From This Observer's Perch

[mweiss]

Jim, of course the simplified structure makes a difference. I don't mean to imply that it doesn't. But it's not like you can simplify the fares and US will magically become an unstoppable behemoth of an intergalactic airline, which seemed to be Eye's allegation.

 

[autofixer]

"All hail the new guy, same as the 'ole guy!" Don't get that warm and fuzzy again. Remember how "cool" and funny Seigel was? "What a breath of fresh air...he will turn this place around." Never mind Seigel was a RJ man, who had experience operating in Chapter 11. How about Wolf? "He was suppossed to be U's version of Crandle. He was here to run an airline this time." And Gangwarld's "RJs are a fad" comment was prophetic wasn't it? Never mind his and Wolf's track records. Have you not learned the leasons of U history?

"Caution wake turbulance...proceed with extreme caution!"

 

[savyinvestor]

This still doesn't solve the Airbus maintenance problem either. Savy

 

[funguy2]

Funnyguy:

I wrote the comments you quoted before the RC5 elected to renege on their promise to work with the company.

My thought was Siegel would not run from the fight and that probably still holds true, but with the company and the RC5 at an impasse, something needed to give to change the logjam.

Regardless of who is the CEO, US Airways’ problems still exist and it’s up to the employees on whether or not they want to participate in the “Going Forward Planâ€￾ or liquidate the airline.

Ok... Fair enough.

What's important to note is that Lakefield and Bronner are venture capitalists who are investors, not airline managers.... Thus, it appears Siegel’s plan to transform US Airways into a LCC/network carrier hybrid has merit.

However, I am not so sure about this. While, it may be nice to have an outside of the indsutry view, as I noted before, it took Tilton, from the oil industry, 9 months to a year to get up to speed at UAL. Given that Lakefield was on the US Airways BOD, it shouldn't take as long, but he will still have some learning to do taking over the day-to-day decision making vs. the BOD only-type items.

Also, Lakefield is an ally of Bronner. Presumably Bronner, Lakefield, and the BOD bought into Siegel's Plan of Reorganization (POR) or "Go Foreard Plan" (GFP) or whatever else we want to call it.

Given that Lakefield, Bronner, and BOD bought into the POR, what makes you think that Seigel's departure will make them completely change their mind on the plan they already approved?

Also, Lakefield probably has worked with Seigels VP's, so he is probably comfortable with those folks, and probably does not have a pool of VP level airline friends, acquaintences, etc, since he doesn't have much background in this industry. Therefore, I see another house cleaning as unlikely.

In otherwords, I don't really see this change (from Seigel to Lakefield) an injecting a whole bunch of new thinking at US Airways in the short term - maybe 6 months or so. However, this airline's ultimate fate will likely be determined in the next 6 months or so. So I see US Airways continuing to hammer away at the employees while continuing to neglect the real changes required for success - fare structure changes, efficiency changes, etc.

Note: See also thread entitled, "Message from Mr. Lakefield". Lakefield and Bronner continually praise Seigel. Would Lakefield and Bronner praise Seigel and then say, "But its all crap, we'll start over!" I think not.

While I believe that Seigel was sacrificed to the "Airline Union Gods", as I said many months ago, I don't believe it will make much difference if the airline doesn't do anything different. I don't believe I will see this airline do anything different.

When Seigel entered the scene, I thought, here's a guy who was part of a big turnaround at CAL. If anyone can do this, its someone from CAL (or maybe LUV). I am not so optimistic than an "insider" (in quotes because he hasn't been an "insider" for long) with little industry background can deliver the changes required fast enough. I am beginning to think whatever happens next may be too little too late. If the current POR changes had been made in bankruptcy, I think US Airways would have had a survival near-miss. I think now, US Airways will be at least critically wounded or worse. I don't hope for this, but to me, the writing is on the wall.

