US Air Still Restructuring; Predicts Links With LCCs
WASHINGTON (Aviation Daily) - As the U.S. network and low-cost carriers (LCC) intensify their current battles, US Airways CEO David Siegel yesterday predicted that the two airline business models will likely converge rather than lead to the "extinction" of any one of the models.
Siegel told the Aero Club of Washington that in some ways, the LCCs are starting to look more like the big airlines. He noted that JetBlue, AirTran and other LCCs are touting frills such as live television and leather seats, and several LCCs are flying long-haul transcontinental routes. At the same time, legacy carriers are dropping meal service on many routes, eliminating first-class cabins and simplifying fares.
Siegel believes low-cost carriers and network carriers will likely form partnerships. For example, "why shouldn't the major U.S. international airlines cooperate with LCCs to feed their international services?" He also thought it would be a good idea to bring LCCs into the major carrier frequent-flyer programs.
One low-cost airline quickly ruled out that possibility yesterday. Southwest Chairman Herb Kelleher, in a conference call with reporters about his carrier's Philadelphia plans, said he has looked at linking with network carriers over the years but found it difficult as Southwest's operations are "completely different" from the other hub-and-spoke carriers "in every respect." In return for an alliance, Kelleher said the network carriers "wanted us to operate the way they do."
Ultimately, however, Siegel said, "Old guard airlines" like US Airways are going to "have to completely change the way we do business. While the carrier's Chapter 11 reorganization gave the airline a "second chance at life...we are certainly not done restructuring."
In response to a question, Siegel said the carrier "has no plans to file" for another round of Chapter 11 protection, but said more changes and cost cuts are needed before the carrier reaches "sustained profitability."
Siegel said the legacy carriers can learn a lot from the LCCs, including their "simple set of customer expectations." Network carriers, "in trying to be all things to all people, have done just the opposite." The airlines have created a "set of schizophrenic expectations, many in conflict with one other."
Siegel believes that some airlines are still looking for the "quick fix" to their problems, citing development of an airline-within-an airline or "less room-in-coach" or the new "elite-for-a-day" marketing program. "These just aren't panaceas," he said. "Not close."
He believes legacy carriers need to find a way to "better exploit the great strengths and structural advantages that made them the world's aviation leaders."
