I'm not too happy with the closure of the BOS, LAS, & LGA Crew bases, but here are some important fundamental factors to consider:
US Airways' current LGA terminal lease and maintenance expense is about $71.5 million per year. After the Shuttle move to the MAT and Mainline move to Gates 8, 9, & 10 the LGA lease expense will drop to $4.5 million per year.
The 124 LGA slots eing provided to Delta are all Express slots. Following the slot transfer US Airways' mainline operation will be larger than today.
30 LGA slots that Delta has agreed to take are an option. Delta has until the date of signing to confirm the acquisition of the 30 slots, which can be returned to US Airways.
The BOS-LGA A319 Shuttle has a 43 percent load factor, which is an average passenger count of 57 people per flight. The BOS-LGA E-190 Shuttle will better match capacity with demand, continue to provide US Airways with larger Shuttle aircraft than Delta in all 3 markets, and permit 4 A319s to be placed into hub mainline operations where they can generate greater revenue.
I have been told Andrew Norcella's Department considers DCA revenue almost bullet proof and DCA is a market with higher RASM than LGA.
Meanwhile, I recently saw a report from Next Generation Equity Research Analyst Dan McKenzie. Here are Mckenzie's comments:
McKenzie thinks (US Airways') executives left out an important factor behind the airline's bullishness: flight cutbacks at rival Southwest Airlines.
US Airways is able to more easily raise ticket prices at two key hubs, Phoenix and Philadelphia, he says, because Southwest is making significant capacity cuts there. The airline isn't growing this year for the first time because of the recession but it has been aggressively starting service in new markets such as Minneapolis, Boston and New York by cutting flights at existing airports.
In Phoenix, McKenzie said in a report Friday, Southwest is offering 10.4 percent fewer non-stop seats each week to cities where it overlaps with US Airways. In the first three months of next year, it will offer 6 percent fewer seats on the same basis, McKenzie said in a report. US Airways and Southwest dominate Sky Harbor International Airport, carrying nearly three out of four passengers.
The Southwest cutbacks on overlapping routes are even greater in Philadelphia, according to his research.
Southwest has 20 percent fewer non-stop seats per week out of Philadelphia to cities where it overlaps with US Airways. In the first quarter, the cut is 22 percent.
At both hubs, the Southwest cutbacks on non-stop routes where it competes with US Airways are significantly higher than overall flight cuts at the airport and US Airways' cutbacks.
"It's really Southwest's capacity cuts in US Airways' markets that give us the confidence that revenues are in fact improving for US Airways," he said in the report.
He said Tempe-based US Airways has one of the better competitive dynamics in the industry right now.
Finally, I like the idea of US Airways placing added service in markets Southwest vacates, especially when they're in hubs like Philadelphia and Phoenix. Separately, US Airways has announced it doesn't intend to pursue a codeshare agreement with Continental, which I find odd for two Star Alliance carriers unless there is another reason why.
Regards,
USA320Pilot
