Could This Be The Answer Replacing Aca?

TravelDude

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Nov 21, 2003
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Could this be the answer replacing ACA at IAD? I would welcome the addition, US Airways has some great very loyal employees, much like Uniteds employees. Not to mention most of the aircraft that US still has more closely align with UA's fleet type.

From the New York Times
http://www.nytimes.com/2004/01/08/business/08air.html

By MICHELINE MAYNARD and ANDREW ROSS SORKIN

Published: January 8, 2004

Less than a year after it emerged from bankruptcy protection, and facing stiff competition from low-fare competitors, US Airways is seeking buyers for a number of its assets, including its East Coast shuttle and possibly one of its three hubs, people who have been briefed on the airline's plans said last night.

The move comes as US Airways has failed to obtain the support of its unions for revisions in its business plan, which would supplant the restructuring plan it completed last April.

As a result, the airline is considering selling assets, those briefed on the plans said. Among them are its shuttle serving Boston, Washington and New York, which operates out of La Guardia Airport; additional gates at La Guardia and Logan Airport in Boston; its regional operation, US Airways Express; and a hub, either Pittsburgh, Philadelphia or Charlotte. A spokesman for US Airways declined to comment.

The airline has retained Morgan Stanley to gauge interest and find potential suitors. A spokesman for Morgan Stanley declined to comment last night.

The airline, the country's seventh largest, filed for bankruptcy protection in August 2002, citing a slump in travel after the September 2001 terrorist attacks.

As part of its restructuring, US Airways' unions agreed to two sets of concessions, which the airline used to obtain $500 million in financing from the Retirement Systems of Alabama, whose chief executive, David G. Bronner, is now the airline's chairman.

But last month, the chief executive of US Airways, David Siegel, said the airline would be forced to revise the business plan on which it based its emergence from bankruptcy last spring. Specifically, he cited a decision by Southwest Airlines to begin operations in May from Philadelphia, one of US Airways' hubs.

Mr. Siegel warned that Southwest's arrival would most likely prompt fares to drop 30 percent and said the airline had to cut its costs in advance so that it could lower its own ticket prices. In addition, US Airways must make debt payments in June to meet covenants of $900 million in federal loan guarantees, which it received when it emerged from bankruptcy.

US Airways lost $90 million in the third quarter, when other carriers posted small profits, buoyed by healthy summer traffic and refunds of federal security fees. The airline has about $1 billion in cash, less than half that of its bigger rivals.

The airline has said every aspect of its operations is under review, from labor costs to schedules to routes, as part of its cost-cutting. But selling assets would be a faster and presumably simpler way for the airline to raise money, depending on the bids it received.

Mr. Siegel's candor about the airline's problems has led to widespread speculation within the airline industry that US Airways might have to seek bankruptcy protection once again. US Airways executives have flatly denied they have any plans for a second bankruptcy filing.

But the chief executive of one airline, who spoke in the condition of anonymity, said last week that Mr. Siegel faced a difficult situation, not only because of Southwest's arrival in Philadelphia, but because low-fare competition is heating up all around US Airways.

Referring to Southwest's plans to begin service at Philadelphia, the executive said, "They're thinking, 'If US Airways goes out of business, we want to be there.' "

Mr. Siegel had met late last year with officials of the company's unions, in a bid to win their support for further cuts. He had characterized the meetings as positive. But last month, leaders of US Airways' pilots union called for Mr. Siegel to step down, contending he had lost the faith of airline employees. Meanwhile officials of its mechanics union refused to grant further cuts, saying, "the concessions stand is closed."

The airline decided to go ahead with drafting its cost-cutting plan and said it would outline it this quarter. But on Tuesday, it postponed a series of meetings with employees that it had planned over the next few weeks.

In a recorded phone message, Mr. Siegel said leaders of the company's unions said they had "no interest in hearing the revised business plan or even having discussions with management on work rule and productivity changes."
 
No, I don't think this is the answer. Remember that in bankruptcy, we need the approval of the court to go after US assets. As enticing a solution as it may seem to replacing ACA at IAD, I think it would be a distraction to our efforts to get out of bankruptcy and return to sustained profits. We should instead focus on fixing the outstanding issues of bankruptcy so we can exit by mid-year. Getting into a probably bidding war for US assets would be an unnecessary distraction in my view.
 
I posted this on another thread; this is how I expect UAL to deal with replacing ACA:

I'll jump in on this one. I anticipate a multiple option approach. On routes where UAL can justify upguaging to larger equipment, UAL will either have 737s or A319s to replace RJs. (This can lead to upguaging equipment throughout the system). On routes where RJs are sufficient, UAL will shuffle in another regional.
This will cause UAL to selectively upguage from RJs throughout the system in order to provide sufficient RJ coverage from the regionals.
While on the surface it may appear that ACA has left UAL short of lift capacity, that is not true. The mainline fleet is currently underutilized and by forcing UAL to upguage, it will actually increase UAL's efficiency. I expect mainline UAL's CASM to be at or below ACA's CASM. However, UAL's marginal CASM (the CASM associated with increased fleet usage) will be well below anything that ACA could touch, even if all of ACA's employees worked for free.
There are two flies in the ointment for UAL. The first will be the number of available pilots. However, UAL could easily recall pilot furloughees from the last six months and run them through short courses where they'd be back flying the line in less than a month.
The second fly in the ointment is aircraft leases. I don't have a good handle on UAL's progress so the following is merely conjecture on my part. I would assume that UAL was very disappointed at ACA's refusal to cut rates because it gives them decreased leverage on renegotiating leases. However, I would be willing to bet that UAL will resolve all leases prior to terminating ACA's contract. And both of those issues will be resolved prior to UAL emerging from chap 11. From my understanding, there are still north of 100 aircraft leases that have to be renegotiated. UAL has rejected several 777 leases, but I've read that the leassors have not been able to find a new leasee. It may be possible for UAL to return to those leassors and make the same offer; I would expect the leassors to rethink their position when they discover that there is an extremely thin market for used aircraft.




I believe that replacing ACA will be a very good thing for UAL. At a time when demand is increasing, this gives UAL the opportunity to shed some of their narrowest guage aircraft (RJs contracted out to ACA) and increase utilization of mainline aircraft. With UAL's current cost structure, I would imagine the cost of flying an A319 is very close to the cost of contracting out a 50 seat RJ. And of course the CASM for the A319 is much lower.
 
Well... Its possible... but this would take a lot of time and money to get done... which are two things UAIR doesn't have. I would put the chances of this happening at less than 15%... Thats just my opinion.