November 18, 2003
David N. Siegel
President and CEO
Dear US Airways Colleague:
Some people think that our successful emergence from bankruptcy was the end of our restructuring. The truth is that our emergence from Chapter 11 was only the beginning. It was the life support that bought us time so that we could go on to fight another day. Well, that day has arrived.
It is time to stand and fight in Philadelphia.
We all know that Southwest has announced plans to launch service next spring from our key hub and that if we give ground there, we will give away control of our future and the very heart of our airline. It’s time to get off the defensive and move to being recognized as the top airline in our markets. It is time to take a stand for our Company.
We can compete with Southwest and other carriers on service: we have a better product, excellent airport facilities, regional and international destinations, marketing alliances, and most importantly, the best people in the business. The industry we are in demands giving customers what they want: not only the professional and courteous service we provide, but safe and reliable air service at the lowest price possible. That’s what makes Southwest, JetBlue and others such strong and successful competitors.
The plain and brutal fact is that we cannot compete with low-cost carriers (LCCs) on one critical factor that can make or break the airline – cost. The fact that analysts and industry experts have even grouped these airlines in their own category – LCCs – is testament to their influence on the industry. No one is to blame for this cost disadvantage, but the simple truth is that the LCCs deliver a seat mile at a cost about 40 percent less than ours. A more efficient operation, better use of technology, lower distribution costs, and greater productivity make up the largest share of their cost advantage.
When I talk about costs and productivity, I am trying to point out a core issue – low-cost competition has changed the airlines as it has other entire industries. The loss of huge textile companies in North Carolina and steel companies in Pittsburgh show how these industries have been beaten down by more efficient importers when they did not adapt to change. Low-cost competition can also change consumer behavior, like shopping at Wal-Mart instead of Woolworth’s. In the airline industry, low-cost competitors are not a passing fad, they are a reality. Southwest, AirTran and JetBlue are fueling growth with new airplanes, airport expansion and access to capital. They are the Wal-Mart, Home Depot and Target of the airline business, and their product is no longer something sold to the once-a-year vacation traveler willing to drive to a secondary airport. Their customers are now the business travelers we have traditionally relied upon.
Collectively, we will choose our future. We cannot become irrelevant to our customers, and without adapting to the changing marketplace, I am afraid we will be. I did not come here to oversee a going-out-of-business sale. I came here to rebuild and grow an important business. But first, we had to prune the worst of the money-losing operation so that we could be in a position to grow. Although our efforts to this point have yielded significant cost improvements, we continue to lose money, and we still do business the same way we have always done it – with inefficient operations, inadequate technology and distribution channels, complex pricing, outdated work rules and personnel policies, and internal dissension.
We must come to grips with the fact that the industry is changing and that to survive, we must transform every part of the company – more efficient operations, simpler pricing strategies, a better product for our customers, more productive work rules, a more flexible business model – literally everything must be on the table. And that is exactly the plan we're working on right now. Our focus is on how to be flexible, adaptable and creative, and to do this, we must think in terms of the customer and what they will demand of us going forward.
There is no reason why US Airways and our employees can’t be the ones opening up new routes and taking new airplanes. We just need to be able to compete in all aspects of the business so that we will have partners willing to invest in our company, lend us money, and sell us airplanes, knowing that we have all the elements for long-term success.
Looking back 18 months ago, the skeptics did not think we’d even still be here. We proved them wrong, but now those same skeptics say we cannot survive in the low-cost market. I believe we all have the spirit and ability to prove them wrong again. And if we can adapt, we can grow, so that rather than Southwest and JetBlue announcing aircraft orders, it will be us.
As we work through our plan, we will make sure you are informed every step of the way. Please make an effort to access the communications that we will be sharing with employees throughout this process.
And most importantly, thanks for your efforts at taking care of our customers. I fully appreciate that people want to see us succeed because of our employees who make the difference.
