Us Airways & Industry Analysis

[nycbusdriver]

If I were you, I'd get a new map. To go from Seattle to Boise, you take 90 to 82 to 84. It is freeway all the way, but if you don't get off of 90, you'll miss Boise by a couple hundred miles.

[post="236420"][/post]​

WHat does Boise (BOI) have to do with Spokane (GEG)?

 

[firstamendment]

We have come a long way in half a years time, and much farther than so so many would have given us credit for.

We have full agreements now with 4/5 unions, and the remaining union's members will still be working, and get to vote upon thier future rather than walking and closing the doors like so so many have said would happen.

The tough issues of retiree costs and pensions have been settled now as well.

We have been told a POR is coming soon, in about a month. While others languish in Bankruptcy, we are getting done what needs to be done, and moving on out.

The ATSB, GE, Embraer, BoA, and Bombardier have all come to agreements with the company, and support our effort/future.
Is it a perfect picture, has it been an easy road, NO...!
But, we have come a long way, and despite the negative publicity, depsite the harsh negotiating enviorment, despite the looming competitive threat we are still moving forward.

Doubt all you want, but as one who witnessed the CAL turnaround, and as one who has studied both the Valujet/AirTran and AWA turnarounds... Things were just as or more dark for them before it got better.

We still control our future, and can make past these tough times into better ones, just like those other companies.

So yeah, we have a real challenge before us, but if it were so easy we would not be in the situation we are in right now anyways.

So wait and see what happens, you might be surprised.

[post="236419"][/post]​

Rico,

I like your optimism. I think we are all busy looking at all the bad. Well, we are not alone...AND it isn't just the airline industry. I, too, am trying to be optimistic. God knows I am hard on the powers that be, but I see things the same way as you.

Btw, our airline fleet is no worse than the others. I think when people say our fleet stinks, they have to remember that besides SW and JB, all others have a mixed fleet. The problem with our airplanes isn't that they are aging, but that they haven't been kept up with all the cutbacks.

You brought up some great points. I take back all the bad things I ever said about you. hehe!

 

[nycbusdriver]

2) The DH8, SF3, etc. are not operated by US Airways. If it weren't for the Express carriers (wholly owned or contract), I'm sure that US Airways would have gone out of business by now.

[post="236422"][/post]​

I disagree. If not for the "pay for departure" contracts that USAirways has with its contract express carriers, I suspect USAirways would be doing much better and Mesa would be out of business by now.

Or, in another scenario, mainline would stop subsidizing fares to all the little "cities" served by those airplanes/carriers and let those folks either pay their own way or drive to a big-city airport. Notice that SWA, JBLU and the other LCC's don't serve small cities, but skim the cream off the large markets that have high traffic numbers.

 

[mweiss]

WHat does Boise (BOI) have to do with Spokane (GEG)?

[post="236426"][/post]​

I hate it when I confuse my airport codes.

 

[funguy2]

mweiss: GEG is Spokane, WA. I-90 starts in SEA and goes through Spokane (GEG) on its way to BOS.

JS:

Focus city: My point is the company said it wants a focus city in PIT, not a hub. My point is that it is still very "hub-like" compared to other focus cities like AA at BNA and RDU, FL at PHL, and NW at IND and MKE.

Fleet types: I think you have the relationship wrong... The only way to cost-effectively dump whole fleets at once is through bankruptcy. Otherwise the costs of terminating leases and giving up large revenue streams with a reduction in fleet is too great. Even though the other carriers acheived this differently, I am certain that AA's large fleet of consistent MD-80's serves it well. CAL is down to just three aircraft types (777, 767/757, and 737), down from like 8 or more way back when (747, DC10, A300, DC-9, B727, B757, MD-80, 737-200). Not a bad accomplishment.

I am not opposed to multiple fleet types, as different aircraft are suited to different missions. However, US Airways has almost two aircraft for every mission. I have discussed this ad nausem previously, but here we go again:

B767/A330 - int'l over-water
B757/A321 - high density - med/long range
B737/A320/319* - medium density - medium range
* The Airbus family does offer much better range than "classic" 737s, thus affording US Airways some relief in this catergory
E170/CRJ-700 - low density - mid-range
ERJ/CRJ - ultra low density - mid range - upgraded/heavy prop market
DH8/SF3 - turbo props - ultra low density - short range

While the RJ's come through contract and wholly owneds, they add complexity to the system where it is unncessary. You don't see AA and CO (the lowest cost legacies) operating multiple types of RJs.

