Dear Fellow Employee:
Sifting through a lot of information and talking with different sources, I have put together a list of information on points being discussed by US Airways' management that could become part of the upcoming "Transformation Plan".
It is my understanding the new business plan will be a hybrid LCC/network carrier program designed to lower unit costs while maintaining a revenue premium in small spoke, Caribbean, and other international markets.
The company recognizes there is a revenue and pricing problem and management understands the need to simplify the fare structure, but before it can be done the company must match the LCC pricing its model to prevent a revenue drain, thus US Airways must transform itself by lowering its unit costs to a competitive level.
Parts of the plan could include rolling hubs to dramatically smooth out flying/hub delays (this could be huge in PHL and I like it) and will also increase ground personnel productivity within current contractual provisions. PHL could also see runway changes with turboprops using runway 26, RJs on 17/35, and mainline aircraft on 9/27s.
The company has hinted to ALPA it intends to expand block hours with more destinations and point-to-point flying, but management will need major productivity improvements across-the-board -- in all work groups -- to permit more flying at a lower unit cost.
The current aircraft utilization rate is 10 hours per day (designed to match capacity with demand) and the company would like to increase this as much as possible -- if costs can be dropped to permit lower fares, which could drop unit costs by better utilizing existing facilities/assets.
We can expect to see more facility integration with United and after LAX early next year, likely airports to see co-located facilities are SFO & DEN, which will reduce the combined business entity facility expense. Moreover, the PIT hub negotiations are still being held hostage to United’s inability to obtain exit financing and PIT costs savings should evolve as well, but it's unclear how this will unfold and the company could exit this hub and move its assets westward.
The company continues to evaluate more long-haul Airbus flying to places like, Panama City, Panama, Guatemala City, Guatemala, San Salvador, El Salvador, Albuquerque, San Jose, Portland, Salt Lake City, and Reno, but to do this management desires improved employee productivity from all workgroups, although the agents and ground personnel have provided productivity enhancements for these new markets with their mainline/express provision and because these new cities can be operated with contractors.
Reports indicate US Airways could sell some gates to Virgin USA to further lower its costs and the airports being mentioned are Boston, Philadelphia, San Francisco Los Angeles, and Miami. The intent could be to obtain capital, increase utilization of existing facilities, and to permit further integration with United. According to the Los Angeles Times Virgin USA CEO Richard Branson indicated an agreement with the airline could be reached as early as next week.
In regard to Europe, Siegel told Air Transport World in their September edition US Airways will "ultimately fly up to 20 European destinations" out of Philadelphia, where I understand Milan, Zurich, Athens, Copenhagen, and Brussels could be new destinations, although just two more can be added with our current fleet (the wide body fleet could grow).
In regard to pilot and F/A productivity, "Pref Bid" will fuel some of these block hour growth this spring, but in my opinion to increase flight crew productivity towards Southwest and JetBlue numbers, I expect to see the company ask for things like PC/PT/RGS to always be pay no credit, combine B767D with B767I flying, establish training lines to reduce or eliminate bought trips, permit pilots to move early to a new bid to avoid inactive with pay status, increase training holds, increase TDY times etc.
Moreover, the plan will involve no W-2 cuts or pilot furloughs.
Let’s not forget the company will see big revenue boosts in 2004 and 2005 with the addition of over 200 more RJs (100 in 2004 & 2005 each) and the Spanair, Lufthansa, Star, and GoCaribbean code share alliances will be fully integrated. In regard to MDA, the EMB-170s will now have a single class, to help the company battle the pending JetBlue EMB-190 deployment scheduled to begin in about 3 years.
The first MDA EMB-170 line pilot training class began on November 20 and MDA is progressing with the specific aircraft delivery schedule to be announced shortly. Last week the federal government approved the FAA Reauthorization Act, which will permit the company to fly the EMB-170 into Washington National. Management believes this will give US Airways a competitive advantage and Siegel has told Shuttle employees this aircraft could fly the Shuttle during off peak hours, to better match capacity with demand.
The intent of the Shuttle move would be to reallocate the current off peak A319s to long-haul markets and make the Shuttle profitable. From this observers first hand experience, mid day Shuttle flights (Boston, New York, and Washington) have between 40 to 60 passengers, therefore, a 70-seat jet could become instantly profitable with its 50% break even load factor.
To further boost revenue and cut costs there will be more emphasis on a simplfied fare structure with lower distribution channels. There will be more focus on Kiosks and internet booking and in my opinion, as part of the PIT hub negotiations, we could see the elimination of the Greentree Reservation facility and the addition of reservation space at the Winston-Salem facility, where there is extra office space available for a streamlined reservations sales operation.
Senior management has let it be known that industry consolidation is inevitable and informed sources have said it's only a matter of time. However, a deal cannot proceed at this time with United because the Chicago-based airline cannot emerge from bankruptcy due to its four key unresolved problems.
One report indicates senior executives would like to see a deal similar in scope to ValueJet and AirTran where US Airways would be the survivor, the corporate headquarters would remain in CCY, the paint scheme and wordmark would be US Airways', and the new name of the combined business entity would be United Airlines because the Chicago-based carrier has greater market identity due to its size and network breath.
If United cannot file a POR that is due the first week in March (although the carrier is expected to seek another extension), then we could see the UCT, an AF-KLM type of deal, or a true merger, provided US Airways can get its unit costs down to about 8.7 cents.
However, as I have said before, before any deal can proceed both companies must first stabilize their business, then they can negotiate the final deal, but industry consolidation is inevitable.
Regardless, the transformation plan is evolving and we should hear more in the not-so-distant future.
