Us Airways Strategic Analysis

USA320Pilot

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May 18, 2003
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US Airways Strategic Analysis - May 5, 2005

Earlier this week US Airways reported a first quarter loss of $191 million, which was disappointing, but beat analyst estimates.

See earnings press release

See related story

Then the company filed its March Operating Results with the U.S. Bankruptcy Court, which indicated the airline made an operating and net profit.

Monthly Operating Report

According to the Charlotte Observer, US Airways made $65 million in net income in March, the first month it has turned a profit since filing for bankruptcy protection in September, the company said in a court filing. Last week, the airline reported a net loss for the quarter of $191 million. Detailed figures released Monday showed that March's gain was outweighed by heavy losses in January and February. In March, the airline said it made $19 million in operating income and also benefited from changes made in its bankruptcy reorganization. Traditionally, US Airways' strongest quarter has been from April through June. March could have been especially strong this year because Easter fell in March instead of April, analysts said.

See Story

Then yesterday US Airways revised its first-quarter results to show losses increased by $91 million to $282 million because the management left out expenses from termination of the AFA and IAM DB pension plans.

The Pittsburgh Tribune Review reported, the additional $91 million expense for the January-March period does not affect US Airways' operating results or its cash position, Robert Mann Jr., head of R.W. Mann & Co. Inc., an industry consultant based on Long Island, N.Y. noted. "They are just trying to get the bad news behind them," said the analyst.

US Airways still had $91 million in pension liabilities for the quarter and erred by booking it on its balance sheet. It then fixed that by recognizing the amount as an expense on its income statement, which expanded the quarterly loss.

See Story

The Tribune Review noted, more worrisome, said Mann, is the fact that US Airways' revenue last quarter fell more than 4 percent. This, despite added capacity and the rare inclusion in the period of Easter holiday traffic and revenue. "Everybody else got a lift out of it, and US Airways came up short," said the analyst. The difference is fare-price pressure from discounters in the Northeast, which accounts for most US Airways flights.

See Story

What Mann fails to realize was the negative effect of the RC4 and the other union(s) resistance to change and the S.1113 fight. This fight caused passengers to book away from the airline because of the widespread national news media attention the company would liquidate. However, when the liquidation threat subsided and the company began its “Clear Skies Ahead†campaign the airline posted positive earnings results with crude oil prices above $50 per barrel.

Some of the blame can be placed on management and Chairman David Bronner’s liquidation talk, which I believe was intended to be a “club†over labor to seek concessions, but I unequivocally believe the January and February revenue deterioration below industry standards can by directly attributed to labor. The strike press releases and resistance to change caused more job loss than necessary, deeper employee cuts than necessary, and a dramatic drop off in revenue.

Meanwhile, US Airways keep’s adjusting its new business plan as it works with creditors and investors to obtain exit and merger financing. The most recent news came yesterday when the company said it will further reduce its mainline fleet by an additional 10 aircraft, which will be B737s, thus the year-end mainline fleet count will be reduced to 250 aircraft. There is reason to believe this reduction is being required by the creditors in exchange for their upcoming exit/merger financing, which was reportedly discussed today in a meeting between CEO Bruce Lakefield and potential investors in New York City.

According to today’s Charlotte Observer, with fuel costs remaining high, ditching the planes will save the airline an undisclosed amount of money and make it more palatable to investors. As we continue to talk with possible investors, the elimination of unprofitable flying is a key topic of conversation," said Bruce Ashby, US Airways' executive vice president of marketing and planning, in a message to employees.

See Story

Separately, yesterday US Airways senior management held two meetings with labor. The Labor Advisory Council (LAC) meet with management in Washington and senior vice president of maintenance John Prestiphilipo, vice president of customer service Donna Paladini, and vice president of operations Ed Bular held a special Check Airman meeting in Charlotte.

According to ALPA, the LAC met to “hear a report from senior management on various issues including first quarter results, non labor cost saving initiatives and employee performance incentive programs. We hope to be able to provide you with more details of the meeting with specific slides that will soon be posted on the pilots only website. The Company also initiated a discussion about various strategic alternatives, in light of the public confirmation that US Airways and America West are in discussions about a possible transaction. Executives of the Company did not disclose specifics on any alternative or on discussions with potential investors, but they gave the LAC background on their analysis and made it clear that the preference was on pursuing alternatives that preserved the jobs of US Airways employees.â€

See Story

The Check Airman meeting covered some of the same topics at the LAC meeting, but also discussed the new on-time initiative called, “All Together. On Time.â€, there were updates on US Airways’ new maintenance programs and vendor work, and a presentation was made by ALPA Trip Construction Productivity leader Chip Mayer on increasing Pilot/Flight Attendant “trip paring†productivity.

