This week US Airways suffered a black eye it can ill afford, but nothing is as good as it seems and nothing is as bad as it seems. Many observers believe the “operational meltdown†may cause a shutdown of US Airways, however, let’s take a look at some facts:
US Airways had about 450 flights canceled from Thursday through Monday and had about 10,000 pieces of stranded luggage due to the Midwest heavy winter storm and employee sick calls. The company operates approximately 1,200 flights and 2,000 commuter flights per day. Thus, the total number of cancelled flights was about 3% of the total system flights for the 5-day period.
When flights were cancelled the company saved operating expense and Customer Service was able to re-book most of the effected customers on other flights, which raised the profitability of those flights that operated. In addition, Comair’s route structure overlaps US Airways’ system more than any other carrier, thus US Airways was able to receive quit a bit of revenue from Delta Air Lines when its Cincinnati-based subsidiary shut down its entire system or about 3,000 for about 3 days. The Comair passengers who traveled on US Airways contributed to US Airways baggage problem with the higher load factors and extra luggage.
Another key financial point that has been overlooked during the past few days is that NYMEX Crude Oil Futures are $2.41 per barrel lower than before the Christmas holiday. The February contract closed on Tuesday at $41.77 and each $2.50 per barrel price drop saves US Airways about $5 million per month. Furthermore, oil is trading more than $2 per barrel lower than the $44 price that US Airways said in its S.1113 filing was necessary to survive.
Although last Thursday’s Midwest winter storm hurt US Airways, so far this winter its hubs have been largely unaffected by winter weather. This week there are mild weather forecasts for the East Coast and the company’s expensive de-icing operation cost is likely far below budget.
US Airways said yesterday that its operations had returned to normal.
The Frequent Flyers Organized and Committed to US Airways Success, an organized group of US Airways frequent fliers, called FFOCUS, suggested in a statement yesterday several steps the company should take to prevent the loss of future customers, including immediate termination of individuals who didn't fulfill their work responsibilities in the past week.
US Airways told employees today in a bulletin, “Given the spike in sick calls that has affected US Airways’ operation, there will be an enhanced review of each person's attendance record during the holiday period (Dec. 23 to Jan. 3) to determine the appropriate action, which could include discipline and/or loss of compensation. Meanwhile, the efforts of all those employees who continue to volunteer for extra shifts or flights is appreciated by your colleagues and customers.â€
US Airways also put union officials on notice that any repeat of what happened over Christmas will not be tolerated, promising to discipline any who abuse the system. "Our customers and our employees expect everyone who is scheduled to work to show up," said US Airways spokesman Chris Chiames.
Today in an internal email to management and office staff employees US Airways sought volunteers from its nonunion workforce to work without pay at its troubled Philadelphia operations over the New Year's weekend. In the email the company said “This is a volunteer program. You will not be paid if this is on your day(s) off. It promises to be a rewarding opportunity to learn more about the operation of our airline and come face to face with our customers." Depending on their background, the employees will be assigned to meet and greet passengers at the ticket counter, security line, curbside or baggage claim, as well as provide assistance on the ramp and in the baggage sorting area, the memo said. Interestingly, today the senior director of flight operations and the Washington chief pilot both worked in Philadelphia doing duties such as sorting and loading baggage.
There is no question that the Christmas holiday events could cause US Airways to fail, however, the airline has taken a very proactive approach to rectifying the problem and could actually become a leaner and financially stronger company cur to the “meltdownâ€.
Vaughn Cordle, chief analyst with Airline Forecasts in Washington, D.C., said the crisis could cost US Airways hundreds of millions of dollars, including the impact of losing disgruntled customers to competing airlines.
Separately, two other airline analysts had a different view. Robert Mann, an airline analyst and labor advisor said, "It's an unfortunate confluence of events." He thinks the company could survive with falling fuel costs and a mild winter, devoid of expensive deicing procedures. But the weekend's situation, if coupled with a snowy winter and high fuel costs, could spell the end of the airline, he noted.
