Siegel''s Contingency Plan Being Readied

Pacemaker

Senior
Sep 3, 2002
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US Airways CEO David Siegel yesterday warned the bankrupt airline still needs to make broader cost cuts than earlier predicted, and will likely include more job cuts in order to survive in the current weak revenue environment.
Separately, Siegel confirmed after a speech to the Wings Club in New York the Retirement Systems of Alabama fund is the front runner in the bidding to provide funding in exchange for a 37.5% stake in the airline. Tomorrow is the deadline for submitting competing offers. While the RSA will likely be the winner, Siegel said there have been recent talks with other private equity firms.
The carrier remains on track to emerge from Chapter 11 bankruptcy protection by March, but Siegel said the operating environment is getting softer and a war with Iraq could potentially be cataclysmic to U.S. network carriers. In a grim
message, Siegel does not foresee any recovery until 2004 at the earliest,
and US Airways faces an even tougher environment than it first anticipated, he told journalists after his remarks.
Siegel's management team is putting the finishing touches on a contingency plan in case the airline faces a worst-case scenario next year. He believes worry over a Middle East conflict has already affected passenger traffic and oil
prices, but US Airways plans to launch its contingency plan ahead of any war.
The industry is on the brink, and we're the next one to get pushed off the cliff, he said.
Despite his warning, Siegel said I'm pretty scrappy, vowing he is determined to succeed in the reorganization and won't go down without a fight. As part of his motto to adapt or we will die, Siegel said more costs need to be cut from the company's structure. He continues to look at all aspects of the US Airways business model, including non-value-added costs, he said. At the end of the day, we can't control the revenue environment, and the only thing we can do
to survive is to size our cost structure responsibly and that's what we're doing.
He also reported the airline still needs to become more efficient, but whether the airline shrinks further depends on the overall passenger demand over the next 12 months. The mainline fleet size of 279 aircraft is roughly in balance with current demand, but the airline's contingency plan postulates speeding aircraft retirements to cut its fleet to 245 aircraft if demand drops
further or if there is a shock to the system, such as an Iraqi war.
Siegel revealed there will be a series of announcements in the coming weeks outlining plans to transfer more flying to its regional affiliates.
He still believes Midway Airlines will be able to start flying again as a US Airways Express operator, as previously announced. Midway should be able to get off the ground again in about three months, he said yesterday.
Siegel also joined the chorus of airline CEOs lobbying Congress for tax relief. He said public officials need to abandon their schizophrenic view of the industry, in which they profess to value its importance, then turn around and tax, regulate and fine us to the point of operational paralysis. He agrees with politicians who have said that airlines' complaints have grown stale, but until something is done to fix the problem, we have no choice [but] to keep pointing out our problem.
The carrier blames taxes and high labor costs for the retreat from markets it once dominated from the Northeast to Florida. If I had the cost structure of low-cost competitors and didn't have to pay a third of the revenue back to the government, we'd probably still be the number one carrier on those routes, Siegel said. Carriers like JetBlue are now kings of the hill because they pay their employees half of what we pay now. -SL
 

Art at ISP

Veteran
Aug 20, 2002
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They are still missing the point....the business model is broken--why can't they fix it? HP did, and although it isn't comparing apples to apples, it appears to be working for them. Simplify and rationalize the fares--not only will revenue improve (maybe not enough), but I'd be willing to bet you'd get more customers!

You can only do so much with costs---now fix the other side. If you keep cutting flights, I have fewer choices. If I have fewer choices you FORCE me to look elsewhere...I don't think that's what you want.

I have used this example before but here it is---I almost always connect through PHL when I travel as it is basically the only destination you serve from ISP non stop. For me to fly from ISP-PHL-LAX, I can get a fare as low as $190 RT AND get a first class seat on the main line segments. BUT if I only want to fly to PHL for the day, the RT fare is $792!!!!!!! I mean what's wrong with this picture?????? The SHUTTLE doesn't cost that much at full fare! What we need are fair fares. And I am not saying you have match WN on the lowest end of the spectrum--you offer more services and I am sure that MOST people will realize that (I am not counting the once a year flier because he won't care). If you raise the bottom a little, but lower the top to where it makes sense, the average will shift upwards. Not every business traveler is looking for the $99 fare, but I am sure none of them want the $2400 one either.

