Dulles In The Picture?

[ITRADE]

Sorry Chip, I can't buy this one.

US used to have 4 hubs concentrated in a 500 mile diameter triangle: PHL-BWI-CLT-PIT. IAD would simply replace BWI and would cannibalize both CLT and PHL.

 

[RowUnderDCA]

Sorry Chip, I can't buy this one.

US used to have 4 hubs concentrated in a 500 mile diameter triangle: PHL-BWI-CLT-PIT. IAD would simply replace BWI and would cannibalize both CLT and PHL.

Itrade- I agree (hey, I just thought I might change my screename to Iagree! That way anybody addressing one of my posts would start with 'Iagree-')

 

[Andre1980]

With regards to MIA, what is stopping US from expanding there now? UA's presence really isn't all that big at the moment anyway.

Wait a minute U want to come head to head with AA at MIA as though AA will just roll over and let U take over. AA is a very serious competitor when it comes to competitors wanting to set up big operations at their hubs or near their hubs (FLL). As I see it AA has MIA sowed up and they are beefing up operations in the next comming month as more aircraft is relased from the STL hub and on some days AA will have more than 300 flights (the largest) operating at MIA. Let us not forget that allot of AA's code share and one world partners have a heavy presence at MIA than Star. And what you said is right UA's operations is paultry in comparison to AA's. TC

 

[Cosmo]

Chip:

The two main theories that you discussed in the post that started this thread -- 1.) that United will sell the assets associated with its IAD hub, and 2.) that Ornstein (through Mesa) is "the surrogate hit man to ensure US Airways would have a turn key Dulles feed operation" -- are both contradicted by the facts.

First, just yesterday, United issued this press release strongly reiterating its intention to maintain its IAD hub despite the potential loss of ACA's feeder flights there. The press release couldn't say it any more emphatically: "United will remain a competitive force at Dulles International Airport and on the routes currently served by United Express with Atlantic Coast Airlines (ACA) as our service provider." This reflects the reality that United is actually adding flights at IAD, the most recent of which was yesterday's announcement in this press release that the carrier would begin daily nonstop IAD-SJO flights in February 2004. I also believe that, if necessary, this is a warning to US Airways to stay away from United's IAD hub operation, in much the same way that United stomped on US Airways' Metrojet operation at IAD a few years ago.

Second, Mesa has stated on numerous occasions since it put ACA into play a few weeks ago that it planned to keep the ACA operation as a United feeder. No mention has been made of using the ACA aircraft to feed US Airways or any other carrier. This was made clear again in this article in the business section of today's Washington Post, where it was noted that "Mesa executives have said that they were confident United will emerge from bankruptcy stronger and that they want to position Mesa as United's top regional carrier."

Finally, this afternoon it was reported in this Reuters article that United said "it hopes negotiations with Mesa Air Group Inc. on regional service to Washington's Dulles Airport will be concluded in 'days, not weeks'." Thus, it is obvious that United expects to complete a deal with Mesa for IAD feed very soon, leaving no possibility that Ornstein could be "the surrogate hit man" for Seigel and US Airways.

So we are left with the choice of believing you, Chip, and your secret sources as you continue to spin UCT/ICT theories, this time involving the fate of ACA and United's IAD hub, or alternatively believing what we see with our own eyes in the form of recent public pronouncements by United and Ornstein/Mesa. IMHO, the latter is the obvious choice.

 

[Flying Titan]

Chip -
As usual, a very interesting thread. Interesting dots you've connected to come to your conclusions. As several others have mentioned already, IAD certainly makes more sense than PIT for a US hub, but there are certainly added costs there, too. There is also the problem of bunching hubs - again! PHL, CLT and IAD present the same geographical conundrum that already exists. The nicest aspect of IAD include a near stranglehold on the Wash, DC O&D market when combined with the operations at DCA (assuming the hub has appropriate size), but wouldn't there be some regulatory hurdles to clear to pull this off?

As for MIA, as another post pointed out, there is the problem of dealing with AA there and IMHO, it's only a matter of time before some LCC decides to establish a serious presence there - perhaps Virgin America?

Again, interesting post, but it seems like the planets would have to really align perfectly for this to happen and, even then, there's no guarantee that this would leave US any better off than the airline is right now. Something to ponder anyway.

 

[Bear96]

It's just Chip's theory of throwing crazy theory after crazy theory out there.

Eventually, one day, maybe one will hit kinda close to the reality. At least close enough so that he can come back and ask, "Who was it who first said....."

And he will hope we have forgotten about all the theories and predictions that went nowhere.

 

[Cosmo]

And just in case there is still some uncertainty, this most recent Reuters article should remove any doubts about the intentions of United and Mesa. The article quotes Mesa as saying "We expect to commence negotiations immediately" and then quotes Jake Brace's comment that "We think that it makes sense to have a deal with Mesa in place as soon as possible."

Is that clear enough?

 

[wrx]

The biggest mistake US Air made was giving up the Westcoast when they bought PSA. They should have kept those routes they acquired when they bought PSA. US had a presence at IAD when MetroJet was around.