And I think US Airways has too many Express partners too... While more than one seems ok, at one point US Airways has 12. I think its now down to 6 or so... which is a good thing, but I think they could be better with 4 or 3.

Revenue: You are right, revenue is down too... But the goal here is profitability, which has yet to be acheived.

Marketing image: Continental is not a niche airline either, yet they have a consistent marketing image. Southwest is growing out of its niche, yet they have a consistent marketing image. US Airways image is not consistent, and sometimes, it seems, management goes out of its way to seem "inconsistent".

 

[sfb]

This is from 4th quarter 03, so it is a bit old, but I haven't downloaded any recently and have this saved in Excel where I can quickly find it:

I've got the 1Q04 (most recent I can find) numbers handy:

PIT-PHL:
distance: 267
pax/day: 446.37
avg fare: 273.06

SEA-GEG:
distance: 224
pax/day: 1311.53 (WN 27.01%; AS @ 72.54%)
avg fare: 74.96 (WN @ 69.61; AS @ 76.93)

Yes, it is clearly possible to compete with Southwest and have leading market share, but (1) Alaska is able to differentiate its product and (2) the revenue premium you can achieve is modest. If you look at PDX-OAK, Southwest leads Alaska in market share at a slightly higher average fare. But Alaska Airlines is pretty well run and has the very lucrative routes up to Alaska to help the airline prosper.

The key is that you're going to see PIT-PHL fares drop to about $50-60 each way on average for a while, and traffic will probably triple or more. Southwest will make money on those fares.

And this talk about Southwest's presence at PIT being "modest" is delusional. There are at least a dozen gates available and US only holds long-term leases on ten gates at PIT. Southwest started at PHL with a "modest" 14 flights per day and nearly tripled that to 41 within fewer than six months. They've got 34 aircraft coming this near (minus about half a dozen -200 retirements) and could probably convince Being to accelerate a few 2006 deliveries if need be.

As others have said, PIT's "abysmal revenue and O&D" (which were, incidentally, higher than CLT's as of 2002), are largely US Airways' doing. Heck, more people fly from El Paso to Baltimore than from Pittsburgh to Baltimore because the fares on US are so ridiculous.

I'm still very, very, very skeptical of the FLL "focus city" plan. Sure, there's money to be made flying from FLL to Latin America and the Caribbean. But you can bet that AA will respond and try to make things "painful" for US. And domestic yields out of FLL are horrendous.

I don't see how anyone can spin Delta's SimpliFares initiative as being good for US. If anything, it points out to me how US management has dragged their feet on simplifying fares. And now it looks like US is going to take a hit in revenue of roughly $15 million/month as a result (while Delta gets a bunch of positive press).

As for the IAM -- the devil is going to be in the details of the company's "final best" offer to the represented workgroups. My crystal ball is really cloudy here since it looks like the company's offer cuts fewer than 50% of the jobs.

 

[firstamendment]

I'm still very, very, very skeptical of the FLL "focus city" plan. Sure, there's money to be made flying from FLL to Latin America and the Caribbean. But you can bet that AA will respond and try to make things "painful" for US. And domestic yields out of FLL are horrendous.

[post="236444"][/post]​

Oh yeah, AA has sooo much money. When are you guys going to concede that AA is as screwed up as U. How much money has American made in 3 years? Some of you will poo-poo ANTHING this company does. Give me a break. :down:

 

[JS]

I disagree. If not for the "pay for departure" contracts that USAirways has with its contract express carriers, I suspect USAirways would be doing much better and Mesa would be out of business by now.

If that's the case, why didn't US gut the Express contracts in Chapter 11? That's even easier than gutting labor contracts (both legally and operationally).

UA tried that, and the result is Independence Air (maybe not indefinitely, but it has hurt UA revenues).

Or, in another scenario, mainline would stop subsidizing fares to all the little "cities" served by those airplanes/carriers and let those folks either pay their own way or drive to a big-city airport. Notice that SWA, JBLU and the other LCC's don't serve small cities, but skim the cream off the large markets that have high traffic numbers.

[post="236431"][/post]​

The only subsidy going on here is EAS, and possibly ATSB.

Making people drive to a big city just means more people flying on a LCC -- not a good idea for US Airways.

WN and B6 don't need to fly to small cities because they fill their planes going to large cities. WN and B6 are today what PI was in 1975. Maybe someday WN or B6 will find themselves in the same boat as US; time will tell.

