Us Airways Said To Be Pursuing Big Asset Sales

[ITRADE]

2. Sell US Airways Express. Why not combine PSA, Allegheny, and Piedmont, spin them off or sell them to Mesa, and then re-hire them as a fee for departure carrier? The costs associated with these entities have to be large. Why not let Mesa pay the wages, benefits, and retirement costs. Good idea CCY.

3. Sell off gates and other assets at BOS and LGA. Well..... DUH..... when you sell the Shuttle, you won't need these assets anymore. Whoever doesn't see that is not the sharpest tool in the shed.

4. Sell a hub. If I were Dave x 2, I would wait awhile for that. When WN hits PHL, US Airways may need PIT or CLT to absorb the assets and capacity that will quickly be abandoned to WN. Kind of like what happened in BWI 10 years ago. It will come to pass because US Airways senior management doesn't have the fortitude to hold off the WN invasion. PIT makes a really nice hub and is operationally much better than PHL. How many days of the year do you have ATC or WX problems in PIT? Less than 30. In PHL, it's more like 26 out of 30 each month. How much money is US Airways pouring into a hole in PHL to make up for the operational problems that currently exist?

Just my thoughts as an industry observer.

#2 I might agree there but you're going to immediately hear howls about how bad J.O. supposedly is.

#3 Why??? LGA is a good business market with some folks willing to shell out some bucks - certainly more bucks than the folks down in MCO are willing to shell out.

#4 I would pick PHL over PIT. At least PHL serves as a good international gateway and has a significant O/D base to support it. PIT is a pit in comparison. As to BWI, US made the decision to choose PHL over BWI before WN really got rolling into the place.

BTW, love the avatar.

 

[pitguy]

Well I guess this is what they call the dangle the carrot and swing the stick form of negotiating.

 

[SpinDoc]

ITRADE:

Thanks for responding. What I'm really dying to know is, has any consulting firm ever studied the revenue/cost equation between PHL and PIT and publicly commented on the results?

It would be interesting to see how it all shakes out because although PIT definitively has a lower O&D revenue stream in comparison to PHL, is the advantage cancelled out by the operational and infrastructure problems that exist in PHL?

If that is the case, US Airways is sticking with PHL only because they have invested so much over the past several years and the management that made those decisions is bound and determined to see their visions through at all costs. It is still difficult to imagine that there is a cost/revenue advantage in PHL when US Airways has to be spending large amounts of money to cover their operating deficits.

Something is fishy despite the higher initial per passenger costs in PIT.

 

[WorldTraveler]

the value of US' assets is not in the ability to operate a flight from a gate at an airport but in the established business that US has built using that flight. US still generates several billion dollars a year in revenue and it is that continued ability to generate revenue that is attractive to any potential acquirer. Companies of all kinds acquire assets that are above the value of the underlying assets and categorize that excess as goodwill or the value of the assets in operation. In that regard, US' assets do have value. Another airline might come in and use different aircraft or employees but keeping the operation going is important.

If an acquiring airline bought US' assets and tried to operate those assets w/ its owned furloughed employees or stored aircraft, it would take months to get it up to speed (with the possible exception of the Shuttle which is a relatively small operation). Every day that an acquired asset is not operated close to full potential is one more day that a competitor could come in and start operating in competition w/ the acquirer. I don't know of any airline in the US that could replace US' operation in any of its hubs in a couple months notice. Pilots throughout the system would have to rebid aircraft types based on the increased flying which is time consuming and costly.... Nearly every airline has some aircraft and employees available to add some flights but a large scale asset acquisition would either require a phased-in implementation or an acquisition of some US employees and aircraft. You can look at who flies the aircraft US flies and figure they have some advantage. Delta and American both operate on a number of intra-NE routes competitive w/ US so can gain immediate advantage if US fails; that also may prevent them from buying some assets that duplicate w/ US.

Further, US' creditors also own stock and want to get their assets redeployed. Although RSA holds controlling interest, GE and Airbus aren't going to let Bronner sell off route authorities w/o attaching people to them. US people are trained to fly and maintain US aircraft. I do think it is very possible that some aircraft and some US people might be involved in an asset acquisition, particularly the larger ones.