 

[767jetz]

From the sound of a majority of the people here, I get the impression very few believe in the banter of a particular USAir captain.

In a previous thread I quoted Benchmark Co. analyst Helane Becker as saying, "I think they (US Airways) emerged from Chapter 11 way too soon. There are rumors they may have to go back into Chapter 11 to get costs down further." Some people were offended and thought I made this up to bait a certain person.

I find it interesting that the very next day there is a lengthy post criticizing this airline analyst legitimacy, and more wild speculations of back room deals where USAir victoriously grabs assets of their business partner, simultaneously curing all of USAir's problems and making all US A320 captains King of the widebodies and rulers of the sky!

Now, once again... someone tell me who is dellusional?

I find it interesting that Chip is so obsessed and emotional about United Airlines. Who is now trying to trash a legitimate industry analyst's credibility, just because he doesn't like what was said? I find it interesting that you feel the need to shoot the messenger, Chip.

Of course management is going to tell it's employees how rosey things are in an effort to maintain moral. Do you think if USAir were possibly going to file for Chapter 11 AGAIN, they would come out and say it. The customers would dry up the next day. Look what happened to Jim Goodwin and his "Perish" letter. I think most people are aware that the best way to increase the morale of a USAir pilot, who's career has been slow and even stagnant, is to promise massive expansion and international widebody flying. After everything that's gone on at USAir, are you niave enough to believe everything management says?

Let's face it, there are analysts who privately and publicly believe USAir is in big trouble. United has publicly expressed interest in certain USAir assets, particularly the Shuttle. ALPA's Master Executive Chairman has publicly said there is no deal being worked out with US Air. USAir's Q3 loss of $90 MILLION was unacceptable and unsustainable. Siegel wants to shut down Pittsburgh. And the IAM is ready to go to war over contract maintenance. I know you don't like to hear it because it goes against your dream of taking what is not yours to have. But I believe you are in denial, and are understandably worried about the uncertain future of your company.

While I do believe USAirways will survive in some form, it will be a shadow of it's former self, and certainly not the Powerhouse you have been describing for so long.

Respectfully,

767jetz

 

[robbedagain]

767jetz: If Uhad to sell it shuttle, wouldn't there have to be a sale or lottery of sorts
or a bid to united or another airline or better yet could you please explain to me how that would work? I have heard that other airlines have always been interested in the Shuttle part of the USAIR ASSETT. Is that true?

 

[USFlyer]

I have a UCT for you:

Take UA's existing network minus IAD as a hub, especially in light of ACA's desire to fly itself into the ground.
Take US's existing network minus PIT as a hub.
Streamline once and for all the feeder operations.
Combine the two with hubs in SFO, LAX, DEN, ORD, PHL and CLT and focus cities in BOS, LGA, DCA, IAD and MIA. By focus cities, I mean operate only those routes where O&D effectively supports the route. In terms of hubs, CLT is the only one without a lot of O&D, but it's also one of the cheapest and, in my opinion, best designed airports to compete with ATL.

I'd love to see an analysis of how this would work out financially. I doubt DOJ/DOT would block it at this point. In terms of employee integration, well, I won't even go there.

 

[USA320Pilot]

Group:

Immediately after the announcement that Atlantic Coast Airlines (ACA) intended to become an independent company, US Airways chief executive officer Dave Siegel (not Chip Munn) told the Washington Times US Airways was interested in acquiring the Dulles hub. What's important to note this is not Chip Munn saying this; it was Siegel in a public venue.

During the following debate in this forum, I questioned the move because of the airports proximity to Washington National, Pittsburgh, & Philadelphia.

However, after discussion with some informed industry and ALPA people, the interest in Dulles is due to O&D traffic, Washington market presence, "S" curve economics, brand allegiance, and more importantly international stage length.

The biggest problem facing network airlines is LCC's and the best way to avoid LCC's is to fly where they do not, e.g. over water. US Airways' route network only permits itself to fly international long-haul to Europe and South America, thus the key interest in Dulles.

Dulles = long haul, widebody's, lower CASM, and higher point-to-point O&D RASM.

Therefore, for some of you who once again want to "shoot the messenger", remember Dave Siegel told the Washington Times he was interested in acquiring the Dulles hub, (not Chip Munn), Ornstein & Siegel have had a personal relationship since their days at the Harvard Business School, and Siegel has said Mesa is the preferred US Airways Express partner.

Also noteworthy, let's not forget United senior vice president of planning Greg Taylor (not Chip Munn) told the bankruptcy court that the United unsecured creditors committee wants the company to sell the Dulles hub.

In regard to financing the deal, let's not forget US Airways chairman of the board David Bronner (not Chip Munn) has said on three separate occasions that United has a 50-50 chance of surviving. He said that if United were to sell assets, he would consider backing the purchase of some "if it would be beneficial to US Airways."