 

[funguy2]

I think the subsidy refered to is that many airlines operate loss-making flights (or at least not the most profitable opportunities) due to history, geography or whatever. The airlines continue to fly at a loss for whatever reason and they internally "subsidize" the loss by making profits in other parts of their system. Even Southwest is "accused" of this by maintaining relatively large operations to smaller cities like LBB and JAN.

I agree with nycbusdriver, that if US Airways wants to be an LCC, they need to give up Youngstown, OH, DuBois, PA, Franklin, PA, Bradford, PA, Jamestown, NY, Altoona, PA, Johnstown, PA and the like, and let those folks drive to BUF, ERI, CLE, CAK, and PIT. That would be better for US Airways and probably better for the consumers (as many of them do this already anyways).

PI flew to lots of smaller cities between 1975 and 1989... and they did it intelligently. Something US Airways could look at... Maybe US Airways flights at ERI would be better (or bigger) if folks drove there from Jamestown, Bradford, Franklin, etc. Maybe CAK would do better without Youngstown. Maybe some of those lost passengers go to other airlines... But cost decline for the passenger and the airline when they drive a little further. Then US Airways could become more like PI was, with mainline jet (or at least CRJ-700) service to places like LAN, FAY, ILM, and UCA (assuming they make their way out of the "death spiral").

 

[JS]

Fleet types: I think you have the relationship wrong... The only way to cost-effectively dump whole fleets at once is through bankruptcy. Otherwise the costs of terminating leases and giving up large revenue streams with a reduction in fleet is too great.

I agree, but to do that successfully, you also have to gut the labor contracts that cause $$$ to be paid out for re-training and sitting at home because there's no airplane to fly.

Even though the other carriers acheived this differently, I am certain that AA's large fleet of consistent MD-80's serves it well. CAL is down to just three aircraft types (777, 767/757, and 737), down from like 8 or more way back when (747, DC10, A300, DC-9, B727, B757, MD-80, 737-200). Not a bad accomplishment.

I agree. AA and CO did not suddenly dump a fleet.

I am not opposed to multiple fleet types, as different aircraft are suited to different missions. However, US Airways has almost two aircraft for every mission. I have discussed this ad nausem previously, but here we go again:

B767/A330 - int'l over-water
B757/A321 - high density - med/long range
B737/A320/319* - medium density - medium range
* The Airbus family does offer much better range than "classic" 737s, thus affording US Airways some relief in this catergory
E170/CRJ-700 - low density - mid-range
ERJ/CRJ - ultra low density - mid range - upgraded/heavy prop market
DH8/SF3 - turbo props - ultra low density - short range

While the RJ's come through contract and wholly owneds, they add complexity to the system where it is unncessary. You don't see AA and CO (the lowest cost legacies) operating multiple types of RJs.

I agree that having two types with the same mission is dumb, but what is even dumber is dumping one of the two. You have to retire them gradually. US Airways has too many 737's and too many A320's to retire either one; otherwise you have to either buy new planes (out of the question at this time) or shrink substantially.

As far as I know, no Express carrier operates both the DH8 and the SF3.

MQ does operate both the ERJ and CRJ. Why that is I have no idea. XJ is all ERJ, and Delta Connection is either all ERJ or all CRJ depending on the carrier.

 

[funguy2]

I agree, but to do that successfully, you also have to gut the labor contracts that cause $$$ to be paid out for re-training and sitting at home because there's no airplane to fly.
I agree. AA and CO did not suddenly dump a fleet.
I agree that having two types with the same mission is dumb, but what is even dumber is dumping one of the two. You have to retire them gradually. US Airways has too many 737's and too many A320's to retire either one; otherwise you have to either buy new planes (out of the question at this time) or shrink substantially.

I agree with your points... However, US Airways had every opportunity in the last 10 years to simplify their fleets. And progress was made. Gone are the DC9's MD80, BAe-146, B727, F.28, F.100, and probably others. I believe the original Wolf/Gangwal Airbus plan envisioned replacing the entire mainline fleet with Airbus. I am sure that fell apart along the road to Chapter 11. Also, a point apparently lost on the airline when, AFTER BK#1 the airline ordered both ERJ-170's and CRJ700/705/900 aircraft!

However, as we stand today, US Airways no longer has the luxury of slowly and methodologically phasing out fleets. So the company is either stuck with multiple fleet types and the increased costs associated with that, or a forced shrinkage to reduce multiple fleet types. Particularly concerning is the A330/B767 fleets... According to research I have read, a fleet of aircraft acheives most of the economies of scale possible around 25 airplanes, in terms of maintenance, spare parts, crew efficiencies, etc. US Airways obviously is not even close to 25 of either type.

