Slot Transaction, E-190 Sale, Crew Base Closures, & Realignment Designed to Shop the Company for Sal

[USA320Pilot]

On November 3 Doug Parker addressed Pilots & Flight Attendants at his monthly CLT Crew News session. A pilot asked Doug, "are you actively shopping to merge with anybody?"

Doug commented on consolidation and said it makes sense and if US Airways participates the company is better off. However, Doug believes US Airways will be a long-term, sustainable airline (without a merger).

Doug indicated "we're not running around with a for sale sign on the company."

However, Doug said, "We have been talking all the time for a long time (on a merger), by the way. I have no idea where this ends up, if anything comes of anything. Because planets have to align."

Then Doug asked a rhetorical question. Doug said, "are we actively shopping to merge with anybody? Are we packaging it for sale?"

Doug responded to his question by stating, "I do not know what that means, frankly. What we announced last week (Crew Base Closures, Transatlantic Service Changes, E-190 on BOS-LGA Shuttle, etc.) does not make it any easier or any harder to merge with another company. (We are) not positioning this airline to sell it."

Separately, at a Press Conference at the CLT Training Center Doug made the following comments:

"Charlotte is extremely resilient and holding up nicely, and there’s a lot else that drives the economy.â€

“The business community here is strong.â€

US Airways “is not shrinking here.â€

Business travel in Charlotte is picking up from the summer doldrums, Parker said, adding he was “cautiously optimistic†about a turnaround in business travel next year.

Parker cited “fuel and revenue†as the carrier’s greatest hurdle to profitability.

The airline is a victim of the economic recession, he said, but will bounce back as the economy rebounds. “That’s assuming fuel (prices) stay where they are.â€

Parker defended the airline’s checked-baggage fee and a la carte menu pricing. He acknowledged the charges were a “sore spot for customers†but said they were necessary to stanch the flow of red ink.

Regards,

USA320Pilot

 

[ableoneable]

Parker said absolutely nothing new, concrete or meaningful.

Why you decided it deserved it's own thread is the real question.

 

[USA320Pilot]

Able,

I made the post because the information presented has direct quotes from Doug Parker and the information is real time focused on three topics. As you know, Doug addressed Pilots and Flight Attendants in separate meetings and he spoke with the News Media on Tuesday.

There were a number of points discussed, but I believe there are three key topics in Doug's discussion that USaviation.com's readers may be interested in hearing about from the company's CEO. The three points are:

1. The recent reorganization consisting of the Delta LGA/DCA Slot Transaction, Republic E-190 Sale, Crew Base Closures, reduction in LAS/BOS & Transatlantic ASMs, etc. is not designed to package the company for sale. The strategic transactions are designed to improve the company's fundamentals. And, Doug indicated "we're not running around with a for sale sign on the company."

2. As far as M&A Activity, Doug said, "We have been talking all the time for a long time (on a merger), by the way. I have no idea where this ends up, if anything comes of anything. Because planets have to align."

3. US Airways “is not shrinking here (CLT)," Doug indicated.

Regards,

USA320Pilot

 

[Dog Wonder]

Nothing new here.

 

[AirbusAVE]

To quote someone from Urbanplanet.org,

"Yesterday's local Raleigh TV news reports inluded a comment from Gov. Perdue to the effect that there will be some big news within the next couple of months involving China and Charlotte as a result of her recent trade mission. Does anybody on here know what she is referring to? Based on her blog comments about the trip, I think it could involve ENN, a Chinese energy company which has recently partnered with Duke Energy to jointly develop commercial solar power projects in the United States. ENN is China's 7th largest privately owned company. Perdue toured the company during her trip and met with ENN officials, and her blog includes the following comment:
"Duke Energy recognizes the promise ENN holds and has wisely tapped into it, joining together with the company in an exciting new business venture. With any luck, that relationship will blossom, leading to a permanent ENN presence in our state""




If Charlotte does get ENN, I bet that will have a profound affect on US Airways and maybe US airways can get some flights to Asia from Charlotte. China's 7th largest company having their US H/Q in Charlotte would be quite amazing. So, I think US in CLT will be around for quite sometime.

 

[ClueByFour]

If Charlotte does get ENN, I bet that will have a profound affect on US Airways and maybe US airways can get some flights to Asia from Charlotte. China's 7th largest company having their US H/Q in Charlotte would be quite amazing. So, I think US in CLT will be around for quite sometime.

Toshiba has owned Westinghouse Electric since 2006. Did not help PIT. ENN is not going to do a damn thing for CLT, except to make it harder to upgrade CLT-SFO and back.

 

[back2CLT]

It'll take a lot more than 1 company to induce US Airways or a *A to add a non-stop Asia-Charlotte. That said, Duke Energy is actively seeking to launch multiple joint ventures with a variety of Chinese firms, as well as establish their own offices in Beijing and Ghangzhou. Maybe 5-10 years, there could be a critical mass that could support a flight, but not now.

