Sunday, March 14, 2004
Hello Everyone:
I know, I know, it's been a month since you've heard from me. Like one airline CEO, I blame everything on Delta and Southwest.
But, here I am and I highly suggest you print this issue because there is a lot of information in today's newsletter. I've got the DOT Air Travel Consumer Report for you, February traffic reports and much more. If you're out of paper, pour yourself a beverage and enjoy my latest.
I'm going to start today's newsletter off with some commentary - just a few thoughts - and I'm also going to offer a counterpoint to US Airways' CEO Dave Siegel's weekly message to employees on March 5th regarding US Airways' efforts to reduce lost time due to illness, etc. and the effect it has on the company.
It was just two months ago when some newspaper headlines read 'Next 60 days critical for US Airways' and it seemed like a lot of folks went into 'panic mode.' But, a funny thing happened on the way to extinction - US Airways and the ATSB restructured the $1 billion loan this past Friday. As I told you after those doom and gloom headlines ran, I didn't think for a minute that US Airways was going out of business in the next 60, 90, 120 days, etc. How convenient that these other options suddenly pop up, seemingly out of nowhere.
US Airways prepaid $250 million of the loan, thereby reducing the remaining outstanding balance to $726 million. It makes me think of the old saying "where there is a will, there is a way." In exchange for the prepayment, US Airways stated that the financial covenants contained in the loan were modified through 2005. The 'new' covenants require that US Airways significantly narrow its losses in 2004 and return to profitability in 2005. The airline isn't shutting down anytime soon folks, believe me.
Now, I'd like to share some of my thoughts with you regarding US Airways - sort of a 'State of The Airline' assessment.
I've been thinking a lot about this lately and I firmly believe that Dave Siegel's days as CEO of US Airways are numbered - and it has nothing to do with recent published reports of Mr. Siegel's opportunity to collect $4.5 million in severance during a 30-day 'window' beginning April 1.
It has everything to do, however, with the following:
Strike 1: The Botched Bankruptcy.
US Airways Chairman of the Board David Bronner has said "there were some things that could have been done differently during the bankruptcy." He's right, but I'd rather hear that from the CEO than the Chairman of the board. Mr. Siegel, in his nearly two years on the job, doesn't seem to apologize much, even for obvious mistakes, but there are certainly a host of excuses to go around, as well as the finger-pointing blaming Delta and Southwest for US Airways' ills.
I think everyone realizes, or has realized for some time now, that the seven-and-a-half month trip through bankruptcy was a big mistake. The goal, entering bankruptcy, was to get US Airways' costs in line with Continental Airlines, which would be US Airways' "rightful place in the industry" Mr. Siegel told me. Now, all the comparison talk revolves around the low-cost carriers and Mr. Siegel rarely mentions comparisons to the other mature, network carriers like Continental, which is the true comparison.
Strike 2: The Business Plan.
As I've been telling you all along, the plan is not working, despite Mr. Siegel's best efforts to tell you that it is. In a recent Wall Street Journal article, Chairman Bronner said "it became pretty obvious the original plan wasn't going to work." I can't help but wonder why that statement can't come from Mr. Siegel. He continues to say the plan is working, just not as fast as he had hoped. However, if Mr. Siegel's plan were working he and his management team would not be meeting with labor leaders, AGAIN, in search of more concessions. You can't blame everything on Southwest and Delta, Mr. Siegel. At some point, you have to admit that you were wrong.
When folks ask me what the business plan is now, I tell them that, in my opinion, the current business plan is to constantly change the business plan - which is what a reactive management team versus a proactive management team does - all under the guise of Mr. Siegel's frequent statements "the industry is changing more rapidly than anyone could have imagined." Anyone Mr. Siegel? Anyone paying attention to monthly traffic reports will tell you that the low-cost carriers are growing just as steadily as they were a year ago. There is nothing 'rapid' or 'extensive' about their growth - unless you haven't been paying attention.
Mr. Siegel recently said that "the customer is king." Yeah, that's why less than 3 months before Southwest begins flying into PHL, US Airways suddenly has decided to fix their long-plagued baggage system. In other words, it's okay to continue to piss off your customers by making them wait up to an hour-and-a-half for their baggage - because you can. However, when another airline enters the picture and you realize that they will offer your customers better service, not to mention walk-up fares more than $2,000 cheaper, then you know you have to get off of your ass and do something. US Airways has suddenly realized that customers want a simplified fare structure. How could any management team just figure this stuff out?
Remember how I've said for so long that US Airways needed to reduce their outrageously high walk-up fares? US Airways insisted that they couldn't do that. Now, they're doing it because Southwest is coming to PHL. So, what I said for so long that they should do and US Airways said they couldn't do, they're now doing it - which means they could have done it long, long ago. Tell that to the business travelers who've abandoned US Airways.
You see folks, US Airways and the other large airlines have not only created the low-cost carriers, they've fed them as well by sending customers to them because of outrageous fares, outdated restrictions, etc., and they seemingly have only now just figured out that they've created the monster known as the low-cost carriers. If the customer were truly king, there wouldn't be any low-cost carriers -- think about it.
It appears that the plan, going forward, is to be a network hub-and-spoke carrier with a dash of point-to-point flying and a prominent emphasis on those little jets that only the folks who have to chose between prop aircraft and small jet aircraft like. Otherwise, most people seem to avoid them. Oh yeah, and don't forget more concessions are part of the new plan as well.
Remember all those statements that the unions were issuing just a couple of months ago? Things like "the concession stand is closed," and "the well is dry," and "we already gave." Keep those in your pocket and let's see what those same folks say in the next few months.