Best of luck to all employees... I hope I am wrong and its not too late. I hope things work out for you all. However, from "this perch", any kind of positive outcome (where US Airways remains in business in its current form, more or less) is hard to see.

 

[usfliboi]

I agree! I for one who has almost 17 years here wants it to work . Bronner do what ya gotta do, I dont care anymore. Drop the unions they are worthless.

 

[RowUnderDCA]

mweiss,

" If HP had US's costs, they'd still be losing money. Even with their simplified fare structure."

Obviously correct - the simplified fare structure isn't the only factor in their profit. But without it they would have either made less or lost money - according to their words.

A few statistics from AWA (year over year):

Average daily A/C utilization - 10.8 hours (up 6.9%) - we're static
Block hours - up 5.1% - we're static
Average stage length - 1037 (up 5.2%) - we're under 800

Reckon any of this had something to do with their success (and lower costs)?

Jim

well, this would be the first major potential policy change I'd look for: deciding to move forward with the concept that simple pricing will increase revenue. Clearly, rightly or wrongly, Siegle did NOT believe that. I, of course, have no idea.

 

[MrAeroMan]

MrAeroMan,

"Do you know or does anyone know for that matter if numbers have been run on increasing the utilization of the mainline A/C to the 12 hour mark to see what the impact could be on not only revenue but costs as well?"

Not directly - there are too many variables. How many aircraft would increase utilization how much - European is maxed out on utilization, probably much the same for many of the planes that do trans-con and Caribbean flying. How many additional seat miles would be generated. What stage lengths for the extra flying.

For general info, our 737's have a direct operating cost of just over 6 cents per ASM (which includes aircraft cost). Flying a currently possessed plane more would result in the additional ASM's being cheaper than that since the cost of the plane is already paid for.

Due to several factors - stage length and age (maintenance) being primary - the 737's have the highest direct operating CASM.

Along this line, the following from AWA's 1st quarter results caught my eye:

"The primary drivers of the airline's CASM improvement during its first quarter 2004 were the increase in aircraft utilization and stage length, as well as the Company's cost reduction plan implemented in early 2003." CASM "decreased 8.5 percent" while "Excluding fuel and special items, CASM decreased 13.0 percent"

If you've ever looked at the curve plotting stage length vs operating cost for ANY airplane, you can see the dramatic difference that stage length makes - especially out to 1000-1500 miles.

Jim

I've seen the curve you're talking about and you're right it is dramatic. What is hard to see here is why this long haul flying hasn't been implemented yet. With the strength of the franchise on the east coast it would be a natural fit to put some long haul flying out of key east coast airports. I've seen your post regarding this and it makes an immense amount of sense. (probably why it hasn't been done??!!)

 

[ktflyhome]

Boeinboy Always makes alot of sense.!!!!!!!!!! Smart Man.

 

[MrAeroMan]

I will concur with you on that one KT....

 

[BoeingBoy]

Aw shucks, quit it now :wub:

Jim

 

[ClueByFour]

well, this would be the first major potential policy change I'd look for: deciding to move forward with the concept that simple pricing will increase revenue. Clearly, rightly or wrongly, Siegle did NOT believe that. I, of course, have no idea.

What Doc Bronner will say is that it will increase revenue in the long term, but kill it in the short term, thus killing US (whose current performance relies upon the "industry leading" RASM number).

That said, I firmly believe that dropping the top end and sanifying the bottom end (eg, the "Art at ISP plan") is the way to go. You can get away with 20 $49 seats on the plane, 100 $150 seats, and 20 $300 seats). LUV does this.

Right now, US is flying a lot of empty $400 and $500 seats, because nobody in their right mind pays it anymore (domestically, anyway).

All this having been said, if they did this gradually while phasing in whatever work-rule changes and the like that come with whatever concession talks render, I think it would be a winner.

That, and more point to point service out of BOS, and as much as possible from DCA and LGA (that nasty perimeter!). The first route I'd like to see?

