- Nov 9, 2003
- 16,512
- 5,865
[Notice that in the 4th paragraph the bar has been raised - Jim]
Aviation Daily
US Air Needs To Cut Costs By Yearend To Survive LCCs Battle
By Steve Lott
02/26/2004 10:00:55 AM
US Airways CEO David Siegel yesterday warned the airline must cut its costs by at least 25% by yearend -- and preferably by this summer -- or face ultimate defeat by Southwest and other low-cost carriers invading its network.
Following a speech to the Potomac Officers Club in Washington, Siegel told The DAILY, "We need to have a competitive cost structure in place" when Southwest starts service to Philadelphia in May, "or shortly thereafter." One thing is clear, it must lower its unit costs in 2004, he said. "The sooner, the better because Southwest is coming, and we need to be able to compete vigorously."
Siegel told local business leaders that US Air's 10-cent unit costs won't lead to profitability in the rapidly changing environment, and he aims to cut four cents from CASM on routes where the airline competes with low-cost carriers.
Roughly 2.5 cents of that will come from labor, he noted. While Siegel is "making good progress" with the carrier's labor groups, if he does not win concessions, the airline will "have to look at other alternatives that are not as attractive to our employees and our stakeholders."
There is no way to stop the economic forces, he said, adding, "We know what will happen to us in Philadelphia if we don't fix our problems." He believes management is entering a "constructive phase" in its labor talks after both sides "vented" frustrations. The next round is often the most difficult, he said, and will be "painful for everyone, but we have no choice but to rally together."
Siegel also said that domestic consolidation is "inevitable" during the next few years. He predicts a U.S. market with two or three strong hub-and-spoke carriers providing international service with broad networks, and then a "swarm" of low-cost carriers battling it out in high-density markets.
After his speech, Siegel said the US Airways assets "will participate in the consolidation process," but not much else unless the airline is able to lower its costs to competitive levels. If it can't cut costs, "we will be the awkward teenager at the school dance, hoping someone will come talk to us, but going home disappointed and lonely."
Aviation Daily
US Air Needs To Cut Costs By Yearend To Survive LCCs Battle
By Steve Lott
02/26/2004 10:00:55 AM
US Airways CEO David Siegel yesterday warned the airline must cut its costs by at least 25% by yearend -- and preferably by this summer -- or face ultimate defeat by Southwest and other low-cost carriers invading its network.
Following a speech to the Potomac Officers Club in Washington, Siegel told The DAILY, "We need to have a competitive cost structure in place" when Southwest starts service to Philadelphia in May, "or shortly thereafter." One thing is clear, it must lower its unit costs in 2004, he said. "The sooner, the better because Southwest is coming, and we need to be able to compete vigorously."
Siegel told local business leaders that US Air's 10-cent unit costs won't lead to profitability in the rapidly changing environment, and he aims to cut four cents from CASM on routes where the airline competes with low-cost carriers.
Roughly 2.5 cents of that will come from labor, he noted. While Siegel is "making good progress" with the carrier's labor groups, if he does not win concessions, the airline will "have to look at other alternatives that are not as attractive to our employees and our stakeholders."
There is no way to stop the economic forces, he said, adding, "We know what will happen to us in Philadelphia if we don't fix our problems." He believes management is entering a "constructive phase" in its labor talks after both sides "vented" frustrations. The next round is often the most difficult, he said, and will be "painful for everyone, but we have no choice but to rally together."
Siegel also said that domestic consolidation is "inevitable" during the next few years. He predicts a U.S. market with two or three strong hub-and-spoke carriers providing international service with broad networks, and then a "swarm" of low-cost carriers battling it out in high-density markets.
After his speech, Siegel said the US Airways assets "will participate in the consolidation process," but not much else unless the airline is able to lower its costs to competitive levels. If it can't cut costs, "we will be the awkward teenager at the school dance, hoping someone will come talk to us, but going home disappointed and lonely."