And finally, there's my long-time favorite topic, fuel hedging. US Airways doesn't do much of it and they say it's because you have to have money up front to do it and they don't have that money. But, they sure can come up with millions of dollars while in bankruptcy to pay 'retention bonuses' for senior management, can't they? They sure can find a way to pay for the production and postage to distribute nearly 30,000 'conduct and ethics' booklets. The end result of the 'retention bonuses' is that we saw several members of management, who shared in that multi-million dollar jackpot, hang around for the shortest amount of time they were legally obligated to, without having to forfeit their bonus, and then they split Crystal City. So, paying alleged "top talent" to retain their services doesn't work UNLESS you've got a business plan that people believe in. Considering that fuel is the second largest expense, behind labor, how could you afford not to have hedged more? And forget hedging now - it's essentially too late. Oil is probably going to hit $40./bbl in the next month or so and it is going to continue to put pressure on all airlines but especially those that are not well-hedged - and you know who those are.
Strike 3: Mr. Siegel has struck out with employees - plain and simple. He's lost the confidence of an entire workforce and I don't even think he knows it - and he probably doesn't care. Heard anyone say "Siegel's a great CEO" lately? Heck, I don't think anyone blames him for what he inherited but he is certainly accountable for what he's done, and what he's failed to do. He isn't able to 'rally the troops' at this point.
He now wants to give merit raises to non-contract personnel, including Management Salary Plan and Administrative Employees. Once again, the company states they "can't afford not to give" these raises at a time when they are asking contract employees for more cuts, yet again. Well, we've heard that lame excuse before and look what happened - senior management has been jumping ship as quickly as they can.
So, what does the future hold. I continue to believe that the airline isn't going down the drain in the next several months. If Mr. Siegel's services are deemed no longer necessary by the board of directors, then who will step in? It's a good question. One obvious name that will immediately come up with be Rono Dutta, one of the current board members at US Airways and the former president of United Airlines. Mr. Dutta was second in command at United during Jim Goodwin's tenure and he was there during United's 'summer from hell' back in 2000. My opinion is that it would be a big mistake to have Mr. Dutta take over the CEO post at US Airways.
US Airways will need someone that either, a) has a good track record within the airline industry, which I believe excludes Mr. Dutta or, B) someone from outside of the industry who can have a 'fresh' start with the employees and someone who will place a strong emphasis on putting the customers and employees first and actually demonstrate that philosophy. Mr. Siegel has failed miserably with the employees and he has yet to demonstrate anything remotely close to his self-professed labor-friendly style.
SHOULD YOU COME TO WORK SICK?
That is an interesting question, isn't it?
On March 5, Dave Siegel's weekly telephone message to employees addressed this issue. Mr. Siegel stated that "if you are sick, stay home and get healthy." He also stated in that message "we will protect the legitimately sick and injured." I beg to differ.
Since I can't cite examples from every work group, I'll tell you what I do know. Let's say a flight attendant has a monthly block worth 85 flight hours. He/she works 50 hours and then gets sick. The flight attendant has only 15 hours in their sick bank so, along with the 50 hours they've flown, they claim that 15 hours which gives them 65 total hours for the month.
They are legitimately sick. They get a legitimate note from their legitimate Doctor. They turn the note in to their illegitimate supervisor -- and they subsequently will be disciplined by US Airways.
Why? In-flight Services will issue the flight attendant a low-block letter, (for only having 65 hours), which will then result in the flight attendant being placed on the Dependability Control Program. In other words, on paper the flight attendant is disciplined for not meeting their monthly obligation but in reality, they are punished for not having sufficient sick time in their sick bank. Funny thing though, there is no company mandate which states a flight attendant must maintain 'x' number of hours in their sick bank.
What is the union (AFA CWA AFL-CIO AHOLES) doing about this? Absolutely nothing! So, if you are a flight attendant and you get sick and you don't have enough time in your sick bank, you better come to work sick otherwise, US Airways will discipline you. "Protect the legitimately sick and injured" Mr. Siegel? That is hardly the case.
THE MERGER IS COMING, THE MERGER IS COMING.
Our old friends, the "it's a done deal" crowd are back and trying to make some noise by claiming that a merger is in the works again between US Airways and United or whatever airline fits into their merger flavor-of-the-day. Let's see now, those merger 'experts' are at 4-years and counting of being wrong, am I right?
Even labor-friendly Dave Siegel said in a speech recently that "the airline industry will eventually consolidate." This is the same rhetoric that former Delta CEO Leo Mullin had said for the past few years and it just never seems to happen, does it? I often ask myself "why is it that some folks think a merger is a cure-all or the answer to an airline's problems?" Who knows, but I see no merger on the horizon for US Airways.
I'm disappointed to hear Mr. Siegel talk about industry consolidation and even the possibility of a merger. That's the same kind of talk we heard from Stephen Wolf a few years back when he didn't know how to manage the airline. Remember his two statements on Capitol Hill? The first was that "US Airways unequivocally doesn't need the merger to survive." A few months later, he stated that "US Airways may not be able to survive without it." What a big bumbling fool he was, not to mention how wrong he was, and thankfully the politicians called him on it.
Let me get out my merger calculator:
1 struggling airline + 1 struggling airline = 1 big money-losing struggling airline. I think that sums up my point. A merger between US Airways and United, or anyone else for that matter, will not produce any tangible benefit(s) for the consumer.
Like I've said before, if you were running another airline, would you want to merge with US Airways? If you're running US Airways, would you honestly want to be a part of United and their plethora of problems?