Randy Nutter, chairman of the business department at Geneva College (near Pittsburgh) and an airline analyst said, "It's seldom one event that causes (a company) to go Chapter Seven. It's a series of events that usually pulls the plug."
According to Tuesday’s Wall Street Journal, “US Airways, has made considerable headway since its September bankruptcy filing. It has gained givebacks from its pilots, dispatchers and customer-service agents. "It's hard to imagine this, in and of itself, would cause US Airways to liquidate. But if it turns into a chronic problem, that's another matter," said Robert Ashcroft, an airline analyst for UBS Investment Research.
The AFA seems to be scrambling to limit the damage to their unions reputation and possible member ramifications, which could include items such as job termination, pay loss, and possible pass privilege elimination, which could be devastating to commuters.
According to the Wall Street Journal, AFA National president Pat Friend told the newspaper she expects that a tentative agreement on a new contract that will save US Airways more than $150 million a year from pay and benefit cuts and a pension-plan termination will be ratified on Jan. 5. "We don't want to tank the operation," she said.
Also Tuesday, the president of the US Airways AFA unit posted a message on the union's Web site chastising workers who failed to report to work over the holidays. "By now, we have all seen the reports on the news about the operation of our airline over this past holiday weekend, and how that operation failed miserably. This was caused, unfortunately, by a minority of employees who appear to have decided to take some type of action against the company," wrote Perry Hayes. "Sadly, the employees who took this action may ultimately cause the failure of the airline," he said.
The announcement that DOT Secretary Norm Mineta will have his department's inspector general investigate the holiday troubles at US Airways should place even more pressure on union employees in the future. For those employees who handle baggage, any tampering or purposeful mishandling of a personal property across state lines is a federal crime. US Airways has security cameras in place that could identify possible crimes. Moreover, during the DOT’s upcoming investigation employee testimony could be used as exhibits if charges are made against any IAM member or other employee who willfully tampered with luggage.
In regard to passenger confidence in the aftermath of last weekends “operational meltdown†the company has not had a significant effect on passenger bookings, yet. The Monday, December 27 mainline and express passenger bookings were 144,000 and 58,000, respectively. The Tuesday, December 28 mainline and express passenger bookings were 135,000 and 51,000, respectively.
To help passenger sentiment US Airways has been quick to respond to passenger needs and has attempted to ease the difficulties for our customers with assistance, where needed, such as hotel rooms, cots in airports, food vouchers and assistance in getting rental cars. In addition, the carrier has had already paid some passengers $50 for the first night they were without their baggage and $25 for the second night, likely soothing some of the sting caused by the operational problems.
Meanwhile, most passengers who booked travel over the Christmas holiday are leisure travelers who travel just a few times per year and likely booked round-trip tickets. These passengers will likely return to their point of origin on US Airways, were dedicated employees will have another chance to deliver a quality product, and the company will keep the return trip revenue.
Also noteworthy, passengers have short memory’s and leisure traveler’s primary select a flight not due to frequent traveler loyalty, but with price. As long as US Airways can maintain operational integrity and the operational problems subside, many of these travelers will return to fly on the airline if the price is right.
Therefore, where is US Airways headed and what could be the ramifications of the holiday fiasco?
It appears from the company’s internal announcement regarding the "enhanced review" of sick calls, Bruce Lakefield will move quickly and decisively. In my opinion, he will come down hard on those employees who abused their sick time and he will prune some of the deadwood employees. Moreover, I believe the “real†US Airways employees will finally reject the losers who are trying to put the company out of business.
This point has not seemed to escape the attention of flight attendants because the "AFA in no way supports any member who calls in sick unless that person is actually sick," Hayes's memo said. Mollie McCarthy, the president of the Association of Flight Attendants chapter in Philadelphia said, "We love this company. It is our home. It is our family," McCarthy said. "This time, the public is blaming us. We're their neighbors. We are the people who help them on the airplane. And they don't trust us anymore."
What’s interesting is that the IAM has been largely silent during the past few days. The union released a vanilla statement that is likely an attempt to deflect negatove sentiment, especially if the DOT determines there was criminal activity due to tampering with or purposely mishandling personal property.
