Southwest, Aa Not Worried About A New Us Airways

[USA320Pilot]

How will the 'new' US Airways fare against Southwest?

The merger still has a number of hurdles to clear before the airlines can consummate their marriage, but if the deal goes through customers can expect fierce competition between Southwest and the "new" US Airways as the two airlines battle for market share.

To get an idea of what customers might expect after a merger, we ran a spot check of fares on 10 routes where Southwest currently competes against either America West or US Airways. We looked at five routes where Southwest flies against US Airways, and another five where it competes against America West.

We found that the airlines are already quite close in the fares they charge on competing routes.

See Story

USA320Pilot comments: In the USA Today's column above, the chart provides a sampling of US Airways and America West fares against Southwest in certain markets. The average US Airways fares are below Southwest and in the Philadelphia markets, US Airways has lower fares than the Texas-based company.

Regards,

USA320Pilot

 

[BoeingBoy]

USA320Pilot comments: In the USA Today's column above, the chart provides a sampling of US Airways and America West fares against Southwest in certain markets. The average US Airways fares are below Southwest and in the Philadelphia markets, US Airways has lower fares than the Texas-based company.

Regards,

USA320Pilot

[post="273463"][/post]​

The problem is that WN can make money at those fares and we can't - at least till we get either our costs or the combined HP/US costs down to theirs.

Having "lower fares" is only good if you can make money at those fares.....

Jim

 

[ClueByFour]

USA320Pilot comments: In the USA Today's column above, the chart provides a sampling of US Airways and America West fares against Southwest in certain markets. The average US Airways fares are below Southwest and in the Philadelphia markets, US Airways has lower fares than the Texas-based company.

[post="273463"][/post]​

A few things you can take from that:

LUV is still filling planes with higher fares. Better revenue management.

At the fare levels charged, LUV is making money. US is not.

What US fails to understand (although HP's management seems to get) is that it's not the lowest fare that matters--it's a fair fare. Paging Art.

Of course, the "Texas based company" has made money for 32 solid years and arguably drove the "Soon to be leaving Arlington" company into bankruptcy for the second time by invading Philadelphia.

But since USA Today caught LUV on a day where more of their advanced purchase buckets were sold out, it's a competitive advantage!

Reality at 11.

 

[insp89]

Really? The hedge is not $26 forever, but they still have hedges that beat the pants off what other airlines are paying. I suggest you take a look at their annual report.

Even absent the hedges, they are still ahead of everyone but B6 on CASM, and will be several cents ahead of the combined HP/US (due to the lion's share of the employees and non-labor costs coming on the US side).

Also, their labor costs on a per CASM basis have decreased YOY, IIRC.

As for PHL, it says tons that it's the fastest growing city they've ever had, but analysts consider it "underperforming." I wonder how much of that statement was referring to the operational side of the house. US still can't hang with LUV with the fares LUV charges out of PHL.

[post="273461"][/post]​

Yeah, Really, You're Right, LUV's Hedge advantage is eroding.

As for your CASM claims, Rest assured, CASM will CONTINUE to be addressed as the proposed HP/US combination progresses..

[ For example], Are you aware that a Southwest mechanic makes $ 8.00/ HR. more than mechanics at either U or HP ?

LUV's CASM advantage is also eroding as time marches on.

 

[insp89]

You're EXACTLY correct! To a point! Are they somewhat worried? YES! There experience tells them however and this is especially true of SWA that the Negative dysfunctional culture of US Airways will be the dominate culture and that as a result the enterprise will fail quickly and miserably.

That's what SWA & AA are gambling on and honestly that's a sound strategy given the track record of US ruining two perfectly good airlines in the past. I think one media outlet called US the "Toxic Lover". How true that is.

[post="273466"][/post]​

Bob, You are aware that America West management, [NOT Usairways management] will be running the show, aren't you ??

 

[ClueByFour]

[ For example], Are you aware that a Southwest mechanic makes $ 8.00/ HR. more than mechanics at either U or HP ?

So? There are fewer of them. Are you aware that a topped out LUV pilot makes 182/hr to fly a 737, where a U topped out U pilot is only bringing down 125/hr on the same equipment?

Yet, LUV has a lower CASM. The moral of the story is that labor costs are only one component of CASM

LUV's management constantly strives to keep nonlabor costs under control. U's never bothers.

LUV's CASM advantage is also eroding as time marches on.

[post="273469"][/post]​

Keep telling yourself that, and hope that West US Airways does not burn thru another billion dollars before it actually happens.