In an article last month in The Washington Post, Steve Pearlstein wrote 'A Suggested Route for US Airways.' In this article, Mr. Pearlstein suggested that US Airways, in order to survive, do the following:
* Put asset sales on hold
* Schedule a "come to Jesus" meeting with union leaders
* Fix, don't abandon, the hubs
* Target the business customer
* Revive the United merger
Well, he had me until that last one. Mr. Pearlstein said "the government goofed when it blocked the deal between United and US Airways."
Mr. Pearlstein, nothing could be further from the truth. The government did the correct thing by stating they would sue to block the merger. Let's assume, for a brief moment, that the merger had been approved. The combined airline, probably called 'US Tedways' would be the absolute worst airline right now and would be losing so much money, the figure might not be calculable. In fact, the airline would be so bad-off financially that it would not even qualify for a loan from the ATSB. I'll never understand why some folks believe that combining the two worst-managed, financially-ailing airlines together will somehow be a 'good thing.'
You know how kids, during drives in the car, love to say "are we there yet, are we there yet?" Each time someone talks about the 'imminent merger' or 'corporate transaction,' or whatever else they call it, between US Airways and United, you should send them an email and ask them "did we merge yet, did we merge yet?" -- and you should send this to them each and every day.
AIR TRAVEL CONSUMER REPORT - JANUARY 2004
The Department of Transportation has released their monthly ATCR. This report is designed to assist consumers with information on the quality of services, or lack thereof, provided by the airlines. Statistics from Comair are now included in this report, bringing the number of airlines reported to 19. Let's take a look and see how things kicked off for 2004.
ON-TIME:
1- Hawaiian Airlines ... 87.3%
2- Southwest Airlines ... 83.5
3- Atlantic Southeast Airlines ... 81.5
4- US Airways ... 80.0
5- Continental Airlines ... 79.9
6- JetBlue Airways ... 78.1
7- ExpressJet Airlines ... 76.9
8- Delta Air Lines ... 76.5
9- America West Airlines ... 76.3
10- Skywest Airlines ... 73.9
11- Northwest Airlines ... 73.8
12- AirTran Airways ... 73.2
13- Comair ... 72.7
14- United Airlines ... 71.6
15- American Airlines ... 68.9
16- ATA Airlines ... 68.5
17- Alaska Airlines ... 67.7
18- American Eagle ... 65.7
19- Atlantic Coast Airlines ... 64.8
(Average: 74.9%)
OVERALL CAUSES OF DELAY - JANUARY 2004:
1- On-time ... 74.85%
2- National Aviation System Delay ... 9.24%
3- Late Arriving Aircraft Delay ... 5.73%
4- Air Carrier Delay ... 5.56%
5- Cancelled ... 3.02%
6- Extreme Weather Delay ... 1.35%
7- Diverted ... 0.17%
8- Security Delay ... 0.07%
(note: there were 17,611 cancellations and 1,015 flight diversions in January 2004)
US Airways' on-time percentage at their hubs and focus cities:
HUBS:
1- CLT ... 84.5%
2- PIT ... 83.4
3- PHL ... 78.0
FOCUS CITIES:
1- DCA ... 87.8
2- BOS ... 85.1
3- LGA ... 81.4
OVERALL NUMBER AND PERCENTAGE OF FLIGHT CANCELLATIONS BY CARRIER:
(worst to best)
19- Alaska cancelled 1,019 flights in January or, 7.7% of their operations.
18- Atlantic Coast cancelled 1,583 flights in January or, 6.8% of their operations.
17- American Eagle cancelled 2,481 flights in January or, 6.5% of their operations.
16- Comair cancelled 1,345 flights in January or, 4.4% of their operations.
15- Skywest cancelled 1,385 flights in January or, 3.8% of their operations.
14- American cancelled 2,300 flights in January or, 3.8% of their operations.
13- Atlantic Southeast cancelled 594 flights in January or, 2.6% of their operations.
12- ATA cancelled 151 flights in January or, 2.3% of their operations.
11- ExpressJet cancelled 638 flights in January or, 2.3% of their operations.
10- Delta cancelled 1,265 flights in January or, 2.2% of their operations.
9- United cancelled 1,017 flights in January or, 2.2% of their operations.
8- Southwest cancelled 1,690 flights in January or, 2.1% of their operations.
7- Northwest cancelled 828 flights in January or, 2.0% of their operations.
6- America West cancelled 314 flights in January or, 1.9% of their operations.
5- US Airways cancelled 549 flights in January or, 1.6% of their operations.
4- AirTran cancelled 160 flights in January or, 1.3% of their operations.
3- Continental cancelled 240 flights in January or, 1.0% of their operations.
2- Hawaiian cancelled 28 flights in January or, 0.7% of their operations.
1- JetBlue cancelled 24 flights in January or, 0.4% of their operations.