 

[JS]

I think the subsidy refered to is that many airlines operate loss-making flights (or at least not the most profitable opportunities) due to history, geography or whatever. The airlines continue to fly at a loss for whatever reason and they internally "subsidize" the loss by making profits in other parts of their system. Even Southwest is "accused" of this by maintaining relatively large operations to smaller cities like LBB and JAN.

I agree with nycbusdriver, that if US Airways wants to be an LCC, they need to give up Youngstown, OH, DuBois, PA, Franklin, PA, Bradford, PA, Jamestown, NY, Altoona, PA, Johnstown, PA and the like, and let those folks drive to BUF, ERI, CLE, CAK, and PIT. That would be better for US Airways and probably better for the consumers (as many of them do this already anyways).

PI flew to lots of smaller cities between 1975 and 1989... and they did it intelligently. Something US Airways could look at... Maybe US Airways flights at ERI would be better (or bigger) if folks drove there from Jamestown, Bradford, Franklin, etc. Maybe CAK would do better without Youngstown. Maybe some of those lost passengers go to other airlines... But cost decline for the passenger and the airline when they drive a little further. Then US Airways could become more like PI was, with mainline jet (or at least CRJ-700) service to places like LAN, FAY, ILM, and UCA (assuming they make their way out of the "death spiral").

[post="236458"][/post]​

This makes no sense. If someone in Jamestown, NY wants to fly but can't fly out of JHW, why drive to ERI when you could drive to PIT and pay less for a non-stop flight?

It would be great for US to be just like PI, but that means a total overhaul of management and employee culture, which isn't going to happen.

 

[RowUnderDCA]

us could simplify by handing to NW the keys to its airbuses and it's PHL hub... throw in DCA and U could get some cash for it. Then merge into UAL with 73s focusing on IAD with a newly cowed codependence air with backing from Bronner.

 

[funguy2]

This makes no sense. If someone in Jamestown, NY wants to fly but can't fly out of JHW, why drive to ERI when you could drive to PIT and pay less for a non-stop flight?

It would be great for US to be just like PI, but that means a total overhaul of management and employee culture, which isn't going to happen.

[post="236467"][/post]​

Because Jamestown to Erie drive is about 1 hour. Jamestown to PIT drive is 4 hrs. Jamestown to BUF drive is 2 hrs. I think a 1 hour drive is not unreasonable. I think people are probably already driving Jamestown to BUF and maybe CLE to get good fares, and if they could drive less, like to Erie and still get a good fare, it gives them a reason to pick US Airways from Erie vs someone else from BUF or CLE. Furthermore, it increases loads at ERI and eliminates the expense of running a station at JHW.

I think US Airways should stop trying to fly turboprops to every small town, and focus on a few of them... This will allow US Airways to fly larger aircraft, which customers prefer and have lower CASM... A win-win. The only "hitch" is that you have to convince the some folks to drive... But I think it can be done... I think US Airways could "consolidate" operations in the following areas:
ELM/ITH/BGM can be consolidated at BGM
JHW/FKL/ERI can be consolidated at ERI
SCE/IPT/DUB can be consolidated at SCE
MGW/CKB/LTE/AOO/JST could be consolidated at PIT
EWN/PGV/OAJ could be consolidated at EWN

I think people would be willing to drive, IF <big IF> the fares for the remaining service at BGM/ERI/SCE/PIT were consistently low like an LCC. If Southwest can do this at MCI (people drive in from Topeka and Wichita), and SDF (people drive in from LEX and CVG) and at BHM (people drive in from HSV and MGM), then US Airways should be able to replicate it on a smaller scale using ERJ-170s or CRJ700s and smaller airports like BGM, EWN, and ERI. This is the kind of outside the box thinking that US Airways needed to do several years ago.

Imagine how different US Airways would be if they had simplified their fleet to A330/A320/A319/B757/ERJ-170/ERJ and had consolidated some of the smaller markets into smaller low-fare regions with a competitive Southwest-style service at the smaller airports (by which I mean flights in almost every direction N/S/E/W with ample connecting opportunities nationwide). If that described US Airways, you'd have a much healthier company right now, in my opinion.

 

[RowUnderDCA]

yes, funguy2.... this is what I keep telling myself that U is really moving toward, even though there's not really a whole lot of evidence to support that illusion.