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- Sep 3, 2002
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US Airways CEO David Siegel yesterday warned the bankrupt airline still needs to make broader cost cuts than earlier predicted, and will likely include more job cuts in order to survive in the current weak revenue environment.
Separately, Siegel confirmed after a speech to the Wings Club in New York the Retirement Systems of Alabama fund is the front runner in the bidding to provide funding in exchange for a 37.5% stake in the airline. Tomorrow is the deadline for submitting competing offers. While the RSA will likely be the winner, Siegel said there have been recent talks with other private equity firms.
The carrier remains on track to emerge from Chapter 11 bankruptcy protection by March, but Siegel said the operating environment is getting softer and a war with Iraq could potentially be cataclysmic to U.S. network carriers. In a grim
message, Siegel does not foresee any recovery until 2004 at the earliest,
and US Airways faces an even tougher environment than it first anticipated, he told journalists after his remarks.
Siegel's management team is putting the finishing touches on a contingency plan in case the airline faces a worst-case scenario next year. He believes worry over a Middle East conflict has already affected passenger traffic and oil
prices, but US Airways plans to launch its contingency plan ahead of any war. The industry is on the brink, and we're the next one to get pushed off the cliff, he said.
Despite his warning, Siegel said I'm pretty scrappy, vowing he is determined to succeed in the reorganization and won't go down without a fight. As part of his motto to adapt or we will die, Siegel said more costs need to be cut from the company's structure. He continues to look at all aspects of the US Airways business model, including non-value-added costs, he said. At the end of the day, we can't control the revenue environment, and the only thing we can do
to survive is to size our cost structure responsibly and that's what we're doing.
He also reported the airline still needs to become more efficient, but whether the airline shrinks further depends on the overall passenger demand over the next 12 months. The mainline fleet size of 279 aircraft is roughly in balance with current demand, but the airline's contingency plan postulates speeding aircraft retirements to cut its fleet to 245 aircraft if demand drops
further or if there is a shock to the system, such as an Iraqi war.
Siegel revealed there will be a series of announcements in the coming weeks outlining plans to transfer more flying to its regional affiliates.
He still believes Midway Airlines will be able to start flying again as a US Airways Express operator, as previously announced. Midway should be able to get off the ground again in about three months, he said yesterday.
Siegel also joined the chorus of airline CEOs lobbying Congress for tax relief. He said public officials need to abandon their schizophrenic view of the industry, in which they profess to value its importance, then turn around and tax, regulate and fine us to the point of operational paralysis. He agrees with politicians who have said that airlines' complaints have grown stale, but until something is done to fix the problem, we have no choice [but] to keep pointing out our problem.
The carrier blames taxes and high labor costs for the retreat from markets it once dominated from the Northeast to Florida. If I had the cost structure of low-cost competitors and didn't have to pay a third of the revenue back to the government, we'd probably still be the number one carrier on those routes, Siegel said. Carriers like JetBlue are now kings of the hill because they pay their employees half of what we pay now. -SL
Separately, Siegel confirmed after a speech to the Wings Club in New York the Retirement Systems of Alabama fund is the front runner in the bidding to provide funding in exchange for a 37.5% stake in the airline. Tomorrow is the deadline for submitting competing offers. While the RSA will likely be the winner, Siegel said there have been recent talks with other private equity firms.
The carrier remains on track to emerge from Chapter 11 bankruptcy protection by March, but Siegel said the operating environment is getting softer and a war with Iraq could potentially be cataclysmic to U.S. network carriers. In a grim
message, Siegel does not foresee any recovery until 2004 at the earliest,
and US Airways faces an even tougher environment than it first anticipated, he told journalists after his remarks.
Siegel's management team is putting the finishing touches on a contingency plan in case the airline faces a worst-case scenario next year. He believes worry over a Middle East conflict has already affected passenger traffic and oil
prices, but US Airways plans to launch its contingency plan ahead of any war. The industry is on the brink, and we're the next one to get pushed off the cliff, he said.
Despite his warning, Siegel said I'm pretty scrappy, vowing he is determined to succeed in the reorganization and won't go down without a fight. As part of his motto to adapt or we will die, Siegel said more costs need to be cut from the company's structure. He continues to look at all aspects of the US Airways business model, including non-value-added costs, he said. At the end of the day, we can't control the revenue environment, and the only thing we can do
to survive is to size our cost structure responsibly and that's what we're doing.
He also reported the airline still needs to become more efficient, but whether the airline shrinks further depends on the overall passenger demand over the next 12 months. The mainline fleet size of 279 aircraft is roughly in balance with current demand, but the airline's contingency plan postulates speeding aircraft retirements to cut its fleet to 245 aircraft if demand drops
further or if there is a shock to the system, such as an Iraqi war.
Siegel revealed there will be a series of announcements in the coming weeks outlining plans to transfer more flying to its regional affiliates.
He still believes Midway Airlines will be able to start flying again as a US Airways Express operator, as previously announced. Midway should be able to get off the ground again in about three months, he said yesterday.
Siegel also joined the chorus of airline CEOs lobbying Congress for tax relief. He said public officials need to abandon their schizophrenic view of the industry, in which they profess to value its importance, then turn around and tax, regulate and fine us to the point of operational paralysis. He agrees with politicians who have said that airlines' complaints have grown stale, but until something is done to fix the problem, we have no choice [but] to keep pointing out our problem.
The carrier blames taxes and high labor costs for the retreat from markets it once dominated from the Northeast to Florida. If I had the cost structure of low-cost competitors and didn't have to pay a third of the revenue back to the government, we'd probably still be the number one carrier on those routes, Siegel said. Carriers like JetBlue are now kings of the hill because they pay their employees half of what we pay now. -SL
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