Last year US Airways hedged about one-third of its fuel requirements and hedged about a five-percent this year.
Today’s edition of the edited by moderator Daily Airline News at report has an interesting table that looks at U.S. Legacy Carrier Operating Results Adjusted By Fuel price and its effect on US Airways’ return to profitability.
Through the third quarter of 2004, US Airways had the lowest fuel cost per gallon of any network carrier and clearly illustrates the company’s current problem. US Airways made this achievement with a successful fuel hedge program coordinated by the Finance Department, however, to comply with federal loan guarantee minimum unrestricted cash requirements the company elected to sell $46 million in fuel hedge positions. Without this sale the company would have violated the end of February minimum cash requirements required by the ATSB.
Each $1 increase in the price of NYMEX Crude Oil Futures increases the company’s average fuel expense by $2 million per month or $24 million per year, which is adversely effecting the company’s transformation. Last summer when the company drew up its new business plan crude oil was trading in the mid-$30s and today it is trading at about $56 per barrel. That increase in about seven months time has increased the company’s annual energy expense by about $500 million per year.
The table at www.chipsplace.com indicates that with US Airways’ labor savings and fuel at more acceptable levels, the company would be profitable today.
To help offset the increase in jet fuel prices the company has obtained deeper employee cost cuts ($317 million per year higher than the initial ask of $800 million for a total of $1.17 billion per year plus elimination of DB retirement plan obligations) and has obtained five fare increases during the past five weeks that will strengthen revenue. To further cut costs the carrier is now focused on cost management, fuel conservation, and operational efficiency. Senior management has created a new task force that began work last week whose objective is to return the airline to industry leading operational performance.
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At the beginning of March US Airways had sufficient cash-on-hand to comply with the ATSB’s minimum requirements and then had access to $100 million in additional liquidity. The company drew down $75 million from the Air Wisconsin debtor-in-possession/equity investment facility and was eligible to draw another $25 million on March 31. In addition, the company can elect to obtain another $110 million in liquidity from its agreement with Wexford Capital/Republic by disposing of MDA assets and 137 East Coast commuter slots, if required.
US Airways poor operational performance created the largest major airline customer-service drop-off last year, reflecting the company’s deep personnel cuts and the turmoil created by the formal reorganization.
One key component of the plan to improve operational performance has to be to improve employee-management relations. During the past few days the company held discussions with the CWA and the AFA to resolve some differences and grievances and a significant amount of progress had been made.
AFA MEC president Teddy Xidas told the Beaver County Times "We're very pleased with this," Xidas said. "This is really moving in the right direction for management and labor for our group." "Basically, the company is wanting us to join hands and kumbaya," she said. "The company wants us to move to help, to get the labor coalition together to find ways to change morale."
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I believe a key component required for US Airways to return its operation to industry leading standards enjoyed in 2002 and 2003, which will further drop unit costs, is for the company to stop exploiting key areas of labor contracts. The airline is now in a period of transition with labor contract changes, outsourcing, new personnel manning models, and fleet plan changes. These changes will cause periods of disruption and to limit the problems, there must be a spirit of cooperation between the parties to provide US Airways’ customers with industry leading service. The only way to achieve the level of cooperation required for success is for management to stop exploiting the pilot and other union contracts, honor the new CBA’s, and to clear up the grievance backlog.
Only then will US Airways be able to obtain industry leading DOT performance, which will increase revenue and lower costs.
Regards,
USA320Pilot
Today’s edition of the edited by moderator Daily Airline News at report has an interesting table that looks at U.S. Legacy Carrier Operating Results Adjusted By Fuel price and its effect on US Airways’ return to profitability.
Through the third quarter of 2004, US Airways had the lowest fuel cost per gallon of any network carrier and clearly illustrates the company’s current problem. US Airways made this achievement with a successful fuel hedge program coordinated by the Finance Department, however, to comply with federal loan guarantee minimum unrestricted cash requirements the company elected to sell $46 million in fuel hedge positions. Without this sale the company would have violated the end of February minimum cash requirements required by the ATSB.
Each $1 increase in the price of NYMEX Crude Oil Futures increases the company’s average fuel expense by $2 million per month or $24 million per year, which is adversely effecting the company’s transformation. Last summer when the company drew up its new business plan crude oil was trading in the mid-$30s and today it is trading at about $56 per barrel. That increase in about seven months time has increased the company’s annual energy expense by about $500 million per year.
The table at www.chipsplace.com indicates that with US Airways’ labor savings and fuel at more acceptable levels, the company would be profitable today.
To help offset the increase in jet fuel prices the company has obtained deeper employee cost cuts ($317 million per year higher than the initial ask of $800 million for a total of $1.17 billion per year plus elimination of DB retirement plan obligations) and has obtained five fare increases during the past five weeks that will strengthen revenue. To further cut costs the carrier is now focused on cost management, fuel conservation, and operational efficiency. Senior management has created a new task force that began work last week whose objective is to return the airline to industry leading operational performance.
See Story
At the beginning of March US Airways had sufficient cash-on-hand to comply with the ATSB’s minimum requirements and then had access to $100 million in additional liquidity. The company drew down $75 million from the Air Wisconsin debtor-in-possession/equity investment facility and was eligible to draw another $25 million on March 31. In addition, the company can elect to obtain another $110 million in liquidity from its agreement with Wexford Capital/Republic by disposing of MDA assets and 137 East Coast commuter slots, if required.
US Airways poor operational performance created the largest major airline customer-service drop-off last year, reflecting the company’s deep personnel cuts and the turmoil created by the formal reorganization.
One key component of the plan to improve operational performance has to be to improve employee-management relations. During the past few days the company held discussions with the CWA and the AFA to resolve some differences and grievances and a significant amount of progress had been made.
AFA MEC president Teddy Xidas told the Beaver County Times "We're very pleased with this," Xidas said. "This is really moving in the right direction for management and labor for our group." "Basically, the company is wanting us to join hands and kumbaya," she said. "The company wants us to move to help, to get the labor coalition together to find ways to change morale."
See Story
I believe a key component required for US Airways to return its operation to industry leading standards enjoyed in 2002 and 2003, which will further drop unit costs, is for the company to stop exploiting key areas of labor contracts. The airline is now in a period of transition with labor contract changes, outsourcing, new personnel manning models, and fleet plan changes. These changes will cause periods of disruption and to limit the problems, there must be a spirit of cooperation between the parties to provide US Airways’ customers with industry leading service. The only way to achieve the level of cooperation required for success is for management to stop exploiting the pilot and other union contracts, honor the new CBA’s, and to clear up the grievance backlog.
Only then will US Airways be able to obtain industry leading DOT performance, which will increase revenue and lower costs.
Regards,
USA320Pilot
