David Siegel, US Airways chief executive officer, addressed the Goldman Sachs 18th Annual Transportation Conference in New York at the Essex House on February 4. Siegel provided conference attendees a 30-minute slide presentation; however, due to the formal restructuring he was unable to answer analyst and news media questions.
The slide presentation can be viewed at http://investor.usairways.com/downloads/U020403.pdf
Siegel noted that US Airways is the only major network carrier to finish in the top three of all DOT rankings during the past two years.
The company is number one in the East Coast and controls about 31 percent of the regions industry revenues. US Airways is number 1 or 2 in 72 percent of the 148 airports served in this region.
Share of Intra-East Coast Revenues
US Airways â€“ 31 percent
Delta â€“ 29 percent
Southwest â€“ 9 percent
Continental â€“ 7 percent
American â€“ 5 percent
Others â€“ 11 percent
The Company serves 10 European destinations and is the second largest carrier to the Caribbean. The Caribbean remains profitable, the Philadelphia international terminal will open mid-year, and US Airways will continue to grow its European operation.
The airline has implemented a 3-part restructuring plan to lower costs, increase revenue, and improve liquidity.
Lower Cost Structure:
Historically US Airways had the highest network cost structure for the 6 network carriers, but the company will drop to the lowest cost structure. Management expects costs to drop between those of America West and Continental and will be closer to America West. The â€œextremely competitiveâ€ cost structure will have about a 15 percent unit cost advantage over the â€œBig 5â€ and after their restructuring, Siegel expects US Airways to still have the lowest costs, which will be effectively frozen for the next 6.5 years.
Total Cash Cost reductions will be approximately $1.9 billion per year for the next 6.5 years
Labor - $1.04 billion, which will remain fixed. Siegel noted that in the event of war or a terrorist attack the company can reduce labor expense by 5 percent, which can be invoked multiple times for the next 6.5 years, if necessary. The will give US Airways a cash flow buffer if a â€œshockâ€ occurs to the industry.
Lessors & Vendors â€“ Approximately $500 million per year with 90 percent on the aircraft agreements already re-negotiated. The Company is currently re-negotiating agreements on 29 Airbus aircraft and expects to obtain further savings.
Management, Others Vendors, and Business Optimization savings - $400 million per year
The Mainline Stage Length Adjusted ASM (excluding fuel)
US Airways â€“ 12.8 cents (pre-restructuring)
Continental â€“ 12.3 cents
Big 5 â€“ 12.1 cents
US Airways (2003) -10.6 cents
America West â€“ 10.0 cents
Southwest - 6.5 cents
Alliances - In process of obtaining final approval to enter the Star Alliance, which is expected this spring. Star alliance code sharing is expected to begin in the late summer or early fall. The UAL domestic alliance revenue is exceeding expectations.
Regional Jets â€“ US Airways is currently in discussions with both Embraer & Bombardier. US Airways Express will add 80 to 100 RJs to the network this year and will have 300 total deployed by 2006. US Airways route network is the perfect network for RJs and the airline went from the most restrictive to the most liberal industry RJ agreement. Later this year US Airways will start up its MidAtlantic division where it will operate the EMB-170/175 or CRJ-700/886, which will seat 76 or 78 passengers respectively in a two-class configuration. Siegel said he believes just like the industry introduction of the 50-seat RJ was a â€œgame changerâ€, so will be the 70-seat RJ. These new scope agreements will allow US Airways to capture mainline revenues will regional costs, in an aircraft that has an Airbus type cabin with two by two seating.
US Airways expects to obtain $1.24 billion in exit financing with $1.0 billion in the ATSB Loan and $240 million in the RSA equity investment. Siegel called RSA â€œhugely supportiveâ€ and very helpful to the fast track reorganization. The company has secured commitments for the $100 million of risk capital of the $1 billion loan and is in the final stages of obtaining ATSB approval. Siegel said he is â€œhighly confidentâ€ the company will obtain the loan guarantee with a stronger application than in the summer and the airline is currently working to finalize the process.
January 17 â€“ Disclosure Statement/Voting Procedures Approved
January 31 - Voting Package Mailed to Creditors
February 27 â€“ Plan Exhibits Filing Deadline
March 10 â€“ Deadline for Voting and Plan Objections
March 18 through 20 â€“ Plan Confirmation Hearing
March 31 â€“ Target Emergence from Chapter 11