In conclusion, as US Airways finalizes its plan of reorganization and appears headed for a merger with America West Airlines union leaders seemed to understand the need for a further fleet reductions, which is being required by the creditors.

According to today’s Observer, leaders of US Airways' pilot and flight-attendant unions, whose jobs tend to be directly affected by changes in the size of the fleet, said they are disappointed in the cuts but that they understand the reasons for them. Both unions said they are short-staffed and that the reduction of planes could bring staffing demands more in line with existing manpower. "It's just an unfortunate reality of what's going on right now," said Jack Stephan, a spokesman for the US Airways chapter of the Air Line Pilots Association. Getting rid of planes that are not fuel-efficient or require expensive maintenance makes sense, said Mike Flores, a flight-attendant union leader from Charlotte.

See Story

Regards,

USA320Pilot
 
Yea it was 4 union guys that destroyed the airline. It had nothing to do with some humanitarian in Alabama spouting off the "L" word to any one that would listen. By the way 320 I am still waiting for your answer to my question, do you think our management has EVER made a mistake?
 
Fr8tmastr:

I do not read most posts on this forum and just caught your question. Many has made many mistakes, but I believe the three largest were buying PSA and then dismantling the system, the $2 billion stock buy back that de-capitalized the balance sheet, and not running the airline while they tried to sell the business enterprise in 2000.

In regard to ALPA's RC4, they lead the labor resistance to change that caused every union to give more than the company's initial "ask", against the advice of every ALPA National official, against the advice of every ALPA financial and legal advisor, and against the advice of the 3 MEC officers and two-thirds of the MEC Reps.

The advisors told the RC4 that each comapny proposal would get worse and guess what? The advisor's were right and the RC4 became the first MEC to give management a concession larger than the "ask", while fueling media article's that US Airways would liquidate in January.

Yes, the RC4 (minus 1) and the other union leadership did more to hurt revenue in January and February than any other person or event.

Regards,

USA320Pilot
 
320 thanks for answering my question.
in regards to the union guys, So by your logic the union gave more than they had to, so our company should be in better shape than they predicted. I guess management owes your favorite 4 a debt of thanks for helping them above and beyond?
 
USA320Pilot said:
Fr8tmastr:



In regard to ALPA's RC4, they lead the labor resistance to change that caused every union to give more than the company's initial "ask", against the advice of every ALPA National official, against the advice of every ALPA financial and legal advisor, and against the advice of the 3 MEC officers and two-thirds of the MEC Reps.
dude...they were duly elected by a majority....you got what you paid for..

The advisors told the RC4 that each comapny proposal would get worse and guess what? The advisor's were right and the RC4 became the first MEC to give management a concession larger than the "ask", while fueling media article's that US Airways would liquidate in January.
you guys keep voting this trash in...no use crying over spilt milk...
Yes, the RC4 (minus 1) and the other union leadership did more to hurt revenue in January and February than any other person or event.

Regards,

USA320Pilot
[post="266992"][/post]​
 
USA320Pilot said:
The advisor's were right and the RC4 became the first MEC to give management a concession larger than the "ask", while fueling media article's that US Airways would liquidate in January.

Well, no. It was voted on by the membership and the previous MEC actually was the one that gave anything away (pension).

I suppose that means that when they return for more (give it another 6 weeks or so) that you will be willing to sign away your LPPs for a merger, for instance, to avoid giving anything greater than "the ask?"

Yes, the RC4 (minus 1) and the other union leadership did more to hurt revenue in January and February than any other person or event.

I can speak for about 6 figures of revenue that says "nope." Bronner kicked it off, and CCY sealed January and February with the meltdown in baggage (PHL) at Christmas.

Very few people know (or care) who the RC4 are. Bronner made national papers and TV with his remarks, however, as did the PHL meltdown.
 
The on-going labor talks and the daily news reports of the S.1113 process had hundreds of more headlines than the Christmas operational meltdown and Bronner's comment.

People booked away from the airline primarily because of labor's resistance to change, the strike press releases, and the fear a labor showdown would ground the airline. Unfortunately, you cannot change stupid when ALPA's RC4 (minus 1) made decisions against the advice of every ALPA National official, against the advice of every ALPA financial and legal advisor, and against the advice of the 3 MEC officers and two-thirds of the MEC Reps.

