Ready for Takeoff

[USA320Pilot]

Ready for Takeoff

Merger puts US Airways on the runway to success

Click here for the story.

Best regards,

USA320Pilot

 

[EricLv2Fish]

Pretty decent article. Drives home AWA's precarious situation prior to the merger and US Airways impending liquidation.

 

[ClueByFour]

Ready for Takeoff

Merger puts US Airways on the runway to success

Click here for the story.

Best regards,

USA320Pilot

From that article:

Yet there were opportunities others didn't see. If America West were to merge with US Airways, it could piggyback on the benefits of bankruptcy, without zeroing out its own stock price or turning control of the company over to creditors. America West couldn't simply tear up the leases on unprofitable aircraft and send them back to the lenders, for instance. But under bankruptcy protection, US Airways could. In a merger, America West could restructure the combined fleet as efficiently as possible.

This being the airline industry, however, there's still plenty that could go wrong. The merger is far from complete, for one thing. America West will still exist in name, fact, and logo until the two carriers merge their reservation and operations systems--thorny tasks that have already left some customers stuck in the netherworld between the two systems. Even once the two operations become seamless--probably by next year sometime--fuel prices could spike, or another shock like 9/11 could traumatize the industry again. Perhaps the worst threat to airlines is their own lack of discipline. In the past, as profits have returned following downturns, carriers have repeatedly added back routes and flights, to protect market share and battle lower-cost competitors--then ended up losing money as margins declined. US Airways says it is determined to evade that. "We're not market-share-driven," insists Kirby. "We will be very disciplined about capacity." That would mark a different kind of airline indeed.

The strategy: being unable to actually manage an airline, the old US screwed employees, creditors, and leaseholders to shrink capacity. HP buys shrunken capacity and shrinks some more. The new US won't be a full network carrier, it's going to attempt to cherry pick profitable routes. If one looks at "new" routes, the "new" US is doing nothing more than shrinking capacity and reshuffling resources to routes without competition (eg, the monopoly hub/route strategy). There are a few problems with that--notably that LUV, Airtran, and B6 have hundreds of aircraft on order and will move in on profitable routes eventually (the run and hide strategy failed during the last boom in the business in the 1990s, it's not going to work now). The second problem is for the employees--anyone who thinks that they are going to advance their career as a result of airframe growth is (according to Kirby's own words) going to be in for a long wait.

Putting aside the fact that making revenue rise by shrinking capacity could have been accomplished by a high-school sophomore who understands the concept of a demand curve, the more pressing problem for US (beyond the fact that operations and reservations among other large things that have not yet been integrated) is:

The implications were dire: Once the discounter lost its cost advantage, fliers were sure to choose other carriers with wider reach and more perks. "It was going to be hard to survive in the future," recalls Doug Parker, who was America West's chief executive.

And this is going to happen to Parker again. AA made a ton of money in the quarter and has a superior product and route system. As will CAL. In coach, there is very little to seperate US from LUV and B6 (the latter coach product is actually better). And much to the chagrin of many, even UA is trending better than US did in it's first BK. DL and NW still have time to trim costs. US was first, and those coming down the pipes (from a legacy cost-cutting standpoint) have better reach and better perks.

History will repeat itself eventually. Nobody has ever shrunk an airline to long term profitability and running away from the LCCs (eg, this "finding profitable flying") has a limited lifespan (especially in light of B6's expansion and LUV's deliveries for the next few years).

 

[EricLv2Fish]

History will repeat itself eventually. Nobody has ever shrunk an airline to long term profitability and running away from the LCCs (eg, this "finding profitable flying") has a limited lifespan (especially in light of B6's expansion and LUV's deliveries for the next few years).

I offer this counter point: Is the merged US Airways smaller or bigger than either the pre-merged AWA or US Airways? Merging and trimming some unprofitable routes I think has actually grown the old US Airways. Like caring for fruit trees, you gotta prune them every so often to maximize their potential.

 

[USA320Pilot]

US News & World Report said: "For a while, the new US Airways was just another airline struggling to stanch losses. Then in April, the company's first-quarter earnings--a tidy $65 million profit--galvanized attention on Wall Street. The modest profit put US Airways in "very elite company," wrote Lehman Brothers analyst Gary Chase, who compared the new carrier to industry darlings Southwest and Alaska airlines. By cutting unprofitable flying, the airline raised its revenue per seat by 24 percent.

Investors have been celebrating. US Airways' share price has soared to as high as $56. The private lenders who invested in two weak carriers have seen returns approaching 400 percent.