 

[767jetz]

PineyBob:

The financial community must have seen something they like in the US Airways - America West business plan or the combined business entity would not have obtained commitments for $1.5 billion in liquidity.

Regards,

USA320Pilot

[post="273434"][/post]​

Hmmm... Just curious. How many BANKS are involved in this merger? Surely when you say "financial community" you mean banks, right?

Or could it be a hodge-podge of groups who are getting some direct benefit out of this deal. Like a major mainenance contract (Air Canada), or selling some new planes (Airbus), or maintaining a source of revenue at a guaranteed price (Air Wisconsin). Oh yeah, and I almost forgot about the cheerleading section of certain over-the-hill, bitter, jealous, narcissistic pilots hoping to extend their un-spectacular careers for just a little longer at the expense of another work group.

Really, when you dissect this "stunning" amount of money, you see a bunch of people getting a piece of the action, but no one willing to ante up a large sum.

Otherwise there would be one or two big banks investing in the whole deal.

 

[insp89]

So? There are fewer of them. Are you aware that a topped out LUV pilot makes 182/hr to fly a 737, where a U topped out U pilot is only bringing down 125/hr on the same equipment?

Yet, LUV has a lower CASM. The moral of the story is that labor costs are only one component of CASM

LUV's management constantly strives to keep nonlabor costs under control. U's never bothers.
Keep telling yourself that, and hope that West US Airways does not burn thru another billion dollars before it actually happens.

[post="273475"][/post]​

The "moral" of the story is that your sacred Southwest cost advantage will continue to erode as the so-called legacy carriers continue to bring their costs down. [Smoke em while you Got em].....

BTW, Do you have the latest number of mechanics @ LUV vs. US handy ??

 

[BoeingBoy]

The "moral" of the story is that your sacred Southwest cost advantage will continue to erode as the so-called legacy carriers continue to bring their costs down. [Smoke em while you Got em].....

I guess one could say that Mt Rushmore is eroding also, but I don't think I have to hop on a flight tomorrow to go see it before it's gone.

My view on the thread topic is that neither WN or AA have much to worry about right now. AA is simple, they've got enough of their own troubles to worry about today. While I'm sure they'll keep an eye on what's happening with HP/US, it's not a "we've gotta do something now" situation yet.

WN has nothing to worry about until they see the HP/US CASM approaching theirs - say dropping thru 8.0 to 8.5 cents and heading lower. Until then, as long as they keep their house in order they have little to worry about.

I did like the "Smoke'em while you Got'em", though. That's certainly what WN's been doing - Smoking US.....

Jim

 

[USA320Pilot]

767jetz:

What is the purpose of a United pilot coming over to the US Airways board and making comments like the one's you posted above?

US Airways pilots, who until recently have enjoyed the industries best contract, are simply trying to make a living. Theyre not as you descirbe a "cheerleading section of certain over-the-hill, bitter, jealous, narcissistic pilots hoping to extend their un-spectacular careers for just a little longer at the expense of another work group."

Meanwhile, regardless of the source of exit financing and M&A monies, the point is the new business enterprise will have a much stronger balance sheet that will be one of the best in the industry. According to US Airways:

The Transaction is expected to be financed with approximately $1.5 billion of new capital from:

-- $350 million of committed new equity plus a planned rights offering

-- More than $675 million from partners and suppliers

-- $250 million or more from aircraft-related financings and/or sales

-- Expected release of $200-300 million in cash reserves

The combination would form one of the industry’s most financially stable airlines with $10 billion in annual revenues, approximately $2 billion in total cash and among the lowest debt levels of all major airlines.

The new airline is expected to have one of the most efficient work groups in the industry. Once the anticipated annual cost savings and revenue synergies of over $600 million are implemented, the new airline will be positioned for profitability at oil prices above $50 per barrel.

See Story

In regard to a Midwest operation, I believe it's abundantly clear that US Airways and United have continued M&A talks since the last merger attempt was terminated, and for one reason or another the discussions failed to reach an accord. The old and new US Airways continues to have its sites set on Midwest expansion, which could include either Denver or Chicago, dependent upon United's restructuring.

Meanwhile, Frontier released its first quarter results today and the Denver-based carrier continues to struggle.

See Story

According to the company's website, Frontier currently operates a fleet of 45 aircraft including 38 132-passenger Airbus A319 jets and seven 114-passenger Airbus A318 jets. These aircraft would fit in nicely with the new US Airways obviously moving towards an all Airbus fleet.

If the new US Airways would purchase Frontier, this would increase the fleet plan to 406 aircraft following the restructuring.