Remember also that DL's acquisition of Pan Am's transatlantic assets was contested, I believe by AA. Supposedly, Delta was successful because they were willing to take the A310's and several thousand Pan Am employees, something AA was not willing to do. UA's acquisition of the PA Pacific operation involved employees and aircraft. Many of the employees still are w/ UA; the planes were dumped fairly quickly just as DL did w/ the Europe operation and AA did w/ TW. Whether that happens again remains to be seen but it is happened before.

 

[BoredToDeath]

I'd like to know why some of you "business minded" people are so quick to say "lets sell the WO's" when they happen to be the ONLY part of this company that operates in the black? Why in the world would you sell that off?

 

[7.5victim]

Other than the pilots, Delta could unilaterally impose wage cuts tomorrow on all of its employee groups if it wanted to. Why haven't they done so??

7.5, do you work for DL?

I no longer work for DL. However, I'm still in the industry. I've thrown bags, slung Cokes, flown domestic and international, spent time at an LCC, got promoted to a supv, and now hold a manager level position at a regional. I'm still in this business because I love it, and the people who work in it. Sadly, most people don't realize how much things have changed.

IMO, DL learned a lot from the last time they cut non-contract employees pay. It opened a gulf at DL that never healed. We all saw how much the company was hurting, and at the time, most Delta people would've given more. The company tried to create a voluntary program for pilots to participate in the 5% cut the rest of us took. ALPA got it stopped. Once the company got pilot concessions the economy had started to improve. ALPA forced the contract to be reopened only halfway thru, resulting in todays pay scales. However, when asked for the same courtesy today, when times are bad, ALPA at first refused.

We all had our pay cut, and then had our senority "adjusted" after the Pan Am acquisition. I personaly was stapled below all PA employees who came over. Iwatched many good people leave. I was moved once during a reorg, and when the second one came along less than 2 years later, I left. It was apparent to me that the airline people were no longer running the airline. The money people were. And money people don't understand airlines.

 

[NewHampshire Black Bears]

ITRADE;

"Toss in the fact that there are 4 shuttles AA,DL,US and "AMTRAK"....................

And the King of the Hill "Robert L. CRANDALL," was just named to the
AMTRAK BOD's.................... "VERY INTERESTING" !!!!!!!!!!!!!!!!!!!

Acela Express...... BOS-PVD-(new haven)-NYC-PHL-DCA. All big cities for US.

Best wishes for US and ALL it's employees(I've got family working among you)

NH/BB's

 

[av8or]

Just my thoughts as an industry observer.

#2 I might agree there but you're going to immediately hear howls about how bad J.O. supposedly is.

how bad he supposedly is?
where have you been?
are you completely blind?
the man, no i wouldn't even deign to call him a man, that CREATURE is a scourge, the worse thing thats ever have happened to the regional airline industry
if you think otherwise, your deluded, it's a pretty universal precept that he is a miserable excuse for a person and business owner

 

[funguy2]

2. Sell US Airways Express. Why not combine PSA, Allegheny, and Piedmont, spin them off or sell them to Mesa, and then re-hire them as a fee for departure carrier? The costs associated with these entities have to be large. Why not let Mesa pay the wages, benefits, and retirement costs. Good idea CCY.

I'd like to know why some of you "business minded" people are so quick to say "lets sell the WO's" when they happen to be the ONLY part of this company that operates in the black? Why in the world would you sell that off?

I have to agree with BoredtoDeath here... The wholy-owned's are supposedly the low-cost and profitable part of the company... Further, you're adding MDA, which is supposed to be very profitable, into the mainline mix... I think UAIR would be better to fold the three wholly-owneds and MDA together (for economies of scale, redux of duplications, etc). UAIR needs to keep what is profitable, if UAIR sells the profitable part, they will never have the opportunity to work on the unprofitable part.

 

[TomBascom]

I'd like to know why some of you "business minded" people are so quick to say "lets sell the WO's" when they happen to be the ONLY part of this company that operates in the black? Why in the world would you sell that off?

