US Airways trains sights on expenses

C

chipmunn

Guest
US Airways trains sights on expenses
PITTSBURGH (Post-Gazette) - US Airways'' plan to decrease costs in bankruptcy proceedings may bring expenses almost in line with low-cost America West Airlines, Standard & Poor''s said, citing court filings.
US Airways, which has had some of the highest operating costs in the industry, said in a filing with the U.S. Bankruptcy Court this past weekend that its cost to fly one seat mile may drop 17 percent when the seventh-biggest U.S. carrier emerges from Chapter 11 bankruptcy protection. Such costs would be higher than Southwest Airlines, S&P analyst Phil Baggley said.
US Airways plans to reduce annual costs by $1.8 billion, including $1 billion from employee pay, benefit and work concessions. It costs U.S. Airways 10.95 cents to fly one seat mile, compared with 7.73 cents for America West and 7.38 cents cents to fly with Southwest, the nation''s No. 6 carrier.
The Arlington, Va.-based carrier said this weekend it hoped to emerge from Chapter 11 by the end of March
On Monday, America West Airlines and the Air Line Pilots Association, which represents 1,800 pilots, agreed on a tentative contract. Terms of the agreement weren''t disclosed.
 

NYPD

Member
Sep 7, 2002
91
0
[P class=MsoNormal style="MARGIN: 0in 0in 0pt"][SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Tahoma"][FONT color=#000000]Excuse me...I'm doing the math here, and it seems that either S&P or US Airways is wrong (or I'm lost), but if you reduce US Airways’ cost per seat mile by 17% as they claim, that brings it down to 9.09 cents from the reported 10.95 cents. 9.09 cents is still 1.71 cents higher than Southwest's 7.38 cents (or 23.2%) and still 1.36 cents higher than America West's 7.73 cents (or 17.6%)[BR][BR]S&P states that U's expenses will be "almost in line with low-cost America West Airlines". I don't see it! 17.6% higher is considered "almost in line"? Looks more like double-digit inflation to me![BR][BR]So if US Airways is able to attain a 17.6% higher load factor than America West, then they’ll be making the same money.[SPAN style="mso-spacerun: yes"] [/SPAN]If load factors of each airline remain even, then US Airways spends 17.6% more cash than America West to fill the same percentage of seats.[SPAN style="mso-spacerun: yes"] [/SPAN]Am I missing something here?[?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:eek:ffice:eek:ffice" /][o:p][/o:p][/FONT][/SPAN][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt"][SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Tahoma"][o:p][FONT color=#000000] [/FONT][/o:p][/SPAN][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt"][SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Tahoma"][FONT color=#000000]I guess that if US Airways’ bean counters do the math correctly (as I’ve shown), then they’ll be asking for another round of concessions.[o:p][/o:p][/FONT][/SPAN][/P]
 

oldiebutgoody

Veteran
Aug 23, 2002
2,627
945
www.usaviation.com
Both of those carriers have either just signed or are negotiating new lablr contracts. U's labor costs have been "locked in" for the next 7 years. Those costs are a moving target; they generally reflect the last quarter's cost and not the next.
 

mbmbbost

Advanced
Dec 13, 2002
213
0
[blockquote]
----------------
On 12/25/2002 10:34:44 AM NYPD wrote:

[P class=MsoNormal style="MARGIN: 0in 0in 0pt"][SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Tahoma"][FONT color=#000000]Excuse me...I'm doing the math here, and it seems that either S&P or US Airways is wrong (or I'm lost), but if you reduce US Airways’ cost per seat mile by 17% as they claim, that brings it down to 9.09 cents from the reported 10.95 cents. 9.09 cents is still 1.71 cents higher than Southwest's 7.38 cents (or 23.2%) and still 1.36 cents higher than America West's 7.73 cents (or 17.6%)

S&P states that U's expenses will be "almost in line with low-cost America West Airlines". I don't see it! 17.6% higher is considered "almost in line"? Looks more like double-digit inflation to me!

So if US Airways is able to attain a 17.6% higher load factor than America West, then they’ll be making the same money.[SPAN style="mso-spacerun: yes"] [/SPAN]If load factors of each airline remain even, then US Airways spends 17.6% more cash than America West to fill the same percentage of seats.[SPAN style="mso-spacerun: yes"] [/SPAN]Am I missing something here?[?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:eek:ffice:eek:ffice" /][o:p][/o:p][/FONT][/SPAN][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt"][SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Tahoma"][o:p][FONT color=#000000] [/FONT][/o:p][/SPAN][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt"][SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Tahoma"][FONT color=#000000]I guess that if US Airways’ bean counters do the math correctly (as I’ve shown), then they’ll be asking for another round of concessions.[o:p][/o:p][/FONT][/SPAN][/P]
----------------
[/blockquote]

You need to consider the fares though, the average fare collected per seat mile on US is obviously higher than that of the low-fare airlines, and ought to continue to be, even if fares are rationalized. If the low fare airlines were operating in the same markets, perhaps their average costs per seat mile would be higher too.
 

NYPD

Member
Sep 7, 2002
91
0
You make a good point MB. I hadn't considered the "revenue" end of the equation. Thanks.