(average: 3.0% of operations were cancelled in January)
MISHANDLED BAGGAGE:
(Reports per 1,000 passengers - best to worst)
1- AirTran ... 3.16
2- Continental ... 3.25
3- Southwest ... 3.48
4- JetBlue ... 3.64
5- Hawaiian ... 3.72
6- US Airways ... 3.85
7- America West ... 3.96
8- Alaska ... 4.09
9- Northwest ... 4.59
10- ATA ... 5.60
11- United ... 5.64
12- Delta ... 5.75
13- ExpressJet ... 5.76
14- American ... 6.10
15- American Eagle ... 12.60
16- Comair ... 14.90
17- Skywest ... 16.79
18- Atlantic Coast ... 19.06
19- Atlantic Southeast ... 19.61
(average: 5.91)
CONSUMER COMPLAINTS:
(Complaints per 100,000 enplanements - best to worst)
1- Southwest ... 0.17
2- Skywest ... 0.22
3- ExpressJet ... 0.23
4- Atlantic Southeast ... 0.42
5- JetBlue ... 0.61
6- Continental ... 0.71
7- American Eagle ... 0.73
8- Comair ... 0.81
9- Hawaiian ... 0.87
10- US Airways ... 1.04
11- American ... 1.11
12- Delta ... 1.22
13- America West ... 1.23
14- United ... 1.33
15- Northwest ... 1.39
16- Alaska ... 1.43
17- ATA ... 1.85
18- AirTran ... 1.90
19- Atlantic Coast ... 2.18
(average: 1.01)
Fun With Numbers: In January, between 9:00 - 9:59 PM, at Philadelphia International Airport, all airlines combined to report a sad 50.0% of their flight operations departing on time. Not to be outdone, during the same month and same one-hour time period, airlines reported that a mere 25.0% of their flight operations departed on time at Miami International Airport.
PIMP MY RIDE!
What happens when you combine the new MTV show 'Pimp My Ride' with an old Fokker F-28-4000 airplane? Something close to what MIA agent Jay Selman shot with his digital camera recently - the new Embraer 170, also known as MidAtlantic Airways.
http://www.airliners.net/open.file?id=524231
http://www.airliners.net/open.file?id=524232
http://www.airliners.net/open.file?id=524239
http://www.airliners.net/open.file?id=527712
http://www.airliners.net/open.file?id=526864
http://www.airliners.net/open.file?id=524539
http://www.jetphotos.net/viewphoto.php?id=242627
FEBRUARY TRAFFIC REPORTS:
LOAD FACTORS:
1- JetBlue Airways ... 77.9%
2- Northwest Airlines ... 74.5
3- United Airlines ... 73.2
4- America West Airlines ... 71.8
5- Continental Airlines ... 70.2
6- American Airlines ... 68.9
7- Delta Air Lines ... 68.6
8- US Airways ... 68.5
9- Alaska Airlines ... 67.7
10- AirTran Airways ... 66.7
11- ATA ... 66.2
12- Southwest Airlines ... 62.2
The following categories, Revenue Passenger Miles (RPMs), Available Seat Miles (ASMs) and Passengers Carried compare February 2004 numbers against those from February 2003.
TRAFFIC -- Revenue Passenger Miles (RPMs):
1- JetBlue posted a 48.8% increase in RPMs.
2- AirTran posted a 28.7% increase in RPMs.
3- ATA posted a 23.6% increase in RPMs.
4- US Airways posted a 15.9% increase in RPMs.
5- Alaska posted a 14.7% increase in RPMs.
6- Continental posted a 13.9% increase in RPMs.
7- America West posted a 12.7% increase in RPMs.
8- American posted a 12.2% increase in RPMs.
9- Southwest posted a 8.8% increase in RPMs.
10- United posted a 8.2% increase in RPMs.
11- Delta posted a 8.0% increase in RPMs.
12- Northwest posted a 1.1% increase in RPMs.
CAPACITY -- Available Seat Miles (ASMs):
1- JetBlue posted a 51.7% increase in ASMs.
2- AirTran posted a 27.8% increase in ASMs.
3- ATA posted a 23.1% increase in ASMs.
4- Alaska posted a 14.2% increase in ASMs.
5- US Airways posted a 13.6% increase in ASMs.
6- American posted a 11.9% increase in ASMs.
7- Continental posted a 11.7% increase in ASMs.
8- America West posted a 11.1% increase in ASMs.
9- Southwest posted a 9.3% increase in ASMs.
10- Delta posted a 8.1% increase in ASMs.
11- United posted a 3.8% increase in ASMs.
12- Northwest posted a 0.5% decrease in ASMs.
PASSENGERS CARRIED IN FEBRUARY 2004:
(number of passengers carried in parenthesis)
1- JetBlue posted a 38.3% increase in passengers carried (836,123)
2- AirTran posted a 22.9% increase in passengers carried (930,691)
3- ATA posted a 22.0% increase in passengers carried (859,584)
4- Alaska posted a 10.9% increase in passengers carried (1,133,300)
5- US Airways posted a 9.0% increase in passengers carried (3,131,137)
6- America West posted a 8.0% increase in passengers carried (1,550,814)
7- Southwest posted a 7.7% increase in passengers carried (5,080,531)
8- American posted a 7.3% increase in passengers carried (6,835,904)
9- Delta posted a 5.3% increase in passengers carried (8,020,329)
10- United posted a 3.6% increase in passengers carried (4,974,000)
11- Northwest posted a 2.4% increase in passengers carried (3,894,759)
(note: Continental does not report this category in their monthly traffic reports)
[Because February had an extra day - leap year - the numbers were higher than they would normally have been. For example, the extra day contributed 4.0 points to both capacity and traffic for American Airlines. Also, without the extra day, Southwest would have reported RPMs of 4.3% (vs. 8.8) and ASMs of 5.6% (vs. 9.3)]
WALL STREET:
Here's where a few of your favorite airline stocks will open on Monday, March 15:
Alaska (ALK) ... 24.12
JetBlue (JBLU) ... 23.27
American (AMR) ... 13.97
Southwest (LUV) ... 13.90
Continental (CAL) ... 13.00
AirTran (AAI) ... 11.97
America West (AWA) ... 10.12
Northwest (NWAC) ... 10.10
Delta (DAL) ... 8.84
ATA (ATAH) ... 8.28
US Airways (UAIR) ... 4.80
United (UALAQ) ... 1.51
Nymex Crude ... 36.19/bbl
Hello Everyone:
I know, I know, it's been a month since you've heard from me. Like one airline CEO, I blame everything on Delta and Southwest.