As far as Parker's comments, I for one take them at face value (this time). This re-alignment makes it less appealing for United, more appealing for CO, probably neutral for AA, etc etc.......They are running the airline to make it as profitable as possible. To think that they would make these major chances on a hope and prayer that it leads to a merger is foolish. They can't groom themselves to attract everyone, so wisely they are just looking out for themselves.

Looking into my crystal ball, I see second half of 2010 to be wildly profitable for US, as I believe the business climates in both Philly and Charlotte to be in full recovery, and Washington will be a huge success, given the magnetic pull this new huge federal government is creating, and their increased stranglehold in that marketplace.

 

[usabusdriver]

...

1. The recent reorganization consisting of the Delta LGA/DCA Slot Transaction, Republic E-190 Sale, Crew Base Closures, reduction in LAS/BOS & Transatlantic ASMs, etc. is not designed to package the company for sale. The strategic transactions are designed to improve the company's fundamentals. And, Doug indicated "we're not running around with a for sale sign on the company."

2. As far as M&A Activity, Doug said, "We have been talking all the time for a long time (on a merger), by the way. I have no idea where this ends up, if anything comes of anything. Because planets have to align."

...
USA320Pilot

I think the key point here is that there may be no for sale sign in the window, but there is definitely a we want to merge sign in the window as well as the front yard. No carrier has excess cash on hand available for an outright purchase, more likely a stock swap merger. The transactions designed to improve the company's fundamentals would also strategically improve the prospects for a merger. He and scooter are frantically trying to align the planets, they have a lot of options that are underwater.

Just my.02

 

[USA320Pilot]

Back2CLT,

I tend to agree with you regarding improvement company economics in the last two quarters of 2010. I believe with an improving economy, stable energy prices, and better company fundamentals/economics management will significantly improve the company's financials in 2010.

It appears for 2009 US Airways will once again be number one in On Time Performance and number two in MBRs behind Continental. And, customer compalints have dropped 40%. There is no question running a good airline is imperative in today's environment.

I do not like the recent restructuring news because of how difficult this and others have been on employees. The LAS, PIT, SYR, BOS, LGA, and other facility downsizings and base closures are very disruptive to people's lives. However, I understand the company's recent moves and the need to improve fundamentals.

LAS has always been a leisure, low fare, low RASM market. I have been to LAS about 6 times in the past few months and the casinos and hotels have a depressed occupancy. Last week many restaurants and bars were empty, live entertainment was almost non-existent, and the strip did not have a lot of people walking around.

In LGA there are and have been a lot of problems of the years. The terminal lease and maintenance costs $71.5 million per year and after the DL Slot Transaction is complete US Airways' facility lease expense will drop to $4.5 million per year. At one time US Airways was able to fly DC-9s and F-100s from LGA to upstate New York, Richmond, Norfolk, etc. and make money because the business fare was so high that costs were covered. However, then JetBlue developed a JFK hub (if JetBlue had not entered JFK Southwest, AirTran, or another low cost airline would have come to NYC) and yields dropped to unprofitable levels. In response US Airways began using a lot of RJs and Turboprops to try to have a lower trip cost, but this failed too when oil prices went up to $147 a barrel and jet fuel/other costs could not be covered in the new lower fare/recession market. In addition, due to the PANYNJ’s perimeter rule US Airways is restricted to flying short-haul markets and cannot fly to markets that would help make LGA profitable.

In BOS the company has a beautiful and expensive terminal with high lease/maintenance costs, but the off-season Caribbean market is no longer profitable in today’s economy and BOS is expected to lose a lot of money following spring break if the schedule is not restructured.

Meanwhile, US Airways and every other legacy airline now has almost every asset leveraged and companies do not have much ability to increase liquidity. In US Airways' case the company has an $850 million unrestricted cash restriction with Citi that cannot be violated. Following the third quarter US Airways had $1.3 billion of unrestricted cash, but the company is going to lose more money in the seasonally slow third and fourth quarters and the analysts expect a 2009 loss of about $600 million.

In the short-term management has indicated that cash will build with new loans expected from its RJ fee for service operators, Airbus, and other business partners. Derek Kerr and senior management are negotiating new aircraft delivery delays that should have PDD cash returned to the Tempe-based airline. To comply with the minimum fleet count requirement Scott Kirby indicated on Wednesday that some B737s to remain in the fleet a little longer (the longer term plan is to replace all these jets), which will reduce the cash outlay required because credit remains tight. However, Doug indicated on Tuesday all 2010 A330-200 aircraft on order will be delivered.

