Hi!
I attended the Focus Group meeting in PHX on 7/16/08. Here is the information that was presented to us. I will start by saying that anyone can join this group. If you are interested or have questions, let me know.
Robert Isom- Chief Operating Officer was first up. For those of you who are not as familiar with him, here is some background. He has been with USAirways for the 10 months. Previously, with Northwest for 10 years, earlier with America West, Proctor and Gamble and GM.
This is what he told us:
Oil has quadrupled since 2000. It DOUBLED last year alone. It had been 15-20% of our expenses, now it is 40%. $300 is needed from an airline ticket for fuel. That means an average ticket needs to be $700 to break even.
If oil stays at a high price or increases there will be a drastic reshaping of who flies and how we get them to fly.
STEPS SO FAR:
1) Reduce flying by 10%. We are near the bottom limit of flying based on pilots contract.
2) Reduction of LAS flights
3) Get rid of 737's and less efficient 767's.
4) Slow down orders of planes, expansion and where we are spending money.
We are changing our business model for the long term to keep prices low enough to attract leisure travelers, but have the amenities passengers can buy if they want to.
TO MAKE MONEY:
1) Charge for Choice Seats: Charge $5-$30 in coach. 4-8% of our seats offer this so far. As of today it is bringing in $15,000/day. We are shooting to increase this to 16% of our seats by end of summer and a max of 50-60% of our seats. Further in this newsletter you will see the amount of yearly savings.
2) Second bag checked at $25 each. $160,000/day. (60-70 million per year)
3) First bag checked after July 9th. about 5% today tracking at $150,000/day.
$300 million/yr projection.
4) Charge for free tickets for frequent travelers.
I couldn't write fast enough, so some points are just fragmented. Sorry!!!
HIS MAIN POINT: Our core product is to get passengers from Point A to Point B SAFELY. That is why people fly - not because they get a free coke or meal. Passengers travel an airline based on reputation and time of flight.
Selling beverages has a potential of $30 -$40 million in revenue (750 f/a jobs!)
We need to change customers expectations as we will be losing hundreds of millions of dollars this year. Our choice is to change our model or go out of business. We have made huge strides in our on time performance, less complaints and baggage handling statistics.. We are still focused on: Reliability, Convenience and Appearance... We were at the bottom of the rankings on OnTime Performance last year. We are now #1 in the first half of this year. Overall, around #20 in airline ratings last year, now #5 or 6.
Mr. Isom, wants to keep paying out the Triple Play Bucks as an incentive to employees. It would save the company about 2 million dollars to end it, but he feels it is an important incentive. He also wants to keep the payout for the Above and Beyond program.
He said the Frequent Traveler issues must be revisited. In short, some changes cost savings have REALLY upset them and that has to be changed.
Because our In-flight Entertainment (IFE) was in the works to be eventually replaced, (yes, that is an amenity that people will fly a specific airline for), they are going to remover our IFE system over the next year on overnights. We are actively working with 3 or 4 vendors to have what Jet Blue has. Generally, a company fronts the money for it, then they take the revenue. For example, our Buy on Board.
However, money is tight with everyone and it has a projected cost of $400million dollars.
Southwest does not have cost pressures now because of fuel hedges. But the hedges will run out in 1 1/2 years.
So, we will stay with this new model for quite sometime and if fuel drops and we make profits it will be put into needed items like a new IFE system.
We are making money at the days end due to our CLT, PHL and PHX hubs. We have great airports for our passengers to fly out of.
Some money is being directed to an audit, so we make sure we are getting what we are paying for.
Deep Cleaning is being done on overnights with a long way to go!
We are looking at Electronic Flight Bags so save paper waste, for pilots.
Empty flights on holidays are being looked in. Especially, this Thanksgiving and Christmas.
We will still serve beverages the same way on International Domestic and Shuttle flights.
COMING:
Credit card readers at the gate
Bag Tag readers at gate (pax can't get away with bringing stuff to gate instead of paying for it!)
