing that is going to change that...is a change to actual thinking from the top on down.

It's the business model that's broken...We are not poised to compete..muchless survive! Until the manner in which we operate and react to the changes ..and fill the need the flying public is demanding of us.
The old and current school of thought in CCY is what's broken...Not the Employee's or it's assets....Note what has delivered in terms of performance and concessions...and note what has failed to adapt to the changes and is asking more from the working class! I think we should be getting a rebate or a refund on defective goods from the leaders this time.

Hey CCY..Time for a new Tea Bag...those leaves in the current cup are beyond readable anymore!!

 

[N628AU]

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On 11/14/2002 1209 AM chipmunn wrote:

There may be more employee layoffs, Siegel said today. He declined to elaborate.


We can't control the revenue environment, Siegel said. The only thing we can do to survive is to size our cost structure responsibly. That's what we're doing.


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[/blockquote]

No, it cannot be controlled, but it can be primed. America West simplified their fare structure and as a result have greatly improved both boardings and revenue. We continue to use the same revenue model of fly leisure travellers well below cost, then bellyache that yields are poor and business travellers are not flying. The old cost models do not work, and it is painfully obvious the revenue models are just as broken if not more. Take $200 R/T coast to coast fares and pitch them right in the trash with the $2400 fares. The former does not work for us, and the latter does not work for our customers. Go with something like $350, $500, $750, and $1000 depending on what restrictions you wish to place and time of purchase. This should raise overall yields, which is whole name of the game isn't it?

 

[delldude]

boyz from lufthansa in PIT FAB for tour and lunch,then booga booga later(11/14)3rd party promo for all.planning advises CF-6 originally destined for CLT to come to PIT FAB as front runner for engine shop relocation.arrival date DEC.16.chk you records for this.
krauts supposedly look for 50% stake in PIT TEST CELL.
unfortuneately look like MECCArules..

 

[OldpropGuy]

[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN style=FONT-SIZE: 12pt; COLOR: #0b3053; FONT-FAMILY: Arial]AOG-N-IT, with an amazing display of wisdom, posted:[?xml:namespace prefix = o ns = urn:schemas-microsoft-comfficeffice /][o][/o][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN style=FONT-SIZE: 9pt; COLOR: #0b3053; FONT-FAMILY: Arial][o] [/o][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 12pt][FONT face=Arial]It's the business model that's broken...We are not poised to compete, much less survive! Until the manner in which we operate and react to the changes..and fill the need the flying public is demanding of us. The old and current school of thought in CCY is what's broken...Not the Employee's or it's assets....Note what has delivered in terms of performance and concessions...and note what has failed to adapt to the changes and is asking more from the working class! I think we should be getting a rebate or a refund on defective goods from the leaders this time.[o][/o][/FONT][/SPAN][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 12pt][o][FONT face=Arial] [/FONT][/o][/SPAN][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][B style=mso-bidi-font-weight: normal][SPAN style=FONT-SIZE: 14pt; FONT-FAMILY: 'Times New Roman']I say:[o][/o][/SPAN][/B][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][B style=mso-bidi-font-weight: normal][SPAN style=FONT-SIZE: 14pt; FONT-FAMILY: 'Times New Roman']Dave, are you paying attention here[/SPAN][/B][/SPAN][SPAN class=bodyfont1][B style=mso-bidi-font-weight: normal][SPAN style=FONT-SIZE: 14pt; FONT-FAMILY: 'Times New Roman']?[/SPAN][/B][/SPAN][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 14pt; FONT-FAMILY: 'Times New Roman'] [o][/o][/SPAN][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'][o] [/o][/SPAN][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 13pt; FONT-FAMILY: 'Times New Roman']Mr. Siegel and the current management team (the much desired, got to have a six million dollar bonus to stay, group) do not appear to be doing so well. The flawed, shrink into profitability, blame it all on 9-11, the economy, and labor, business plan is not working. We all know that U was bleeding at an unendurable rate prior to 9-11. Some progress has been made as labor groups have been convinced to make concessions, and some of the old outrageous aircraft leases and debts were eliminated. [STRONG]But the required restructuring goal is still far out of reach under the current plan.[/STRONG] It’s obvious that the solution is not to shrink operations until the expenses are at the desired level, as the revenues will also shrink. Very simply stated, if we park everything we will save a fortune, but we will also make nothing.[o][/o][/SPAN][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 13pt; FONT-FAMILY: 'Times New Roman'][o] [/o][/SPAN][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 13pt; FONT-FAMILY: 'Times New Roman']Now, it’s time for some thinking outside the current paradigm. Maybe get a little creative with current fare structure. I learned long ago that people must have a reason to deal with us, instead of someone else. Let’s give them something. Maybe eliminating the atrocious business fares could be a beginning. Purging the penny-pinching leisure fares should help offset the loss there. If we fill the seats with profitable, but not overpriced customers, we will not need to give away the economy seats as is currently done. We will not need to try to salvage a miniscule amount of revenue which is lost flying with a seat which was previously empty. There must be a middle ground which is acceptable to the flying public and also profitable for us. Obviously, the present arrangement does not work.[o][/o][/SPAN][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 13pt; FONT-FAMILY: 'Times New Roman'][o] [/o][/SPAN][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 13pt; FONT-FAMILY: 'Times New Roman']Then there is the outsourcing of our work to contract carriers, etc. This company has an admirable work force of thousands here at U, including three proven wholly-owned regionals. All have shown that they are more than willing to help. All of these are assets that management should be taking advantage of, rather than contracting out the work to someone else. It seems we must be losing revenue if we are paying another company to fly our routes or do our work while they make a profit. [o][/o][/SPAN][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 13pt; FONT-FAMILY: 'Times New Roman'][o] [/o][/SPAN][/SPAN][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN class=bodyfont1][SPAN style=FONT-SIZE: 13pt; FONT-FAMILY: 'Times New Roman']Sorry if I may have oversimplified things here. I’m just a simple man. But I can see that the current course is not the one to our company’s salvation. [STRONG]Unfortunately, if the existing plan is all we have, I’m afraid that there is no future here for any of us.[/STRONG] The sooner we bury this dying beast, reach closure, and continue on with our lives, the better.[/SPAN][/SPAN][SPAN style=FONT-SIZE: 13pt; COLOR: #0b3053][o][/o][/SPAN][/P]