The IAM did release a statement that can be viewed at the following hyperlink:
See Story
While the AFA is doing a full court press to limit their damage, the IAM spokespersons have been largely quite. Why is that? Could the IAM just have received the out to permit “imposition†to occur?
In regard to the IAM and company contract negotiations, there is little progress to report and I believe the IAM may have just sabotaged any attempt to save the majority of their contract. The union suffered enormous damage in the court of public opinion and how could judge Stephen Mitchell have much sympathy after all of the negative press the IAM and its members received due to their sick calls. What’s sad is that there are many good IAM represented employees who could be badly hurt due to union leadership failures and employees who disregarded their employment responsibilities.
There are reports US Airways has plans in place to subcontract all heavy maintenance and maybe line maintenance. In addition, all utility could be eliminated; as well as baggage handling catering and other fleet service functions in Philadelphia contracted out too.
For months the IAM has said the “concession stand is closed†and now the union may have sealed their fate because Mitchell is likely to have no sympathy for the union after last weekend’s activity making “imposition†almost certain. Mitchell is likely to be very upset with some union members trying to kill the company he is trying to save. Furthermore, in the long-term the airline may now have received the ammunition necessary to eliminate much of the IAM problem that could save the airline maybe as much as $300 million per year with union members possibly driving the final nail in its coffin.
Do not be surprised if US Airways IAM represented employees who have good performance records become contractor supervisors or quality insurance representatives as US Airways employees.
In conclusion, US Airways has some increased costs in passenger “good will†and baggage delivery expenses, but the airline has obtained other cost cuts and revenue gains that will offset much of the increased costs and revenue lost.
The company did not operate 450 flights saving this expense and will likely see employee back pay withheld and headcount reduced after it completes its “sick call†review. Moreover, this should happen about the same time the new flight attendant productivity enhancements begin on January 6, 2005. The reduction in energy costs will have a big impact on finances as long as the downward trend continues and has been overlooked this week.
The airline also received increased revenue from Delta when Comair shut down and from flight consolidations. It’s difficult to quantify the short-term or long-term financial impact and I believe Cordle’s financial prediction is not accurate.
Regards,
USA320Pilot
US Airways had about 450 flights canceled from Thursday through Monday and had about 10,000 pieces of stranded luggage due to the Midwest heavy winter storm and employee sick calls. The company operates approximately 1,200 flights and 2,000 commuter flights per day. Thus, the total number of cancelled flights was about 3% of the total system flights for the 5-day period.
When flights were cancelled the company saved operating expense and Customer Service was able to re-book most of the effected customers on other flights, which raised the profitability of those flights that operated. In addition, Comair’s route structure overlaps US Airways’ system more than any other carrier, thus US Airways was able to receive quit a bit of revenue from Delta Air Lines when its Cincinnati-based subsidiary shut down its entire system or about 3,000 for about 3 days. The Comair passengers who traveled on US Airways contributed to US Airways baggage problem with the higher load factors and extra luggage.
Another key financial point that has been overlooked during the past few days is that NYMEX Crude Oil Futures are $2.41 per barrel lower than before the Christmas holiday. The February contract closed on Tuesday at $41.77 and each $2.50 per barrel price drop saves US Airways about $5 million per month. Furthermore, oil is trading more than $2 per barrel lower than the $44 price that US Airways said in its S.1113 filing was necessary to survive.
Although last Thursday’s Midwest winter storm hurt US Airways, so far this winter its hubs have been largely unaffected by winter weather. This week there are mild weather forecasts for the East Coast and the company’s expensive de-icing operation cost is likely far below budget.
US Airways said yesterday that its operations had returned to normal.
The Frequent Flyers Organized and Committed to US Airways Success, an organized group of US Airways frequent fliers, called FFOCUS, suggested in a statement yesterday several steps the company should take to prevent the loss of future customers, including immediate termination of individuals who didn't fulfill their work responsibilities in the past week.