Increasing 500 agents to assist at gates. No single agent should be at gate eventually for better screening and assistance.
Adding ramp personnel.
Looking at boarding zones and increase who is in Zone 1 and Zone2 so they have the chance to make sure their belongings are on board, since they are our Frequent Travelers.
If prices increase and capacity decreases and our new changes are successful we should be able to cover our increase in fuel and be in great shape!!!!
Next up: Steven Kingsley, Financial Operations Update
As far as flight reduction, our hit is allot less than United, Northwest, and others. With fuel at $135/barrel, we are looking at a 1 Billion dollar loss. We are reducing aircraft totals to 202 in the East and 120 in the West.
We must run a good airline.
We are at a very good cash position with 1.9 Billion in total cash. We can spend 1.5 Billion anyway we want to.
10% of Management will be laid off. Some were effective as of this past Wednesday.
There will be a Comprehensive Cost Study to decide whether something should be insourced or outsourced.
All our partners are being talked to: Airbus, Barclays. Looking at ways to reduce Capital Expenditures. Reevaluate our 2009 budget.
Again, great strides with ON Time Performance and Baggage handling.
Sherri Shamblin Continues:
She reviewed costs of tickets changes and showed us where the increases are. Savings: 185 million
Choice Seats: once IT can update the website it will be savings of $400 million
First bag: $235 million
(Please remember I am writing all this down fast, so if something is not exact it is my fault, not theirs)
It costs us 1.6 million annually for coffee. We will stay with $1 coffee, until an upgrade is made.
( A F/A made a point of mentioning free refills if we hit turbulence, so that issue will be addressed in an opening announcement about our al a carte service.)
We looked at 3 choices of pillow/blanket combinations. Selling for between $5-$15 depending on choice. Some choices had inflatable pillow, ear plugs, eye mask, etc.) Air Canada has had success with this item to sell.
Tracking Complaints: Only 600 to date about the 2nd bad being checked. 375 from Dividend Mile Members. They want bonus miles back.
Now Service Presented by Stacy Benson Manager of In-flight Policies and Procedures
The water that we will sell will be a 16.9 oz bottle given with a cup of ice.
The soda can will be unopened
For flights 224 miles and less, a nine hole tray will be used to take orders and deliver. (My take it will be like Metrojet)
For flights 225 miles and greater a cart will be used.
When In-flight Cafe is offered then we will do push pull
Flights greater than 1500 miles will have an arrival service. So for Trans Con, no Coffee Water Service, but another al a cart pass through cabin.
Who will get it complimentary??? Unaccompanied Minors (they should since now the cost for them is $100),
Uniformed crew members, passengers who need to take a pill will be given a cup of water and anyone in medical distress, Extended onboard delays of 2 hours receive free soft drinks.
(Don't shoot me, I am just the messenger here!)
There will be no change fund. Everything we pass out that cannot be capped or stowed for landing, must be picked up. If short flight this should be relayed to customer.
We will have a new ON BOARD REVENUE REPORT
It will list headsets, liquor, beer and wine that needs to be audited. B is responsible and A will tell B what the f/c count is to add to inventory.
A makes sure all balance and does the deposit. New report when carts are changed or crew change.
There will be a crew room blitz on all of this from 7/28 through 8/8
Now Nick Ferguson from Dining and Cabin:
3 Brinks safes will be installed in PHX.
Handheld devices have been chosen. Guest Logix was selected. Target Date: 1st quarter of 2009. (Remember the uniforms? This is a Target date.)
After April 2009, we will start negotiating with vendors when contracts expire. For example Coke products will be reevaluated. Everything will be evaluated to see if it is a seller or a loser.
We already are getting calls from other airlines about this new model.
Coupons are being discussed with IT, as well as cards with money credits.
All of your wonderful suggestions are being listened to.
The best source for comments is AskInflight.com . That site is monitored very closely.
Thanks for taking the time to read this. Pass any info you want on to your co-workers.