 

[UAL777flyer]

No, actually the whole name of the game is unit revenue (RASM), not yield. That is because yield is misleading. Your yield can actually go up dramatically while also lowering onboard revenue. Think about it. As average fares increase, yield naturally increases. However, increasing average fares can depress your load factor, which will ultimately lower total onboard revenue. But, as you pointed out, pricing is the key. Your unit revenue can increase with fare sales or lowering your fare structure. But that is only provided that enough seats are filled to increase load factor enough to compensate for the net fare reduction.

We are in a VERY volatile environment. If US attempts a wholesale fare restructure right now, there is no guarantee that it will recapture enough traffic from other airlines, or stimulate enough new traffic to drive up load factor to offset the fare decreases. You can bet that other carriers will CMI you to death if you lower your fare structure. So you better be sure that your strategy will work, otherwise, as your competition undercuts your new fare structure because they're ticked off, it'll actually take traffic away from you and put more pressure on you to pull your fare restructure. HP was able to implement a fare level restructuring because their CASM is low enough. US is not at that level of CASM yet. It basically comes down to the fact that you don't know if other carriers are going to match your fare changes. Because their cost structures are bloated, chances are they won't. So if you go ahead with lowering your structure and your CASM is still too high, you are simply not going to be successful in increasing revenue enough.

I'm sure there are opportunities to lower fares in many areas. But a wholesale fare restructure isn't the answer until US can achieve a much lower level of costs.

 

[ITRADE]

I'm not sure we have totally valid comparisons. What was HP's load factor in comparison to, say, Alaskan's?

 

[genejockey]

A quick example of how America West's simplified fare structure is attracting passengers:

Load Factors for Tuesday November 12:

America West = 74.7%
US Airways = 56.8%

A rational fare structure will fill seats...reasonably priced seats, not give-aways or gouges! AWA is consistently proving this.

 

[WNjetdoc]

Would you rather have a load factor of 95% and lose money or 65% and make money?

 

[AOG-N-IT]

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On 11/14/2002 2:08:37 PM WNjetdoc wrote:

Would you rather have a load factor of 95% and lose money or 65% and make money?
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[/blockquote]
Obviously , the range between 95% and 65% of the seats being filled lends anyone to think that profits can be made by a middle ground adjustment being made.

In U's case..even a 1% margin of profit would be a marked victory in itself!! The return of ridership would also produce long term gains too.

The time to do nothing other than shriveling up into a corner is long past a proven loser. The time to think in a different manner is also passing us by too. If we don't make some changes soon....changes are going to be made for us...By the Judge and our Creditors.

 

[UAL777flyer]

genejockey,

What about unit revenue? You can't make the flat extrapolation that because HP's new fare structure is succeeding, that if US did the same thing, it too would succeed. That's crazy. I'll illustrate my point. HP's 3rd Qtr 2002 CASM was 7.75 cents. US 3rd Qtr 2002 CASM was 10.94 cents. That is an unbelievably huge difference! But to prove my point about yield being misleading, HP's 3rd Qtr yield was 9.1 cents, whereas US Airways was 12.2 cents! Due to US Airways predominantly short-haul network, their average stage length is very low. So given that, their yield is going to be higher than most carriers, on average. But due to that average short stage length, US costs are higher. So until US achieves a lower CASM, they will not succeed in a total revamp of their fare structure. Once again, given a new lower fare structure, unit revenue (RASM) will only increase if you generate enough load factor pressure to offset the net fare change. US Airways 3rd Qtr LF was 71.8 %. HP's was 74.9 %. So given US Airways current cost level, implementing a totally revamped fare structure is not going to be revenue positive with only a 3-4 point jump in load factor.

 

[motnot]

Actually, HP's load factor for Tuesday was 66.3 percent, but the point is still valid. CO's was 59.4 percent.

And since HP redid its fare structure, it has attracted a bigger share of business travelers. That's why HP is carrying higher loads than other airlines almost every day of the week, but especially on days skewed more toward business travel.

In October, one of the heaviest business-travel months of the year, HP beat CO domestic by almost 4 points, and CAL has had the highest domestic loads among hub-spoke airlines for the past few years.

 

[Blueskies/400 UpperDeck]

Motnot, I think you should refresh your stats for Cont. load factor's comparison to the other 4 large network carriers. HOUSTON, Nov. 1 /PRNewswire-FirstCall/ -- Continental Airlines (NYSE:CAL) today reported an October 2002 systemwide mainline jet load factor of 69.4 percent,
ST. PAUL, Minn., Nov 5 (Reuters) - Northwest Airlines [NWAC.O] said on Tuesday it filled an average of 75.1 percent of its seats in October,,
ATLANTA, Nov 5 (Reuters) - Delta Air Lines [DAL.N] said on Tuesday that its load factor, or percentage of capacity in use, rose 10.4 percentage points to 70.9 percent in October