To view Frontier's route map and how a Denver focus city/hub could fit into the new US Airways route network click here.

Regards,

USA320Pilot

P.S. You're not upset that the major portion of US Airways will survive and that both the Arlington-based company's management, along with America West's management, believe the combined business entity will evolve into a vibrant carrier that will be a strong competitor to other companies, including United, are you? Moreover, you're not upset that United is going to lose code share revenue and could be required to obtain even deeper cost cuts, maybe from employees, because of the US Airways - America West agreement, are you?

 

[USA320Pilot]

BoeingBoy:

BoeingBoy said: "The problem is that WN can make money at those fares and we can't - at least till we get either our costs or the combined HP/US costs down to theirs. Having "lower fares" is only good if you can make money at those fares."

USA320Pilot comments: Agreed. GoFares (or America West's simplified fare structure) will only work with a competitive cost structure, which has not yet been obtained by US Airways. According to a bankruptcy court filing, the CASM of the combined (US Airways - America West) business when adjusted for stage length is projected to be 7.3 cents in 2007, a 22% improvement over US Airways' 9.3 cent CASM in 2004.

Regards,

USA320Pilot

 

[ClueByFour]

USA320Pilot comments: Agreed. GoFares (or America West's simplified fare structure) will only work with a competitive cost structure, which has not yet been obtained by US Airways. According to a bankruptcy court filing, the CASM of the combined (US Airways - America West) business when adjusted for stage length is projected to be 7.3 cents in 2007, a 22% improvement over US Airways' 9.3 cent CASM in 2004.

[post="273483"][/post]​

US torched about a billion dollars in cash since the last bankruptcy filing. HP has some big debt payments coming due, US will have to start paying the ATSB, and will have to start paying integration costs (that's probably $500 million--at a minimum).

So, LUV's CASM actually fell YOY 2004-2005 to something like 6.32 cents. Within 2 years, the new management team has to cut expenses by about 2 cents to even get close.

But forget all that--the 7.3 cent number is projected. Tell me, when was the second bankruptcy filing projected in the first bankruptcy filing?

 

[USA320Pilot]

ClueByFour:

You never post anything positive and always post negative comments regarding US Airways, which clearly provides a “Clue†to your personality. As a passenger with "an obvious ax to grind" I find your continued diatribe boring and nonsensical. You have said over-and-over again that US Airways was “basically dead†and the company continues to prove you wrong. How can that be?

Today the company once again posted an operating profit for April and its unrestricted cash position increased by $23 million, although $25 million came from the Air Wisconsin DIP financing facility. That's only a $2 million drop, which is not bad considering the price of jet fuel.

Meanwhile, financial partners are willing to provide the new US Airways with at least $1.5 billion in new liquidity an according to company’s press release, “The combination (of US Airways and America West) would form one of the industry’s most financially stable airlines with $10 billion in annual revenues, approximately $2 billion in total cash and among the lowest debt levels of all major airlines."

Clue, how can it be that the new US Airways will obtain what many consider a "stunning" amount of new liquidity while you continue to post disparaging comments?

What do you know that US Airways, America West, and the combined carriers financial partners do not? I find it interesting that the combined business entity can attract financial support from people who have seen the business plan, but you as one of US Airways’ most ardent, outspoken, and longest critiques continue to make negative comments.

What’s interesting is that you have “none, zero, nada†access to inside the company and you continue to be wrong time-and-time again, but you continue to post your diatribe. Instead of ClueByFour, would it not be better to change your ID to ClueLessByFour?

Best regards,

USA320Pilot

 

[gso-crew]

USA320Pilot comments: In my opinion, US Airways and America West will expand into the Midwest with point-to-point service and could create a focus city. The focus city could be determined by what happens at United, which could create an ORD or DEN option.

If United is successful in its restructuring and does not shed domestic assets then I believe STL or DEN could be an option for the new buisness enterprise, with Frontier a potential M&A target.

Regards,

USA320Pilot

[post="273454"][/post]​

How about MSP or DTW, I think NW (and all her Airbus) will be joining the US/HP party as soon as they get new labor contracts.

 

[wnbubbleboy]

The "moral" of the story is that your sacred Southwest cost advantage will continue to erode as the so-called legacy carriers continue to bring their costs down. [Smoke em while you Got em].....

BTW, Do you have the latest number of mechanics @ LUV vs. US handy ??

[post="273480"][/post]​

WN has around 1600 mechanics. The formula of the number of Mechs Vs Aircraft is getting very close to where the company wants it to be.