Meanwhile, there are two major reasons 10 E-190s were sold and this capacity being removed. The pilot’s contract and specifically the Transition Agreement provides a Group II aircraft and above (B737, A320 family, B767/757, and A330) minimum fleet count, which limits the company’s ability to remove mainline capacity. The E-190 does not count towards the minimum fleet count and can be removed to help the company match capacity with today’s demand. Therefore, the only way to lower US Airways Group’s capacity is to remove E-190s because wholly owned flying and fee for service flying is very difficult to further remove from the network. Some fee for service flying ASMs have been removed voluntarily from the network by US Airways’ partners, but US Airways has contracts that cannot be broken with companies like Mesa (by the way…Doug indicated Mesa is a “severe†situation and today their stock is trading at about 15 cents per share or default levels as a penny stock), Air Wisconsin, and Republic. As far as PSA or Piedmont, some Dash 8s have been removed whose leases have expired, but nobody wants to buy a 50-seat RJ and PSA aircraft cannot be sold. That leaves only the E-190s to be sold/removed from service to reduce ASMS and Republic was a willing and ready buyer.

In summary, do I like the new restructurings? No, of course not. However, I understand the logic and the need for management to place the company's assets in markets that make money and remove assets from markets that do not make money. According to Scott Kirby and Doug PHL, DCA, CLT, and PHX make money and LAS, BOS, and LGA do not.

In my opinion, in today's marketplace US Airways cannot wait for the economy to improve or energy prices to go down. Management needs to manage the company to permit US Airways to regain profitability to position the company to be a stand-alone business entity that can withstand difficult economic environments.

Regards,

USA320Pilot

 

[US Oringinal]

Someone once told me:

You know how you can tell when Doogie is lying?? His lips are moving.

Sorry to remain pessimistic, but Doug will do whatever is financially expedient for himself, Scooter and the Board of Directors. If that is a merger, we'll merge. If that is an asset sale, he'll sell off whatever anyone will buy.

Now it may turn out that he has decided that the best way to line his own pockets is to run a profitable airline. But I think we'd be foolish to believe that the man has any other incentives besides making millions off our backs (in my humble opinion)

 

[bigbusboy]

Now it may turn out that he has decided that the best way to line his own pockets is to run a profitable airline.

Profitability certainly lines the pockets of senior exec. But it also creates job security and increased earning potential for the rank and file as well as growth potential for the organization. Business 101.

 

[a320av8r]

Someone once told me:

You know how you can tell when Doogie is lying?? His lips are moving.

Sorry to remain pessimistic, but Doug will do whatever is financially expedient for himself, Scooter and the Board of Directors. If that is a merger, we'll merge. If that is an asset sale, he'll sell off whatever anyone will buy.

Now it may turn out that he has decided that the best way to line his own pockets is to run a profitable airline. But I think we'd be foolish to believe that the man has any other incentives besides making millions off our backs (in my humble opinion)

"You know how you can tell when Doogie is lying?? His lips are moving." Did you just make that up? Hysterical <_< .

As far as doing what is expedient for ...BOD ala share holders, that is his job. Actually he is doing a good job. We are number 1 for on time, number 2 for mishandled baggage (unheard of before), number 1 for financial performance among legacy carriers, etc...
Most of us have goals. Since I was a child mine was to be an airline pilot, you may have one too. Doug wants to be CEO of a global airline and he will be. That is good for us since we will ride on his coat tails. I also believe that as painful as it is for some, the new business plan makes sense and will work. It isn't much different than what the other legacy carriers are doing, retrenching to their core markets. Even WN is pulling down flying and reallocating assets to more profitable markets. jetBlue is not taking delivery of new aircraft so guess where their new BOS flying will be coming from?
Most of us have been through base closings, we adjust and move on. Basically the Allegheny/Mohawk/Lake Central USAir is finally and thankfully gone, what is left is Piedmont, America West and post PI/PS/AL merger US Airways. We are literally scraping the rust off of this company and moving forward. You can come along for the ride or move on to other opportunities. I am optimistic.

Back to lurking...

 

[FlyUs]

In summary, do I like the new restructurings? No, of course not. However, I understand the logic and the need for management to place the company's assets in markets that make money and remove assets from markets that do not make money. According to Scott Kirby and Doug PHL, DCA, CLT, and PHX make money and LAS, BOS, and LGA do not.

PHX makes money?? yeah... right

 

[a320av8r]

PHX makes money?? yeah... right

Actually, yes.

 

[bigbusboy]

jetBlue is not taking delivery of new aircraft so guess where their new BOS flying will be coming from? DL and AA's JFK hub.

Interesting and a VERY GOOD point. I said earlier that all of this pruning points to a merger. But now I'm leaning more towards the possibility that, just maybe, they're starting to focus on running a financially viable operation. The SWOT analysis around here has sucked for a long time. In that scenario, the fundamentals of business tell you to assess what makes you money, look for opportunities, but get back to the basics of your operation. I think that's exactly what they're doing.