Click here for the entire story.

Airlines may get over the hump

"The star of this round of earnings may be US Airways Group Inc., which combined last year with America West Holdings Corp. Analysts expect the carrier to report earnings of $3.31 a share, or about $285 million."

Click here for the entire story.

USA320Pilot comments: JP Morgan airline analyst Jamie Baker is predicting a $285 to $330 million quarterly profit for US Airways, but there are “whispersâ€￾ emitting from Wall Street the Tempe-based airline could exceed airline analyst estimates.

What's interesting is that a poster in this thread recently said that "no airline can make money with crude oil at $70 per barrel (paraphrased)."

Best regards,

USA320Pilot

 

[ilg30/7]

History will repeat itself eventually. Nobody has ever shrunk an airline to long term profitability and running away from the LCCs (eg, this "finding profitable flying") has a limited lifespan (especially in light of B6's expansion and LUV's deliveries for the next few years).

Just like clockwork. Clue shows up again to inform us we are all doomed. Like any of us needed to be told.

Must be earnings season. And we must be reporting good news.

And predicting an eventual downturn? Bold.

 

[USA320Pilot]

Earnings Preview: US Airways Group

Analysts Looking for Strong 2Q From US Airways Group on Higher Fares

Analysts are looking for the newly combined US Airways to post some of the industry's best results. The combined company also boasts some of the industry's lowest costs.

Lehman Brothers analyst Gary Chase named US Airways as one of his top picks in a second-quarter earnings preview, along with AirTran Holdings Inc. and United Airlines' parent UAL Corp.

Lehman Brother's Chase called the improving revenue trends at US Airways "compelling."

The key issue for investors, he said, "is the ability to continue current revenue momentum, particularly in the regional entity and the western hubs (old America West), as well as updates on merger integration undertakings and future integration milestones."

Click here for the entire story.

Best regards,

USA320Pilot

 

[exB717Flyer]

Doug's face looks really wrinkly in the picture.

 

[robbedagain]

without more heding in place, I would have to say it may be a bit harder to make a profit with oil going towards the $80 market and who knows after that givent he mideast conflict

 

[PITbull]

Earnings Preview: US Airways Group

Analysts Looking for Strong 2Q From US Airways Group on Higher Fares

Analysts are looking for the newly combined US Airways to post some of the industry's best results. The combined company also boasts some of the industry's lowest costs.

Lehman Brothers analyst Gary Chase named US Airways as one of his top picks in a second-quarter earnings preview, along with AirTran Holdings Inc. and United Airlines' parent UAL Corp.

Lehman Brother's Chase called the improving revenue trends at US Airways "compelling."

The key issue for investors, he said, "is the ability to continue current revenue momentum, particularly in the regional entity and the western hubs (old America West), as well as updates on merger integration undertakings and future integration milestones."

Click here for the entire story.

Best regards,

USA320Pilot

Hmmm, appears that labor has a shot at improving wages, benefits and work conditions with these projected profits and upturn.

To labor, I say "bunker down", and push to get some of the 'givebacks' returned!!!!

After all, the transition agreement MUST go out for a vote for ratification.

 

[delldude]

Just like clockwork. Clue shows up again to inform us we are all doomed. Like any of us needed to be told.

Must be earnings season. And we must be reporting good news.

And predicting an eventual downturn? Bold.

No,I think he makes light of everything is the same as it was before BK....all the legacies have tightened their belts,LLC's are lying in wait and now basically the playing field is level once again.so how are you ahead of the game?

 

[Flufdriver]

exB717Flyer...his face looks wrinkled because it's a "Dry" heat! lol!!

 

[ChrisUS]

Hmmm, appears that labor has a shot at improving wages, benefits and work conditions with these projected profits and upturn.

To labor, I say "bunker down", and push to get some of the 'givebacks' returned!!!!

After all, the transition agreement MUST go out for a vote for ratification.

How about waiting for a few more profitable quarters? Two quarters and people are getting greedy. We arent out of the woods.

 

[Dog Wonder]

How about waiting for a few more profitable quarters? Two quarters and people are getting greedy. We arent out of the woods.

You are right.

Pretty hard to tell from the rewards given top management. No waiting to see if we are 'out of the woods' for them.

Of course, finding woods to get out of in Tempe is like finding a virgin in Vegas.

 

[autofixer]

Oooo, oooo, I get to keep my job a little longer!!! So what! All this means is the stock price will drive higher and management gets richer. This is CEO #7 for me and they are ALL the same. This to will pass; remember the business cycle still exists.