See you on the line,
G.B. DCA F/A
I attended the Focus Group meeting in PHX on 7/16/08. Here is the information that was presented to us. I will start by saying that anyone can join this group. If you are interested or have questions, let me know.
Robert Isom- Chief Operating Officer was first up. For those of you who are not as familiar with him, here is some background. He has been with USAirways for the 10 months. Previously, with Northwest for 10 years, earlier with America West, Proctor and Gamble and GM.
This is what he told us:
Oil has quadrupled since 2000. It DOUBLED last year alone. It had been 15-20% of our expenses, now it is 40%. $300 is needed from an airline ticket for fuel. That means an average ticket needs to be $700 to break even.
If oil stays at a high price or increases there will be a drastic reshaping of who flies and how we get them to fly.
STEPS SO FAR:
1) Reduce flying by 10%. We are near the bottom limit of flying based on pilots contract.
2) Reduction of LAS flights
3) Get rid of 737's and less efficient 767's.
4) Slow down orders of planes, expansion and where we are spending money.
We are changing our business model for the long term to keep prices low enough to attract leisure travelers, but have the amenities passengers can buy if they want to.
TO MAKE MONEY:
1) Charge for Choice Seats: Charge $5-$30 in coach. 4-8% of our seats offer this so far. As of today it is bringing in $15,000/day. We are shooting to increase this to 16% of our seats by end of summer and a max of 50-60% of our seats. Further in this newsletter you will see the amount of yearly savings.
2) Second bag checked at $25 each. $160,000/day. (60-70 million per year)
3) First bag checked after July 9th. about 5% today tracking at $150,000/day.
$300 million/yr projection.
4) Charge for free tickets for frequent travelers.
I couldn't write fast enough, so some points are just fragmented. Sorry!!!
HIS MAIN POINT: Our core product is to get passengers from Point A to Point B SAFELY. That is why people fly - not because they get a free coke or meal. Passengers travel an airline based on reputation and time of flight.
Selling beverages has a potential of $30 -$40 million in revenue (750 f/a jobs!)
We need to change customers expectations as we will be losing hundreds of millions of dollars this year. Our choice is to change our model or go out of business. We have made huge strides in our on time performance, less complaints and baggage handling statistics.. We are still focused on: Reliability, Convenience and Appearance... We were at the bottom of the rankings on OnTime Performance last year. We are now #1 in the first half of this year. Overall, around #20 in airline ratings last year, now #5 or 6.
Mr. Isom, wants to keep paying out the Triple Play Bucks as an incentive to employees. It would save the company about 2 million dollars to end it, but he feels it is an important incentive. He also wants to keep the payout for the Above and Beyond program.
He said the Frequent Traveler issues must be revisited. In short, some changes cost savings have REALLY upset them and that has to be changed.
Because our In-flight Entertainment (IFE) was in the works to be eventually replaced, (yes, that is an amenity that people will fly a specific airline for), they are going to remover our IFE system over the next year on overnights. We are actively working with 3 or 4 vendors to have what Jet Blue has. Generally, a company fronts the money for it, then they take the revenue. For example, our Buy on Board.
However, money is tight with everyone and it has a projected cost of $400million dollars.
Southwest does not have cost pressures now because of fuel hedges. But the hedges will run out in 1 1/2 years.
So, we will stay with this new model for quite sometime and if fuel drops and we make profits it will be put into needed items like a new IFE system.
We are making money at the days end due to our CLT, PHL and PHX hubs. We have great airports for our passengers to fly out of.
Some money is being directed to an audit, so we make sure we are getting what we are paying for.
Deep Cleaning is being done on overnights with a long way to go!
We are looking at Electronic Flight Bags so save paper waste, for pilots.
Empty flights on holidays are being looked in. Especially, this Thanksgiving and Christmas.
We will still serve beverages the same way on International Domestic and Shuttle flights.
COMING:
Credit card readers at the gate
Bag Tag readers at gate (pax can't get away with bringing stuff to gate instead of paying for it!)