As far as choices, I see we are losing a couple of the ISP-PHL flights by January--namely the 6AM ISP-PHL and the 8PM return. How does this affect me? If I need to be somewhere early in the morning, I now have to either drive to LGA like I did yesterday (5:45AM to CLT), OR I take Eagle through BOS or CO through CLE. Also I can't use the 4-5PM bank of FL-PHL flights to get me home by 9PM because there is no valid connection at 8PM any more, plus it looks like some Florida markets have lost their 6-7PM departures northbound as well. Again, I am forced to look elsewhere to meet my schedule requirements. It's like giving the business away.

I don't mean to rant, and by no means would I disparage my good friends at US--you are truly the best, and you know I am not shy about saying that. But if the brain trust (?) at CCY keeps cutting and cutting, and doesn't address the REAL problem, how do they expect to survive?

My best wishes to you all, and let's hope they finally come to their senses before it's too late!
 

MCORORES

Senior
Aug 19, 2002
317
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www.usaviation.com
Art...you hit the nail right on the head. What the company is doing with all these furloughs is nothing more than a short term solution to a long term problem. It will only provide a temporary quick fix.
 

dfw79

Senior
Aug 20, 2002
308
0
Has anyone here thought about attempting to share their ideas with management? A lot of good ideas are being thrown around here, but it seems it is also coupled with a lot of ranting that has no grounds. Everyone should have Dave's e-mail address to contact, however don't stop there. Forget your immediate supervisor...start sending ideas to every member of the BOD, RSA, etc. You'd be shocked at just how clueless some people are to things the peons think are quite obvious.
 

phillyguy

Advanced
Aug 20, 2002
140
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But would you not want them to have some contingency plans?

It has got to be a tough spot - they need to generate/maintain short term cash flow but in business most times you can not save your way to propserity and that is what is going to hurt U because that is exactly what they are trying to do.

It seems that many companies achieve sustained success by empowering employees. Now personally I think 'empowered' is one of those way over used business buszzwords.

But it seems that there are tons of small things that the employees of U know will work. First and foremost would be to allowed those front line employeess some leeway in how they handle customers and some of these new rules. Let them have guidelines but allow them flexibility. Don't penalize the workers for helping customers and in many cases making a good business decision or at least one that does not hurt anything but makes the customer satisfied.

3 times in the past 2 weeks, I walked up to the gate agent about getting on an earlier flight. All 3 times I just said I don't know what fare class this ticket is but I wonder if i can get on the earlier flight. 2 of the 3 times, the agent said - you being a Chairman Preferred means more to mean than the fare class and put me on the earlier flight.

The 3rd time, the agent said - no that is against the rules. And this was PHL-BOS where there is hourly service. And the earlier flights were wide open!!! What did they save?

Let the employees loose - that will quicky improve things.

Just my opinion
 

UAL777flyer

Veteran
Aug 20, 2002
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Once again I'll point out how ridiculous it is to compare what HP has done with what US could possibly do. HP enjoys a HEFTY CASM advantage over US Airways. Hence, their ability to restructure fares and increase the revenue stream. Until US achieves a comparible level of CASM, a fare restructuring is not going to work. You can't just make blanket assumptions, such as I'd bet it would bring more passengers and increase our revenue without having a thorough understanding of unit revenue, yield and the factors that determine each. US Airways network is centralized in the highest operating cost area of the country: the Northeastern U.S. HP's network is centralized in one of the lowest operating cost areas of the country: the Southwestern U.S. As I've pointed out, HP's CASM is significantly lower than US (currently they enjoy about a 3 cents CASM advantage). Until US Airways can lower their costs to that level, a fare level restructuring isn't going to do them any good. In fact, it would do more harm than good. Why? Because even though you might be increasing your load factor (bringing in more people), it won't be near enough to offset your high costs. Last time I checked, US Airways network was primarily short-haul, which accounts for the huge amount of cost they incur. You simply have to understand the fundamental differences between US and HP before you make the assumption that because HP modified their fare structure with success, that US could do the same today.
 

wings396

Veteran
Aug 20, 2002
3,672
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Has anyone here thought about attempting to share their ideas with management? A lot of good ideas are being thrown around here, but it seems it is also coupled with a lot of ranting that has no grounds. Everyone should have Dave's e-mail address to contact, however don't stop there. Forget your immediate supervisor...start sending ideas to every member of the BOD, RSA, etc. You'd be shocked at just how clueless some people are to things the peons think are quite obvious.