BOS-SNN-DUB-BOS. Instant winner (well, I'm Irish and biased)....

 

[RowUnderDCA]

What Doc Bronner will say is that it will increase revenue in the long term, but kill it in the short term, thus killing US (whose current performance relies upon the "industry leading" RASM number).

That said, I firmly believe that dropping the top end and sanifying the bottom end (eg, the "Art at ISP plan") is the way to go. You can get away with 20 $49 seats on the plane, 100 $150 seats, and 20 $300 seats). LUV does this.

Right now, US is flying a lot of empty $400 and $500 seats, because nobody in their right mind pays it anymore (domestically, anyway).

All this having been said, if they did this gradually while phasing in whatever work-rule changes and the like that come with whatever concession talks render, I think it would be a winner.

That, and more point to point service out of BOS, and as much as possible from DCA and LGA (that nasty perimeter!). The first route I'd like to see?

BOS-SNN-DUB-BOS. Instant winner (well, I'm Irish and biased)....

That makes sense to me. Thus the double-bind, and why I think some mix of small permanent concessions, with profit sharing and some temporary concessions to make the leap might be what the "Doctor" orders. Then it would be clear that everyone is 'leaping' together for one last attempt to REALLY transform. But it could fail miserably.

I agree with Internation flying out of BOS. AMR flying to Manchester UK instead of U hurts.

Take the RJ's out of DCA, BOS, and LGA, replace with big jets and 170s and fly to where those folks want to go, including other majors' hubs. Be BOS's hometown, non-stop airline and LGA's and DCA's. Forget the idea of connecting these folks through PHL to major markets. I could see connecting them through PIT to outer-perimeter destinations, but only after U win's over the FF's at these major markets with all the new non-stop service. Roll PHL, to transition to a more point to point operation there. And continue to run CLT as a omni-directional hub alternative to ATL.

 

[Art at ISP]

Clue,

Thanks for your vote of support-one can only hope they're listening.

Regarding HP's costs, although they are a factor, let me remind you all that AS costs are not much lower than US, yet they are making money with their rationalized fare structure. If we raise the bottom by a small margin (and let the once a year flyers go to WN if they want), then lower the high end to tolerable levels, you will fill the planes with more business travelers. By doing so, you will see an increase in AVERAGE RASM, thereby increasing revenue overall. If you couple this with the operational cost savings which can be realized (I know workrule changes are needed), you would be in a much better position to survive and grow the airline.

Another thing which I have not mentioned lately, is how many of us frequent business travelers are beginning to resent subsidizing the once a year traveler who uses the $29 to $49 fares most? I don't recall ever paying less than $99 one way for any trip.

As long as fares are FAIR and we get value for the dollar, I think this can work.

My best to you all......

 

[RowUnderDCA]

Clue,

If we raise the bottom by a small margin (and let the once a year flyers go to WN if they want), then lower the high end to tolerable levels, you will fill the planes with more business travelers. By doing so, you will see an increase in AVERAGE RASM, thereby increasing revenue overall. If you couple this with the operational cost savings which can be realized (I know workrule changes are needed), you would be in a much better position to survive and grow the airline.

Right-

But U isn't doing this in a static market. What about competitor's response. Didn't AWA have to survive quite awhile of getting under cut? Won't SWA just lower its lowest, especially if U doesn't have the financial staying power, because of total employee costs? Again, I don't have the numbers, but I understand the dilemma.

Yes, I understand you're resentful.

 

[Art at ISP]

Row,

While I see your point regarding competitive response, the fact is that US to date has done absolutely nothing about the fares. If they did I bet they would see a shift to higher averages.

Surely this is not the only answer--costs must be addressed somehow, but I think this would be a way to improve the revenue picture on an overall basis.

It ain't perfect but it would be a good start...

And maybe we're tired of subsidizing--perhaps resentful was too strong a word. We shouldn't have to that's all....