Increasing 500 agents to assist at gates. No single agent should be at gate eventually for better screening and assistance.
Adding ramp personnel.
Looking at boarding zones and increase who is in Zone 1 and Zone2 so they have the chance to make sure their belongings are on board, since they are our Frequent Travelers.
If prices increase and capacity decreases and our new changes are successful we should be able to cover our increase in fuel and be in great shape!!!!
Next up: Steven Kingsley, Financial Operations Update
As far as flight reduction, our hit is allot less than United, Northwest, and others. With fuel at $135/barrel, we are looking at a 1 Billion dollar loss. We are reducing aircraft totals to 202 in the East and 120 in the West.
We must run a good airline.
We are at a very good cash position with 1.9 Billion in total cash. We can spend 1.5 Billion anyway we want to.
10% of Management will be laid off. Some were effective as of this past Wednesday.
There will be a Comprehensive Cost Study to decide whether something should be insourced or outsourced.
All our partners are being talked to: Airbus, Barclays. Looking at ways to reduce Capital Expenditures. Reevaluate our 2009 budget.
Again, great strides with ON Time Performance and Baggage handling.
Sherri Shamblin Continues:
She reviewed costs of tickets changes and showed us where the increases are. Savings: 185 million
Choice Seats: once IT can update the website it will be savings of $400 million
First bag: $235 million
(Please remember I am writing all this down fast, so if something is not exact it is my fault, not theirs)
It costs us 1.6 million annually for coffee. We will stay with $1 coffee, until an upgrade is made.
( A F/A made a point of mentioning free refills if we hit turbulence, so that issue will be addressed in an opening announcement about our al a carte service.)
We looked at 3 choices of pillow/blanket combinations. Selling for between $5-$15 depending on choice. Some choices had inflatable pillow, ear plugs, eye mask, etc.) Air Canada has had success with this item to sell.
Tracking Complaints: Only 600 to date about the 2nd bad being checked. 375 from Dividend Mile Members. They want bonus miles back.
Now Service Presented by Stacy Benson Manager of In-flight Policies and Procedures
The water that we will sell will be a 16.9 oz bottle given with a cup of ice.
The soda can will be unopened
For flights 224 miles and less, a nine hole tray will be used to take orders and deliver. (My take it will be like Metrojet)
For flights 225 miles and greater a cart will be used.
When In-flight Cafe is offered then we will do push pull
Flights greater than 1500 miles will have an arrival service. So for Trans Con, no Coffee Water Service, but another al a cart pass through cabin.
Who will get it complimentary??? Unaccompanied Minors (they should since now the cost for them is $100),
Uniformed crew members, passengers who need to take a pill will be given a cup of water and anyone in medical distress, Extended onboard delays of 2 hours receive free soft drinks.
(Don't shoot me, I am just the messenger here!)
There will be no change fund. Everything we pass out that cannot be capped or stowed for landing, must be picked up. If short flight this should be relayed to customer.
We will have a new ON BOARD REVENUE REPORT
It will list headsets, liquor, beer and wine that needs to be audited. B is responsible and A will tell B what the f/c count is to add to inventory.
A makes sure all balance and does the deposit. New report when carts are changed or crew change.
There will be a crew room blitz on all of this from 7/28 through 8/8
Now Nick Ferguson from Dining and Cabin:
3 Brinks safes will be installed in PHX.
Handheld devices have been chosen. Guest Logix was selected. Target Date: 1st quarter of 2009. (Remember the uniforms? This is a Target date.)
After April 2009, we will start negotiating with vendors when contracts expire. For example Coke products will be reevaluated. Everything will be evaluated to see if it is a seller or a loser.
We already are getting calls from other airlines about this new model.
Coupons are being discussed with IT, as well as cards with money credits.
All of your wonderful suggestions are being listened to.
The best source for comments is AskInflight.com . That site is monitored very closely.
Thanks for taking the time to read this. Pass any info you want on to your co-workers.
See you on the line,
G.B. DCA F/A
We really should change our name to US Trailways. 