But, here I am and I highly suggest you print this issue because there is a lot of information in today's newsletter. I've got the DOT Air Travel Consumer Report for you, February traffic reports and much more. If you're out of paper, pour yourself a beverage and enjoy my latest.
I'm going to start today's newsletter off with some commentary - just a few thoughts - and I'm also going to offer a counterpoint to US Airways' CEO Dave Siegel's weekly message to employees on March 5th regarding US Airways' efforts to reduce lost time due to illness, etc. and the effect it has on the company.
It was just two months ago when some newspaper headlines read 'Next 60 days critical for US Airways' and it seemed like a lot of folks went into 'panic mode.' But, a funny thing happened on the way to extinction - US Airways and the ATSB restructured the $1 billion loan this past Friday. As I told you after those doom and gloom headlines ran, I didn't think for a minute that US Airways was going out of business in the next 60, 90, 120 days, etc. How convenient that these other options suddenly pop up, seemingly out of nowhere.
US Airways prepaid $250 million of the loan, thereby reducing the remaining outstanding balance to $726 million. It makes me think of the old saying "where there is a will, there is a way." In exchange for the prepayment, US Airways stated that the financial covenants contained in the loan were modified through 2005. The 'new' covenants require that US Airways significantly narrow its losses in 2004 and return to profitability in 2005. The airline isn't shutting down anytime soon folks, believe me.
Now, I'd like to share some of my thoughts with you regarding US Airways - sort of a 'State of The Airline' assessment.
I've been thinking a lot about this lately and I firmly believe that Dave Siegel's days as CEO of US Airways are numbered - and it has nothing to do with recent published reports of Mr. Siegel's opportunity to collect $4.5 million in severance during a 30-day 'window' beginning April 1.
It has everything to do, however, with the following:
Strike 1: The Botched Bankruptcy.
US Airways Chairman of the Board David Bronner has said "there were some things that could have been done differently during the bankruptcy." He's right, but I'd rather hear that from the CEO than the Chairman of the board. Mr. Siegel, in his nearly two years on the job, doesn't seem to apologize much, even for obvious mistakes, but there are certainly a host of excuses to go around, as well as the finger-pointing blaming Delta and Southwest for US Airways' ills.
I think everyone realizes, or has realized for some time now, that the seven-and-a-half month trip through bankruptcy was a big mistake. The goal, entering bankruptcy, was to get US Airways' costs in line with Continental Airlines, which would be US Airways' "rightful place in the industry" Mr. Siegel told me. Now, all the comparison talk revolves around the low-cost carriers and Mr. Siegel rarely mentions comparisons to the other mature, network carriers like Continental, which is the true comparison.
Strike 2: The Business Plan.
As I've been telling you all along, the plan is not working, despite Mr. Siegel's best efforts to tell you that it is. In a recent Wall Street Journal article, Chairman Bronner said "it became pretty obvious the original plan wasn't going to work." I can't help but wonder why that statement can't come from Mr. Siegel. He continues to say the plan is working, just not as fast as he had hoped. However, if Mr. Siegel's plan were working he and his management team would not be meeting with labor leaders, AGAIN, in search of more concessions. You can't blame everything on Southwest and Delta, Mr. Siegel. At some point, you have to admit that you were wrong.
When folks ask me what the business plan is now, I tell them that, in my opinion, the current business plan is to constantly change the business plan - which is what a reactive management team versus a proactive management team does - all under the guise of Mr. Siegel's frequent statements "the industry is changing more rapidly than anyone could have imagined." Anyone Mr. Siegel? Anyone paying attention to monthly traffic reports will tell you that the low-cost carriers are growing just as steadily as they were a year ago. There is nothing 'rapid' or 'extensive' about their growth - unless you haven't been paying attention.
Mr. Siegel recently said that "the customer is king." Yeah, that's why less than 3 months before Southwest begins flying into PHL, US Airways suddenly has decided to fix their long-plagued baggage system. In other words, it's okay to continue to piss off your customers by making them wait up to an hour-and-a-half for their baggage - because you can. However, when another airline enters the picture and you realize that they will offer your customers better service, not to mention walk-up fares more than $2,000 cheaper, then you know you have to get off of your ass and do something. US Airways has suddenly realized that customers want a simplified fare structure. How could any management team just figure this stuff out?
Remember how I've said for so long that US Airways needed to reduce their outrageously high walk-up fares? US Airways insisted that they couldn't do that. Now, they're doing it because Southwest is coming to PHL. So, what I said for so long that they should do and US Airways said they couldn't do, they're now doing it - which means they could have done it long, long ago. Tell that to the business travelers who've abandoned US Airways.
You see folks, US Airways and the other large airlines have not only created the low-cost carriers, they've fed them as well by sending customers to them because of outrageous fares, outdated restrictions, etc., and they seemingly have only now just figured out that they've created the monster known as the low-cost carriers. If the customer were truly king, there wouldn't be any low-cost carriers -- think about it.
It appears that the plan, going forward, is to be a network hub-and-spoke carrier with a dash of point-to-point flying and a prominent emphasis on those little jets that only the folks who have to chose between prop aircraft and small jet aircraft like. Otherwise, most people seem to avoid them. Oh yeah, and don't forget more concessions are part of the new plan as well.
Remember all those statements that the unions were issuing just a couple of months ago? Things like "the concession stand is closed," and "the well is dry," and "we already gave." Keep those in your pocket and let's see what those same folks say in the next few months.