The RC4 negotiated a TA that was greater than the "ask", which is the first time in the history of ALPA this happened. In addition, the RC4 blocked the membership from voting on the company's September 6 offer by "roll call" by a 4-8 vote. Then on September 10, management provided a proposal that eliminated the 279 fleet count, fragmentation rights, CAR's, and other scope issues, two days before the formal reorganization motion was filed with the bankruptcy court.

At least ALPA has LPP Allegheny-Mohawk and ALPA Merger Policy seniority integration protections, which management kept in the contract.

Even Lynndie England listened to her legal advisor, but the RC4...

Yes, the additional cost cuts will help the bottom line going forward, but they did not do much in January and February, except for the temporary S.1113(e) cuts, which are less than the new long-term contract changes.

The good news is the March operating and net profit, strong May and June bookings, increased revenue with six fare hikes, much better operational peformance, and equity/exit financing on the horizon that will most likely be announced in conjunction with a merger/stategic transaction.

Regards,

USA320Pilot
 
USA320Pilot said:
The RC4 negotiated a TA that was greater than the "ask", which is the first time in the history of ALPA this happened.
Regards,
USA320Pilot
[post="267008"][/post]​
Guess you forgot about the MEC during the first bankruptcy that GAVE AWAY your pension without even negotiating it nor letting the membership vote on it.

Don't let the facts get in your way.

So it would be the SECOND time in the history of ALPA that it happened.
 
You don't even mention that people booked away in large numbers due to the Christmas meltdown, which was caused in a large part by failure to plan. Nor do you mention the exhorbitant costs associated with PAWOBS over the past quarter.

While US retains a high level of loyalty from Frequent Fliers (which may begin to decline now as well), those itinerant travelers who were caught up in the Christmas debacle, or who arrived without bags during the first quarter represent revenue lost forever, or at least for the short term....

Curious how no one mentions that in this thread.....

It's time for a change you know where......
 
USA320Pilot said:
The on-going labor talks and the daily news reports of the S.1113 process had hundreds of more headlines than the Christmas operational meltdown and Bronner's comment.

People booked away from the airline primarily because of labor's resistance to change, the strike press releases, and the fear a labor showdown would ground the airline.


I'll accept that conclusion as your opinion.

Living in a non-hub city, there was far more coverage of the operational meltdown than the labor talks and court proceedings. More importantly, that coverage was daily for an extended period of time. Bronner's comments were a blip, in comparison. I heard nothing about booking patterns being altered by his statements.

However, Christmas in Philly caused the public to sit up and take notice. DL is number one here since US vacated that spot several years ago. Once Comair owned up to the problem and accepted the resignation of the person responsible, all the bad press was US Airways alone. Delta is seen as having fixed their problem, but not US.

I never heard anyone who booked away due to labor issues.

People are still wary of PHL and we usually don't have Express on that route. I would guess that others who use Terminal F more frequently have even greater concerns.

So how has the company responded to keep people flying through PHL? From JAX, the round-trip fare to LGW was 14% less expensive than connecting in CLT and the lowest posted fare of any airline on that route. Management is right about one thing- the public will go for the lowest price.
 
PineyBob said:
Art,

Now c'mon it's not nice to confuse the pilot with facts. Reading some posts is like re-reading George Orwell's Animal farm.

CCY=Good
RC 4 =Bad
CCY=Good
RC 4 =Bad
CCY=Good
RC 4 =Bad

Bronner = Good
Customers = Bad
Bronner = Good
Customers = Bad

Just keep bleating like the sheep in the story
[post="267054"][/post]​

hey bob i ran rc4 on a google image search and look what came up:
 
USA320Pilot said:
Unfortunately, you cannot change stupid when ALPA's RC4 (minus 1) made decisions
[post="267008"][/post]​

USA320Pilot said:
I'm not going to continue with "mud slinging", emotional comments, or to try and discredit the messenger. If you choose to do so, so be it.

Respectfully,

USA320Pilot
[post="266173"][/post]​
 
To Art and Bob...

Go back and read USA320management mouthpiece's 2nd post in this thread. Pay particular attention to the first sentence. In fact, don't even read beyond the first sentence.

Never mind, I'll save you the trouble. Here it is. " I do not read most posts on this forum..."

The good captain evidently realized a long time ago that facts and opinions other than his own could be confusing; so, he ignores them.