Regards,
Chip
Sifting through a lot of information and talking with different sources, I have put together a list of information on points being discussed by US Airways' management that could become part of the upcoming "Transformation Plan".
It is my understanding the new business plan will be a hybrid LCC/network carrier program designed to lower unit costs while maintaining a revenue premium in small spoke, Caribbean, and other international markets.
The company recognizes there is a revenue and pricing problem and management understands the need to simplify the fare structure, but before it can be done the company must match the LCC pricing its model to prevent a revenue drain, thus US Airways must transform itself by lowering its unit costs to a competitive level.
Parts of the plan could include rolling hubs to dramatically smooth out flying/hub delays (this could be huge in PHL and I like it) and will also increase ground personnel productivity within current contractual provisions. PHL could also see runway changes with turboprops using runway 26, RJs on 17/35, and mainline aircraft on 9/27s.
The company has hinted to ALPA it intends to expand block hours with more destinations and point-to-point flying, but management will need major productivity improvements across-the-board -- in all work groups -- to permit more flying at a lower unit cost.
The current aircraft utilization rate is 10 hours per day (designed to match capacity with demand) and the company would like to increase this as much as possible -- if costs can be dropped to permit lower fares, which could drop unit costs by better utilizing existing facilities/assets.
We can expect to see more facility integration with United and after LAX early next year, likely airports to see co-located facilities are SFO & DEN, which will reduce the combined business entity facility expense. Moreover, the PIT hub negotiations are still being held hostage to United’s inability to obtain exit financing and PIT costs savings should evolve as well, but it's unclear how this will unfold and the company could exit this hub and move its assets westward.
The company continues to evaluate more long-haul Airbus flying to places like, Panama City, Panama, Guatemala City, Guatemala, San Salvador, El Salvador, Albuquerque, San Jose, Portland, Salt Lake City, and Reno, but to do this management desires improved employee productivity from all workgroups, although the agents and ground personnel have provided productivity enhancements for these new markets with their mainline/express provision and because these new cities can be operated with contractors.
Reports indicate US Airways could sell some gates to Virgin USA to further lower its costs and the airports being mentioned are Boston, Philadelphia, San Francisco Los Angeles, and Miami. The intent could be to obtain capital, increase utilization of existing facilities, and to permit further integration with United. According to the Los Angeles Times Virgin USA CEO Richard Branson indicated an agreement with the airline could be reached as early as next week.
In regard to Europe, Siegel told Air Transport World in their September edition US Airways will "ultimately fly up to 20 European destinations" out of Philadelphia, where I understand Milan, Zurich, Athens, Copenhagen, and Brussels could be new destinations, although just two more can be added with our current fleet (the wide body fleet could grow).
In regard to pilot and F/A productivity, "Pref Bid" will fuel some of these block hour growth this spring, but in my opinion to increase flight crew productivity towards Southwest and JetBlue numbers, I expect to see the company ask for things like PC/PT/RGS to always be pay no credit, combine B767D with B767I flying, establish training lines to reduce or eliminate bought trips, permit pilots to move early to a new bid to avoid inactive with pay status, increase training holds, increase TDY times etc.
Moreover, the plan will involve no W-2 cuts or pilot furloughs.
Let’s not forget the company will see big revenue boosts in 2004 and 2005 with the addition of over 200 more RJs (100 in 2004 & 2005 each) and the Spanair, Lufthansa, Star, and GoCaribbean code share alliances will be fully integrated. In regard to MDA, the EMB-170s will now have a single class, to help the company battle the pending JetBlue EMB-190 deployment scheduled to begin in about 3 years.
The first MDA EMB-170 line pilot training class began on November 20 and MDA is progressing with the specific aircraft delivery schedule to be announced shortly. Last week the federal government approved the FAA Reauthorization Act, which will permit the company to fly the EMB-170 into Washington National. Management believes this will give US Airways a competitive advantage and Siegel has told Shuttle employees this aircraft could fly the Shuttle during off peak hours, to better match capacity with demand.
The intent of the Shuttle move would be to reallocate the current off peak A319s to long-haul markets and make the Shuttle profitable. From this observers first hand experience, mid day Shuttle flights (Boston, New York, and Washington) have between 40 to 60 passengers, therefore, a 70-seat jet could become instantly profitable with its 50% break even load factor.
To further boost revenue and cut costs there will be more emphasis on a simplfied fare structure with lower distribution channels. There will be more focus on Kiosks and internet booking and in my opinion, as part of the PIT hub negotiations, we could see the elimination of the Greentree Reservation facility and the addition of reservation space at the Winston-Salem facility, where there is extra office space available for a streamlined reservations sales operation.
Senior management has let it be known that industry consolidation is inevitable and informed sources have said it's only a matter of time. However, a deal cannot proceed at this time with United because the Chicago-based airline cannot emerge from bankruptcy due to its four key unresolved problems.
One report indicates senior executives would like to see a deal similar in scope to ValueJet and AirTran where US Airways would be the survivor, the corporate headquarters would remain in CCY, the paint scheme and wordmark would be US Airways', and the new name of the combined business entity would be United Airlines because the Chicago-based carrier has greater market identity due to its size and network breath.
If United cannot file a POR that is due the first week in March (although the carrier is expected to seek another extension), then we could see the UCT, an AF-KLM type of deal, or a true merger, provided US Airways can get its unit costs down to about 8.7 cents.
However, as I have said before, before any deal can proceed both companies must first stabilize their business, then they can negotiate the final deal, but industry consolidation is inevitable.
Regardless, the transformation plan is evolving and we should hear more in the not-so-distant future.
Regards,
Chip
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