Because when you need to raise cash in a hurry it's a whole lot easier to sell something that is attractive than it is to sell something that's a pig.

Would it be a good long term move? That depends on what the long term outlook for the divested assests is, what the sale price is and what you think the outlook for the other assets is and what you do with the money.

If you don't make it through the short term you won't need to worry about the long term.

 

[DCAview]

Here's the problem with selling the wholly-owneds:

1. Unless the sale included a long-term contract to continue supplying lift for US, I can't imagine that anyone would be interested in buying the props that the three carriers own now. Carriers have largely moved away from props.

2. The PSA jets that are set to come online may be more attractive, but here too US may be too late. We're already approaching a saturation point when it comes to the 50-seat jets.

3. The real prospect among the Express carriers might come in Midatlantic's new E-jets, but there's two problems for US with an MDA sale: First, anyone interested in the 170s could get them easily from Embraer (though not as quickly). Second, that would leave US to sacrifice its future to pay for its present.

This isn't a situation like the one at Continental, where the airline owns a single all-jet Express provider that it can spin off or sell for cash. Anyone picking up Piedmont, Allegheny and PSA would likely demand a long-term contract to keep those aircraft in US Airways colors, because they simply don't fit anywhere else or with any other airline.

If you ask me (which, admittedly, no one did), while this is certainly posturing to drive the unions to the table, it is also a serious *effort* to sell parts of the carrier. I say effort because I don't think the company has any certain expectations that it will sell its Boston leases, say, or the Shuttle, but I think it's the company's way of letting people know that it is open to offers while presenting a worst-case scenario to the unions.

 

[PITbull]

Piney Bob,

The thread was closed that you addressed me. I chose this thread to respond to your below last statement as I thought it was appropriate as it pertains to U's "plan".

You stated:
If your current efforts to thwart managements current or alledged plan and the company subsequently fails, one could make the argument that AFA leadership FAILED it's membership as they would all be unemployed.

It could also be argued that local AFA leadership FAILED in maintaining a significant revenue stream for the national AFA by allowing the plan to go unpresented and the company ultimately failing.


You say you speak facts???? the above is nothing more than a bunch of "assumptions", and baseless I might add.

 

[sfb]

DCAview makes great points about the wholly-owneds. I'd add, though, that a long-term contract with US Airways to keep them flying as US Express isn't necessarily as attractive a prospect as it seems. UAL had long-term contracts with the United Express regionals which it has renegotiated (aside from the ACA debacle) through Chapter 11. I think the significant possibility of a second Chapter 11 filing on the part of UAIR, coupled with the relatively unattractive prop fleet, makes the sale of US Airways Express, Inc. a difficult prospect. None of the other majors would sign a contract with an all- or mostly-prop regional for routes with enough demand for RJ's.

The only assets which anyone would buy are the ones that can make money somehow. The only reason the wholly-owneds would be attractive to a buyer is their profitability. The Shuttle used to be a great business, but I doubt it has consistently (or at all) made money since 9/11. Using the EMB-170's on the route would probably help with profitability, but it seems likely that the Shuttle will no longer be the cash cow it once was. Acela has picked up a lot of market share in the NE Corridor. I don't believe the Shuttle has much value beyond associated gate leases and DCA/LGA slots anymore, simply because the fare premiums aren't being paid by enough people.

I can't sit here and tell US Airways employees or management what to do because it's not my place. I do honestly believe, though, that if these asset sales go beyond a few gates or slots here and there, that US Airways simply will not survive much longer. Without some sort of real initiative on the part of management to revamp the airline's cost structure, US will continue to slowly bleed until there's nothing left to sell. Management needs to be open and honest about what its so-called plan is, and the unions need to commit to at least listen, whether they choose to say yea or nay. And I think management needs to basically lay out their strategy in the absence of whatever concessions/work rule changes they will demand. If the employees don't feel that the business is worth saving, then the company needs to shut the doors and let people move on with their lives. After all the cuts the employees have faced, I'm not sure I'd agree to additional cuts unless I knew management would be taking the same sort of cuts (without back-loaded bonuses) as well.