And finally, there's my long-time favorite topic, fuel hedging. US Airways doesn't do much of it and they say it's because you have to have money up front to do it and they don't have that money. But, they sure can come up with millions of dollars while in bankruptcy to pay 'retention bonuses' for senior management, can't they? They sure can find a way to pay for the production and postage to distribute nearly 30,000 'conduct and ethics' booklets. The end result of the 'retention bonuses' is that we saw several members of management, who shared in that multi-million dollar jackpot, hang around for the shortest amount of time they were legally obligated to, without having to forfeit their bonus, and then they split Crystal City. So, paying alleged "top talent" to retain their services doesn't work UNLESS you've got a business plan that people believe in. Considering that fuel is the second largest expense, behind labor, how could you afford not to have hedged more? And forget hedging now - it's essentially too late. Oil is probably going to hit $40./bbl in the next month or so and it is going to continue to put pressure on all airlines but especially those that are not well-hedged - and you know who those are.
Strike 3: Mr. Siegel has struck out with employees - plain and simple. He's lost the confidence of an entire workforce and I don't even think he knows it - and he probably doesn't care. Heard anyone say "Siegel's a great CEO" lately? Heck, I don't think anyone blames him for what he inherited but he is certainly accountable for what he's done, and what he's failed to do. He isn't able to 'rally the troops' at this point.
He now wants to give merit raises to non-contract personnel, including Management Salary Plan and Administrative Employees. Once again, the company states they "can't afford not to give" these raises at a time when they are asking contract employees for more cuts, yet again. Well, we've heard that lame excuse before and look what happened - senior management has been jumping ship as quickly as they can.
So, what does the future hold. I continue to believe that the airline isn't going down the drain in the next several months. If Mr. Siegel's services are deemed no longer necessary by the board of directors, then who will step in? It's a good question. One obvious name that will immediately come up with be Rono Dutta, one of the current board members at US Airways and the former president of United Airlines. Mr. Dutta was second in command at United during Jim Goodwin's tenure and he was there during United's 'summer from hell' back in 2000. My opinion is that it would be a big mistake to have Mr. Dutta take over the CEO post at US Airways.
US Airways will need someone that either, a) has a good track record within the airline industry, which I believe excludes Mr. Dutta or, B) someone from outside of the industry who can have a 'fresh' start with the employees and someone who will place a strong emphasis on putting the customers and employees first and actually demonstrate that philosophy. Mr. Siegel has failed miserably with the employees and he has yet to demonstrate anything remotely close to his self-professed labor-friendly style.
SHOULD YOU COME TO WORK SICK?
That is an interesting question, isn't it?
On March 5, Dave Siegel's weekly telephone message to employees addressed this issue. Mr. Siegel stated that "if you are sick, stay home and get healthy." He also stated in that message "we will protect the legitimately sick and injured." I beg to differ.
Since I can't cite examples from every work group, I'll tell you what I do know. Let's say a flight attendant has a monthly block worth 85 flight hours. He/she works 50 hours and then gets sick. The flight attendant has only 15 hours in their sick bank so, along with the 50 hours they've flown, they claim that 15 hours which gives them 65 total hours for the month.
They are legitimately sick. They get a legitimate note from their legitimate Doctor. They turn the note in to their illegitimate supervisor -- and they subsequently will be disciplined by US Airways.
Why? In-flight Services will issue the flight attendant a low-block letter, (for only having 65 hours), which will then result in the flight attendant being placed on the Dependability Control Program. In other words, on paper the flight attendant is disciplined for not meeting their monthly obligation but in reality, they are punished for not having sufficient sick time in their sick bank. Funny thing though, there is no company mandate which states a flight attendant must maintain 'x' number of hours in their sick bank.
What is the union (AFA CWA AFL-CIO AHOLES) doing about this? Absolutely nothing! So, if you are a flight attendant and you get sick and you don't have enough time in your sick bank, you better come to work sick otherwise, US Airways will discipline you. "Protect the legitimately sick and injured" Mr. Siegel? That is hardly the case.
THE MERGER IS COMING, THE MERGER IS COMING.
Our old friends, the "it's a done deal" crowd are back and trying to make some noise by claiming that a merger is in the works again between US Airways and United or whatever airline fits into their merger flavor-of-the-day. Let's see now, those merger 'experts' are at 4-years and counting of being wrong, am I right?
Even labor-friendly Dave Siegel said in a speech recently that "the airline industry will eventually consolidate." This is the same rhetoric that former Delta CEO Leo Mullin had said for the past few years and it just never seems to happen, does it? I often ask myself "why is it that some folks think a merger is a cure-all or the answer to an airline's problems?" Who knows, but I see no merger on the horizon for US Airways.
I'm disappointed to hear Mr. Siegel talk about industry consolidation and even the possibility of a merger. That's the same kind of talk we heard from Stephen Wolf a few years back when he didn't know how to manage the airline. Remember his two statements on Capitol Hill? The first was that "US Airways unequivocally doesn't need the merger to survive." A few months later, he stated that "US Airways may not be able to survive without it." What a big bumbling fool he was, not to mention how wrong he was, and thankfully the politicians called him on it.
Let me get out my merger calculator:
1 struggling airline + 1 struggling airline = 1 big money-losing struggling airline. I think that sums up my point. A merger between US Airways and United, or anyone else for that matter, will not produce any tangible benefit(s) for the consumer.
Like I've said before, if you were running another airline, would you want to merge with US Airways? If you're running US Airways, would you honestly want to be a part of United and their plethora of problems?