In regard to Mesa acquiring ACA, the key here is J4J because US Airways and ACA do not have J4J agreement. However, regardless of who operates the hub, the major airline will need feed, thus Mesa acquiring ACA would bypass Siegel's J4J problem and the regional airline could provide US Airways with immediate feed, if Bronner elects to buy the hub.

Could this be why United said it wants to craft a deal with Mesa in days because Bronner (actually his consultant -- former United president and current US Airways board member Rono Dutta) may want to submit his own plan of reorganization to the bankruptcy court handling United's formal reorganization?

Finally, for those United naysayers who love to dispute every comment I say about a potential corporate combination between the business partners, would you simply contact United WHQ reception and ask them why members of the US Airways and United executive suites have been holding multiple meetings within recent days?

Will something occur? Maybe, maybe not, but it sure seems as if there is now fire coming from the smoke.

Separately, we could find out more about US Airways’ future on Tuesday (three days before United’s earnings announcement) because Siegel will be the featured speaker at the luncheon meeting of the Aero Club of Washington. The lunch will start at 12 noon at the Capitol Hilton hotel in Washington and the news media is scheduled to interview Siegel.

Regards,

Chip

 

[USA320Pilot]

Just one more point...

For those naysayers or people who like to attack US Airways let's consider the following facts:

The US Airways business plan and loan guarantee application did not predict a profit until 2005.

On Wednesday, US Airways executive vice president of human resources Jerry Glass told LaGuardia based employees US Airways would not re-enter Chapter 11.

Standard & Poor's Ratings Services and airline analyst Jim Corridore said, "US Airways ratings and outlook on both entities are not affected (by the third quarter loss). US Airways' results are expected to be somewhat worse than average among peer airlines in the third quarter, despite the cost and balance sheet improvements achieved in the company's Chapter 11 bankruptcy reorganization."

US Airways has $1.94 billion in unrestricted and $1.38 billion unrestricted cash on hand. "Liquidity continues to be adequate, with unrestricted cash of $1.38 billion at Sept. 30, 2003, little changed from the June 30 figure, and manageable cash obligations in the near term," Corridore said.

Last quarter US Airways placed 9 additional RJs into service, with 206 more RJs expected to be flying in the current US Airways system in the next 3 years. MDA has yet to spool up and the company has told ALPA the airline will lower unit costs, increase revenues, and be instantly profitable. The Lufthansa alliance begins this Sunday, October 26 and the Star Alliance in the beginning of 2004. US Airways and United now code share on only 3,000 flights and their alliance is about one-third complete.

The total RJ and alliance revenue is expected to yield $600 million in annual profits in three years and the airline has yet to scratch the surface on these financial benefits.

In conclusion, US Airway's third quarter financial performance was disappointing, but for those who suggest the company is in danger of failure, they must know something that Corridore does not. Could these posters simply be vindictive because their company could fragment or liquidate?

Respectfully,

Chip

 

[USA320Pilot]

USFlyer:

You just described a potential final form of the UCT, but it could be done with a United asset divestiture into US Airways versus a merger.

It's no secret the two companies desire to avoid the employee problem, which is a key UCT motivation, especially considering past United employee merger sentiment. In regard to antitrust issues, with United in bankruptcy, the "failing carrier guidelines" would likely apply, similar in scope to what happened with TWA and American.

The "revenue umbrella" would the domestic/Star alliances.

The benefits to United would be lower unit costs, less LCC exposure, exit financing, greater synergistic revenue, and a means to obtain the loan guarantee, e.g. survival.

The benefits for US Airways would be lower unit costs, increased stage length, and a means to avoid the LCC's, and greater synergistic revenue.

In regard to financial benefits, United EF&A believed the 2000 merger would have yielded $1.6 to $1.9 billion in additional incremental revenue per year. This would be new revenue to the combined business entity, but not new revenue to the industry. The revenue would have been a revenue shift from the competition. Post September 11 I suspect this figure would be much lower, however, it could easily be at least $1.2 billion per annum. How would that look to the two companies today and the unsecured creditors committee with a UCT?

Also noteworthy, United ALPA seems to understand this because the union went from a pre-nuptial seniority clause, bypassing ALPA Merger Policy in ERP 1 and ERP II in late 2003, to ratifying identical pilot seniority language to the US Airways pilot contract.

Specifically, both contracts provide for ALPA Merger & Fragmentation Policy and Allegheny-Mohawk LPP's. The only major difference is that if more than 15% of US Airways' assets are sold pilots must transfer to the successor. However, at United, the company does not have to transfer pilots to the successor unless 50% or more the assets are sold.

Contractually, the United pilots agreed that no United pilot would be required to transfer to the successor if 49.9% of less of the company is sold.

Considering all of the United pilot bravado, including some people within this forum, why would the United pilots have agreed to such poor fragmentation language?

Regards,

Chip

P.S. For more information, refer to the United pilot contract, dated March 27, 2003, Section G (Career Security), page 29.

:blink:

 

[delldude]

you actually think we could float IAD past anti-trust,chip?