This is an excellent idea nad we should go back to the
roundtable concept that we had with Seth a few years ago. With that system there we only a few reps there, but maybe we could have one selected person from each station there to discuss some ideas. We need some input from ALL stations, not just the hubs..and I'M afraid to say only what the BIG cities think and want counts with the unions.
Mayve Chip can pass this on to upper mgmt......



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N628AU

Veteran
Aug 22, 2002
909
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UAL777...

Are you UAL's version of Chip? I respect your right to an opinion, but get your own house in order, we have enough to deal with. Your statements like at death's door and threats of liquidation are becoming as tiresome as the unique corporate transaction. This place is a mess, I understand that, thank you very much. I point to the labor union's protecting work rules at the expense of common sense, I have posted on this since the request for concessions first occurred, but I am a small cog in a large wheel, and no matter how squeaky I am, I am not getting the grease!

As for you saying we just can't make blanket assumptions, how is what the company is doing any better? They have gone from $1.2 billion to $1.3 to $1.4 to $1.6, and now is like $1.9 billion. When does it end? Until the revenue side is addressed, the pruning will continue until the dead trunk is all that remains. If we are so perilously close to liquidation (which I happen to agree with, BTW), what the hell do we have to lose? Take a good look at what we are going through, UAL is undoubtedly following the same path. As a wise man told my supervisor last night, The road to hell is paved with good intentions.

Remember this as you try to right your own ship, those who do not learn from history are doomed to repeat it.
 
C

chipmunn

Guest
Give UAL777flyer a break. He is a valuable poster who provides balanced and well thought out information. I have learned a lot about this industry and his company through his posts. UAL777flyer has the best of intentions and I am glad he takes his personal time to post his perspective on the US board.[BR][BR]Keep it up UAL777flyer, we need your input.[BR][BR]Chip
 

TomBascom

Veteran
Aug 20, 2002
660
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US does not have to match HP's fare's. They need to emulate the technique.

Yes, there are differences in detail. There are also striking similarities between the two airlines.

UAL777flyer often brings up the difference in CASM as being significant. Ok, fine, it's significant. Let's work the numbers... according to usairways.com CASM is now 10.95 cents/mile. Average passenger journey is 845 miles. Load factor is 66.9%. To break even with that load factor US Airways needs 16.34 cents/mile from passengers.

Given those numbers I should be able to fly MHT to PHL & back for less than $100. What does it really cost? $720. Is it any wonder that business travelers feel ripped off?
 

OldGuyinPA

Veteran
Aug 20, 2002
700
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Common sense left USAir...ways more than a decade ago. Common sense would tell Dave to get rid of any of the old inept VP's..from the Wolf, Gangwal regime. It isn't going to change until he does.
 

fr8tmastr

Senior
Aug 20, 2002
482
46
Did anyone else notice in the opening statement Dave said the reason U is losing passengers to and from FL. is because of taxes and High Labor costs? What he didnt mention is when you reduce your flying to FL your pax count will also be reduced. So in other words our leader thinks that we, labor are to blame for losing the FL flying, not the fact that the flights have been drastically cut. Maybe we should all work for free for a week just to see how he can spin U's disaster on us that week. I still think he is only trying to reduce U to a carrier small enough to be sold off or merged with someone else
 

AOG-N-IT

Veteran
Aug 19, 2002
1,132
1
www.usaviation.com
[blockquote]
----------------
On 11/16/2002 8:16:56 PM oldiebutgoody wrote:

[blockquote]
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On 11/16/2002 5:42:27 PM fr8tmastr wrote:

... I still think he is only trying to reduce U to a carrier small enough to be sold off or merged with someone else
----------------
[/blockquote]
Not a doubt in my mind....
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[/blockquote]
Oldie, That has been my thoughts all along. The lack of dealing with the internal..and fixable flaws has had me wondering if there hasn't been an alterior motive for months...then again this is not to discount the Wolf Doctrine is still not the ultimate goal anyway. [img src='http://www.usaviation.com/idealbb/images/smilies/8.gif']
 

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