In an article last month in The Washington Post, Steve Pearlstein wrote 'A Suggested Route for US Airways.' In this article, Mr. Pearlstein suggested that US Airways, in order to survive, do the following:
* Put asset sales on hold
* Schedule a "come to Jesus" meeting with union leaders
* Fix, don't abandon, the hubs
* Target the business customer
* Revive the United merger
Well, he had me until that last one. Mr. Pearlstein said "the government goofed when it blocked the deal between United and US Airways."
Mr. Pearlstein, nothing could be further from the truth. The government did the correct thing by stating they would sue to block the merger. Let's assume, for a brief moment, that the merger had been approved. The combined airline, probably called 'US Tedways' would be the absolute worst airline right now and would be losing so much money, the figure might not be calculable. In fact, the airline would be so bad-off financially that it would not even qualify for a loan from the ATSB. I'll never understand why some folks believe that combining the two worst-managed, financially-ailing airlines together will somehow be a 'good thing.'
You know how kids, during drives in the car, love to say "are we there yet, are we there yet?" Each time someone talks about the 'imminent merger' or 'corporate transaction,' or whatever else they call it, between US Airways and United, you should send them an email and ask them "did we merge yet, did we merge yet?" -- and you should send this to them each and every day.
AIR TRAVEL CONSUMER REPORT - JANUARY 2004
The Department of Transportation has released their monthly ATCR. This report is designed to assist consumers with information on the quality of services, or lack thereof, provided by the airlines. Statistics from Comair are now included in this report, bringing the number of airlines reported to 19. Let's take a look and see how things kicked off for 2004.
ON-TIME:
1- Hawaiian Airlines ... 87.3%
2- Southwest Airlines ... 83.5
3- Atlantic Southeast Airlines ... 81.5
4- US Airways ... 80.0
5- Continental Airlines ... 79.9
6- JetBlue Airways ... 78.1
7- ExpressJet Airlines ... 76.9
8- Delta Air Lines ... 76.5
9- America West Airlines ... 76.3
10- Skywest Airlines ... 73.9
11- Northwest Airlines ... 73.8
12- AirTran Airways ... 73.2
13- Comair ... 72.7
14- United Airlines ... 71.6
15- American Airlines ... 68.9
16- ATA Airlines ... 68.5
17- Alaska Airlines ... 67.7
18- American Eagle ... 65.7
19- Atlantic Coast Airlines ... 64.8
(Average: 74.9%)
OVERALL CAUSES OF DELAY - JANUARY 2004:
1- On-time ... 74.85%
2- National Aviation System Delay ... 9.24%
3- Late Arriving Aircraft Delay ... 5.73%
4- Air Carrier Delay ... 5.56%
5- Cancelled ... 3.02%
6- Extreme Weather Delay ... 1.35%
7- Diverted ... 0.17%
8- Security Delay ... 0.07%
(note: there were 17,611 cancellations and 1,015 flight diversions in January 2004)
US Airways' on-time percentage at their hubs and focus cities:
HUBS:
1- CLT ... 84.5%
2- PIT ... 83.4
3- PHL ... 78.0
FOCUS CITIES:
1- DCA ... 87.8
2- BOS ... 85.1
3- LGA ... 81.4
OVERALL NUMBER AND PERCENTAGE OF FLIGHT CANCELLATIONS BY CARRIER:
(worst to best)
19- Alaska cancelled 1,019 flights in January or, 7.7% of their operations.
18- Atlantic Coast cancelled 1,583 flights in January or, 6.8% of their operations.
17- American Eagle cancelled 2,481 flights in January or, 6.5% of their operations.
16- Comair cancelled 1,345 flights in January or, 4.4% of their operations.
15- Skywest cancelled 1,385 flights in January or, 3.8% of their operations.
14- American cancelled 2,300 flights in January or, 3.8% of their operations.
13- Atlantic Southeast cancelled 594 flights in January or, 2.6% of their operations.
12- ATA cancelled 151 flights in January or, 2.3% of their operations.
11- ExpressJet cancelled 638 flights in January or, 2.3% of their operations.
10- Delta cancelled 1,265 flights in January or, 2.2% of their operations.
9- United cancelled 1,017 flights in January or, 2.2% of their operations.
8- Southwest cancelled 1,690 flights in January or, 2.1% of their operations.
7- Northwest cancelled 828 flights in January or, 2.0% of their operations.
6- America West cancelled 314 flights in January or, 1.9% of their operations.
5- US Airways cancelled 549 flights in January or, 1.6% of their operations.
4- AirTran cancelled 160 flights in January or, 1.3% of their operations.
3- Continental cancelled 240 flights in January or, 1.0% of their operations.
2- Hawaiian cancelled 28 flights in January or, 0.7% of their operations.
1- JetBlue cancelled 24 flights in January or, 0.4% of their operations.