Sincerely,
Dave
David N. Siegel
President and CEO
Dear US Airways Colleague:
Some people think that our successful emergence from bankruptcy was the end of our restructuring. The truth is that our emergence from Chapter 11 was only the beginning. It was the life support that bought us time so that we could go on to fight another day. Well, that day has arrived.
It is time to stand and fight in Philadelphia.
We all know that Southwest has announced plans to launch service next spring from our key hub and that if we give ground there, we will give away control of our future and the very heart of our airline. It’s time to get off the defensive and move to being recognized as the top airline in our markets. It is time to take a stand for our Company.
We can compete with Southwest and other carriers on service: we have a better product, excellent airport facilities, regional and international destinations, marketing alliances, and most importantly, the best people in the business. The industry we are in demands giving customers what they want: not only the professional and courteous service we provide, but safe and reliable air service at the lowest price possible. That’s what makes Southwest, JetBlue and others such strong and successful competitors.
The plain and brutal fact is that we cannot compete with low-cost carriers (LCCs) on one critical factor that can make or break the airline – cost. The fact that analysts and industry experts have even grouped these airlines in their own category – LCCs – is testament to their influence on the industry. No one is to blame for this cost disadvantage, but the simple truth is that the LCCs deliver a seat mile at a cost about 40 percent less than ours. A more efficient operation, better use of technology, lower distribution costs, and greater productivity make up the largest share of their cost advantage.
When I talk about costs and productivity, I am trying to point out a core issue – low-cost competition has changed the airlines as it has other entire industries. The loss of huge textile companies in North Carolina and steel companies in Pittsburgh show how these industries have been beaten down by more efficient importers when they did not adapt to change. Low-cost competition can also change consumer behavior, like shopping at Wal-Mart instead of Woolworth’s. In the airline industry, low-cost competitors are not a passing fad, they are a reality. Southwest, AirTran and JetBlue are fueling growth with new airplanes, airport expansion and access to capital. They are the Wal-Mart, Home Depot and Target of the airline business, and their product is no longer something sold to the once-a-year vacation traveler willing to drive to a secondary airport. Their customers are now the business travelers we have traditionally relied upon.
Collectively, we will choose our future. We cannot become irrelevant to our customers, and without adapting to the changing marketplace, I am afraid we will be. I did not come here to oversee a going-out-of-business sale. I came here to rebuild and grow an important business. But first, we had to prune the worst of the money-losing operation so that we could be in a position to grow. Although our efforts to this point have yielded significant cost improvements, we continue to lose money, and we still do business the same way we have always done it – with inefficient operations, inadequate technology and distribution channels, complex pricing, outdated work rules and personnel policies, and internal dissension.
We must come to grips with the fact that the industry is changing and that to survive, we must transform every part of the company – more efficient operations, simpler pricing strategies, a better product for our customers, more productive work rules, a more flexible business model – literally everything must be on the table. And that is exactly the plan we're working on right now. Our focus is on how to be flexible, adaptable and creative, and to do this, we must think in terms of the customer and what they will demand of us going forward.
There is no reason why US Airways and our employees can’t be the ones opening up new routes and taking new airplanes. We just need to be able to compete in all aspects of the business so that we will have partners willing to invest in our company, lend us money, and sell us airplanes, knowing that we have all the elements for long-term success.
Looking back 18 months ago, the skeptics did not think we’d even still be here. We proved them wrong, but now those same skeptics say we cannot survive in the low-cost market. I believe we all have the spirit and ability to prove them wrong again. And if we can adapt, we can grow, so that rather than Southwest and JetBlue announcing aircraft orders, it will be us.
As we work through our plan, we will make sure you are informed every step of the way. Please make an effort to access the communications that we will be sharing with employees throughout this process.
And most importantly, thanks for your efforts at taking care of our customers. I fully appreciate that people want to see us succeed because of our employees who make the difference.
Sincerely,
Dave