US Airways told employees today in a bulletin, “Given the spike in sick calls that has affected US Airways’ operation, there will be an enhanced review of each person's attendance record during the holiday period (Dec. 23 to Jan. 3) to determine the appropriate action, which could include discipline and/or loss of compensation. Meanwhile, the efforts of all those employees who continue to volunteer for extra shifts or flights is appreciated by your colleagues and customers.â€
US Airways also put union officials on notice that any repeat of what happened over Christmas will not be tolerated, promising to discipline any who abuse the system. "Our customers and our employees expect everyone who is scheduled to work to show up," said US Airways spokesman Chris Chiames.
Today in an internal email to management and office staff employees US Airways sought volunteers from its nonunion workforce to work without pay at its troubled Philadelphia operations over the New Year's weekend. In the email the company said “This is a volunteer program. You will not be paid if this is on your day(s) off. It promises to be a rewarding opportunity to learn more about the operation of our airline and come face to face with our customers." Depending on their background, the employees will be assigned to meet and greet passengers at the ticket counter, security line, curbside or baggage claim, as well as provide assistance on the ramp and in the baggage sorting area, the memo said. Interestingly, today the senior director of flight operations and the Washington chief pilot both worked in Philadelphia doing duties such as sorting and loading baggage.
There is no question that the Christmas holiday events could cause US Airways to fail, however, the airline has taken a very proactive approach to rectifying the problem and could actually become a leaner and financially stronger company cur to the “meltdownâ€.
Vaughn Cordle, chief analyst with Airline Forecasts in Washington, D.C., said the crisis could cost US Airways hundreds of millions of dollars, including the impact of losing disgruntled customers to competing airlines.
Separately, two other airline analysts had a different view. Robert Mann, an airline analyst and labor advisor said, "It's an unfortunate confluence of events." He thinks the company could survive with falling fuel costs and a mild winter, devoid of expensive deicing procedures. But the weekend's situation, if coupled with a snowy winter and high fuel costs, could spell the end of the airline, he noted.
Randy Nutter, chairman of the business department at Geneva College (near Pittsburgh) and an airline analyst said, "It's seldom one event that causes (a company) to go Chapter Seven. It's a series of events that usually pulls the plug."
According to Tuesday’s Wall Street Journal, “US Airways, has made considerable headway since its September bankruptcy filing. It has gained givebacks from its pilots, dispatchers and customer-service agents. "It's hard to imagine this, in and of itself, would cause US Airways to liquidate. But if it turns into a chronic problem, that's another matter," said Robert Ashcroft, an airline analyst for UBS Investment Research.
The AFA seems to be scrambling to limit the damage to their unions reputation and possible member ramifications, which could include items such as job termination, pay loss, and possible pass privilege elimination, which could be devastating to commuters.
According to the Wall Street Journal, AFA National president Pat Friend told the newspaper she expects that a tentative agreement on a new contract that will save US Airways more than $150 million a year from pay and benefit cuts and a pension-plan termination will be ratified on Jan. 5. "We don't want to tank the operation," she said.
Also Tuesday, the president of the US Airways AFA unit posted a message on the union's Web site chastising workers who failed to report to work over the holidays. "By now, we have all seen the reports on the news about the operation of our airline over this past holiday weekend, and how that operation failed miserably. This was caused, unfortunately, by a minority of employees who appear to have decided to take some type of action against the company," wrote Perry Hayes. "Sadly, the employees who took this action may ultimately cause the failure of the airline," he said.
The announcement that DOT Secretary Norm Mineta will have his department's inspector general investigate the holiday troubles at US Airways should place even more pressure on union employees in the future. For those employees who handle baggage, any tampering or purposeful mishandling of a personal property across state lines is a federal crime. US Airways has security cameras in place that could identify possible crimes. Moreover, during the DOT’s upcoming investigation employee testimony could be used as exhibits if charges are made against any IAM member or other employee who willfully tampered with luggage.
In regard to passenger confidence in the aftermath of last weekends “operational meltdown†the company has not had a significant effect on passenger bookings, yet. The Monday, December 27 mainline and express passenger bookings were 144,000 and 58,000, respectively. The Tuesday, December 28 mainline and express passenger bookings were 135,000 and 51,000, respectively.