(average: 3.0% of operations were cancelled in January)
MISHANDLED BAGGAGE:
(Reports per 1,000 passengers - best to worst)
1- AirTran ... 3.16
2- Continental ... 3.25
3- Southwest ... 3.48
4- JetBlue ... 3.64
5- Hawaiian ... 3.72
6- US Airways ... 3.85
7- America West ... 3.96
8- Alaska ... 4.09
9- Northwest ... 4.59
10- ATA ... 5.60
11- United ... 5.64
12- Delta ... 5.75
13- ExpressJet ... 5.76
14- American ... 6.10
15- American Eagle ... 12.60
16- Comair ... 14.90
17- Skywest ... 16.79
18- Atlantic Coast ... 19.06
19- Atlantic Southeast ... 19.61
(average: 5.91)
CONSUMER COMPLAINTS:
(Complaints per 100,000 enplanements - best to worst)
1- Southwest ... 0.17
2- Skywest ... 0.22
3- ExpressJet ... 0.23
4- Atlantic Southeast ... 0.42
5- JetBlue ... 0.61
6- Continental ... 0.71
7- American Eagle ... 0.73
8- Comair ... 0.81
9- Hawaiian ... 0.87
10- US Airways ... 1.04
11- American ... 1.11
12- Delta ... 1.22
13- America West ... 1.23
14- United ... 1.33
15- Northwest ... 1.39
16- Alaska ... 1.43
17- ATA ... 1.85
18- AirTran ... 1.90
19- Atlantic Coast ... 2.18
(average: 1.01)
Fun With Numbers: In January, between 9:00 - 9:59 PM, at Philadelphia International Airport, all airlines combined to report a sad 50.0% of their flight operations departing on time. Not to be outdone, during the same month and same one-hour time period, airlines reported that a mere 25.0% of their flight operations departed on time at Miami International Airport.
PIMP MY RIDE!
What happens when you combine the new MTV show 'Pimp My Ride' with an old Fokker F-28-4000 airplane? Something close to what MIA agent Jay Selman shot with his digital camera recently - the new Embraer 170, also known as MidAtlantic Airways.
http://www.airliners.net/open.file?id=524231
http://www.airliners.net/open.file?id=524232
http://www.airliners.net/open.file?id=524239
http://www.airliners.net/open.file?id=527712
http://www.airliners.net/open.file?id=526864
http://www.airliners.net/open.file?id=524539
http://www.jetphotos.net/viewphoto.php?id=242627
FEBRUARY TRAFFIC REPORTS:
LOAD FACTORS:
1- JetBlue Airways ... 77.9%
2- Northwest Airlines ... 74.5
3- United Airlines ... 73.2
4- America West Airlines ... 71.8
5- Continental Airlines ... 70.2
6- American Airlines ... 68.9
7- Delta Air Lines ... 68.6
8- US Airways ... 68.5
9- Alaska Airlines ... 67.7
10- AirTran Airways ... 66.7
11- ATA ... 66.2
12- Southwest Airlines ... 62.2
The following categories, Revenue Passenger Miles (RPMs), Available Seat Miles (ASMs) and Passengers Carried compare February 2004 numbers against those from February 2003.
TRAFFIC -- Revenue Passenger Miles (RPMs):
1- JetBlue posted a 48.8% increase in RPMs.
2- AirTran posted a 28.7% increase in RPMs.
3- ATA posted a 23.6% increase in RPMs.
4- US Airways posted a 15.9% increase in RPMs.
5- Alaska posted a 14.7% increase in RPMs.
6- Continental posted a 13.9% increase in RPMs.
7- America West posted a 12.7% increase in RPMs.
8- American posted a 12.2% increase in RPMs.
9- Southwest posted a 8.8% increase in RPMs.
10- United posted a 8.2% increase in RPMs.
11- Delta posted a 8.0% increase in RPMs.
12- Northwest posted a 1.1% increase in RPMs.
CAPACITY -- Available Seat Miles (ASMs):
1- JetBlue posted a 51.7% increase in ASMs.
2- AirTran posted a 27.8% increase in ASMs.
3- ATA posted a 23.1% increase in ASMs.
4- Alaska posted a 14.2% increase in ASMs.
5- US Airways posted a 13.6% increase in ASMs.
6- American posted a 11.9% increase in ASMs.
7- Continental posted a 11.7% increase in ASMs.
8- America West posted a 11.1% increase in ASMs.
9- Southwest posted a 9.3% increase in ASMs.
10- Delta posted a 8.1% increase in ASMs.
11- United posted a 3.8% increase in ASMs.
12- Northwest posted a 0.5% decrease in ASMs.
PASSENGERS CARRIED IN FEBRUARY 2004:
(number of passengers carried in parenthesis)
1- JetBlue posted a 38.3% increase in passengers carried (836,123)
2- AirTran posted a 22.9% increase in passengers carried (930,691)
3- ATA posted a 22.0% increase in passengers carried (859,584)
4- Alaska posted a 10.9% increase in passengers carried (1,133,300)
5- US Airways posted a 9.0% increase in passengers carried (3,131,137)
6- America West posted a 8.0% increase in passengers carried (1,550,814)
7- Southwest posted a 7.7% increase in passengers carried (5,080,531)
8- American posted a 7.3% increase in passengers carried (6,835,904)
9- Delta posted a 5.3% increase in passengers carried (8,020,329)
10- United posted a 3.6% increase in passengers carried (4,974,000)
11- Northwest posted a 2.4% increase in passengers carried (3,894,759)
(note: Continental does not report this category in their monthly traffic reports)
[Because February had an extra day - leap year - the numbers were higher than they would normally have been. For example, the extra day contributed 4.0 points to both capacity and traffic for American Airlines. Also, without the extra day, Southwest would have reported RPMs of 4.3% (vs. 8.8) and ASMs of 5.6% (vs. 9.3)]
WALL STREET:
Here's where a few of your favorite airline stocks will open on Monday, March 15:
Alaska (ALK) ... 24.12
JetBlue (JBLU) ... 23.27
American (AMR) ... 13.97
Southwest (LUV) ... 13.90
Continental (CAL) ... 13.00
AirTran (AAI) ... 11.97
America West (AWA) ... 10.12
Northwest (NWAC) ... 10.10
Delta (DAL) ... 8.84
ATA (ATAH) ... 8.28
US Airways (UAIR) ... 4.80
United (UALAQ) ... 1.51
Nymex Crude ... 36.19/bbl