To help passenger sentiment US Airways has been quick to respond to passenger needs and has attempted to ease the difficulties for our customers with assistance, where needed, such as hotel rooms, cots in airports, food vouchers and assistance in getting rental cars. In addition, the carrier has had already paid some passengers $50 for the first night they were without their baggage and $25 for the second night, likely soothing some of the sting caused by the operational problems.
Meanwhile, most passengers who booked travel over the Christmas holiday are leisure travelers who travel just a few times per year and likely booked round-trip tickets. These passengers will likely return to their point of origin on US Airways, were dedicated employees will have another chance to deliver a quality product, and the company will keep the return trip revenue.
Also noteworthy, passengers have short memory’s and leisure traveler’s primary select a flight not due to frequent traveler loyalty, but with price. As long as US Airways can maintain operational integrity and the operational problems subside, many of these travelers will return to fly on the airline if the price is right.
Therefore, where is US Airways headed and what could be the ramifications of the holiday fiasco?
It appears from the company’s internal announcement regarding the "enhanced review" of sick calls, Bruce Lakefield will move quickly and decisively. In my opinion, he will come down hard on those employees who abused their sick time and he will prune some of the deadwood employees. Moreover, I believe the “real†US Airways employees will finally reject the losers who are trying to put the company out of business.
This point has not seemed to escape the attention of flight attendants because the "AFA in no way supports any member who calls in sick unless that person is actually sick," Hayes's memo said. Mollie McCarthy, the president of the Association of Flight Attendants chapter in Philadelphia said, "We love this company. It is our home. It is our family," McCarthy said. "This time, the public is blaming us. We're their neighbors. We are the people who help them on the airplane. And they don't trust us anymore."
What’s interesting is that the IAM has been largely silent during the past few days. The union released a vanilla statement that is likely an attempt to deflect negatove sentiment, especially if the DOT determines there was criminal activity due to tampering with or purposely mishandling personal property.
The IAM did release a statement that can be viewed at the following hyperlink:
See Story
While the AFA is doing a full court press to limit their damage, the IAM spokespersons have been largely quite. Why is that? Could the IAM just have received the out to permit “imposition†to occur?
In regard to the IAM and company contract negotiations, there is little progress to report and I believe the IAM may have just sabotaged any attempt to save the majority of their contract. The union suffered enormous damage in the court of public opinion and how could judge Stephen Mitchell have much sympathy after all of the negative press the IAM and its members received due to their sick calls. What’s sad is that there are many good IAM represented employees who could be badly hurt due to union leadership failures and employees who disregarded their employment responsibilities.
There are reports US Airways has plans in place to subcontract all heavy maintenance and maybe line maintenance. In addition, all utility could be eliminated; as well as baggage handling catering and other fleet service functions in Philadelphia contracted out too.
For months the IAM has said the “concession stand is closed†and now the union may have sealed their fate because Mitchell is likely to have no sympathy for the union after last weekend’s activity making “imposition†almost certain. Mitchell is likely to be very upset with some union members trying to kill the company he is trying to save. Furthermore, in the long-term the airline may now have received the ammunition necessary to eliminate much of the IAM problem that could save the airline maybe as much as $300 million per year with union members possibly driving the final nail in its coffin.
Do not be surprised if US Airways IAM represented employees who have good performance records become contractor supervisors or quality insurance representatives as US Airways employees.
In conclusion, US Airways has some increased costs in passenger “good will†and baggage delivery expenses, but the airline has obtained other cost cuts and revenue gains that will offset much of the increased costs and revenue lost.
The company did not operate 450 flights saving this expense and will likely see employee back pay withheld and headcount reduced after it completes its “sick call†review. Moreover, this should happen about the same time the new flight attendant productivity enhancements begin on January 6, 2005. The reduction in energy costs will have a big impact on finances as long as the downward trend continues and has been overlooked this week.
The airline also received increased revenue from Delta when Comair shut down and from flight consolidations. It’s difficult to quantify the short-term or long-term financial impact and I believe Cordle’s financial prediction is not accurate.
Regards,
USA320Pilot
