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Storm worsens plight of US Airways - Crowd of pilots expected at Virginia courthouse
CHARLOTTE (Charlotte Observer) - Just when it seemed that conditions could get no worse for US Airways, they did.
A snowstorm caused the airline to cancel 1,500 flights between Sunday and Tuesday, costing millions. An industry effort to raise round-trip fares by $20 due to higher oil prices fell through Monday. But oil prices kept rising, reaching a 29-month high of $37 a barrel on Wednesday.
The bad news rolled in even as US Airways prepares to face a major protest today by its pilots, scores of whom are expected to attend a bankruptcy court hearing in Alexandria, Va. So many pilots are expected the court expects to open a second room to accommodate them, showing the hearing by video.
Pilots will argue that the plan's termination is a contract issue, not an issue to be resolved in the bankruptcy court, said pilot spokesman Roy Freundlich. If the court agrees, the issue could become the subject of a lengthy contract negotiation process that could potentially end in a strike, although Freundlich said the pilots would seek a quicker, more satisfactory resolution.
Pilots have already made $646 million in annual concessions. The company is ignoring our contributions, Freundlich said. It's a slap in the face.
US Airways spokesman David Castelveter said the airline is being forced by financial realities to terminate the plan, and will present supporting information during the hearing.
Both sides acknowledged the airline faces many problems.
The airline's storm cancellations amounted to about 42 percent of its mainline flights for three days. All six of its key airports -- Charlotte, Philadelphia, Pittsburgh, Boston, New York La Guardia and Washington National -- got walloped by the storm. US Airways has its busiest hub in Charlotte.
Airlines owe aircraft lease payments whether or not a flight takes off, said Josh Marks, chief of staff for the Transportation Operations Center at George Washington University. Canceling 40 percent of US Airways flights translates to at least $3 million in lease costs without corresponding revenues.
US Airways faced added costs for passenger refunds, overtime, and de-icing, despite the lost revenues. Castelveter declined to estimate the loss, but said the airline budgets for winter storms. We're still on track to emerge from bankruptcy protection by March 31, he said.
Experts say the storm's impact is secondary to the impacts of expectations for a war with Iraq, which is causing fuel prices to rise while demand falls off.
With a number of airlines already on life support or ready to go on it, the results could be similar to those of a serious influenza outbreak on patients whose defenses have already been weakened, said Dan Kasper, managing director of LECG consultants in Cambridge, Mass.
Remember those $190 round-trip Charlotte-London fares that US Airways put on sale last week?
In a report Thursday, J.P. Morgan analyst Jamie Baker said passenger counts on trans-Atlantic flights fell 4 percent during the first two weeks of February. Travelers are avoiding Europe due to war fears and there appears to be little evidence of non-Europe market substitution, he said.
Baker estimated the airline industry will lose $2.4 billion in the first quarter, up from $2 billion in 2002. He said the best-case scenario could be a shutdown of United Airlines, which would send passengers to other carriers.
Like US Airways, United is operating under bankruptcy court protection. But United has not yet reached cost-cutting agreements with workers or aircraft lessors. The airline says it expects to emerge from bankruptcy protection next year.
Marks said lower revenue and higher fuel costs are forcing a transformation in the industry. He said old-line dinosaur carriers must restructure.
Raising prices won't work, he said. The market won't even support a fuel surcharge. It's evolve or die, and every blizzard brings extinction closer for the dinosaurs.
CHARLOTTE (Charlotte Observer) - Just when it seemed that conditions could get no worse for US Airways, they did.
A snowstorm caused the airline to cancel 1,500 flights between Sunday and Tuesday, costing millions. An industry effort to raise round-trip fares by $20 due to higher oil prices fell through Monday. But oil prices kept rising, reaching a 29-month high of $37 a barrel on Wednesday.
The bad news rolled in even as US Airways prepares to face a major protest today by its pilots, scores of whom are expected to attend a bankruptcy court hearing in Alexandria, Va. So many pilots are expected the court expects to open a second room to accommodate them, showing the hearing by video.
Pilots will argue that the plan's termination is a contract issue, not an issue to be resolved in the bankruptcy court, said pilot spokesman Roy Freundlich. If the court agrees, the issue could become the subject of a lengthy contract negotiation process that could potentially end in a strike, although Freundlich said the pilots would seek a quicker, more satisfactory resolution.
Pilots have already made $646 million in annual concessions. The company is ignoring our contributions, Freundlich said. It's a slap in the face.
US Airways spokesman David Castelveter said the airline is being forced by financial realities to terminate the plan, and will present supporting information during the hearing.
Both sides acknowledged the airline faces many problems.
The airline's storm cancellations amounted to about 42 percent of its mainline flights for three days. All six of its key airports -- Charlotte, Philadelphia, Pittsburgh, Boston, New York La Guardia and Washington National -- got walloped by the storm. US Airways has its busiest hub in Charlotte.
Airlines owe aircraft lease payments whether or not a flight takes off, said Josh Marks, chief of staff for the Transportation Operations Center at George Washington University. Canceling 40 percent of US Airways flights translates to at least $3 million in lease costs without corresponding revenues.
US Airways faced added costs for passenger refunds, overtime, and de-icing, despite the lost revenues. Castelveter declined to estimate the loss, but said the airline budgets for winter storms. We're still on track to emerge from bankruptcy protection by March 31, he said.
Experts say the storm's impact is secondary to the impacts of expectations for a war with Iraq, which is causing fuel prices to rise while demand falls off.
With a number of airlines already on life support or ready to go on it, the results could be similar to those of a serious influenza outbreak on patients whose defenses have already been weakened, said Dan Kasper, managing director of LECG consultants in Cambridge, Mass.
Remember those $190 round-trip Charlotte-London fares that US Airways put on sale last week?
In a report Thursday, J.P. Morgan analyst Jamie Baker said passenger counts on trans-Atlantic flights fell 4 percent during the first two weeks of February. Travelers are avoiding Europe due to war fears and there appears to be little evidence of non-Europe market substitution, he said.
Baker estimated the airline industry will lose $2.4 billion in the first quarter, up from $2 billion in 2002. He said the best-case scenario could be a shutdown of United Airlines, which would send passengers to other carriers.
Like US Airways, United is operating under bankruptcy court protection. But United has not yet reached cost-cutting agreements with workers or aircraft lessors. The airline says it expects to emerge from bankruptcy protection next year.
Marks said lower revenue and higher fuel costs are forcing a transformation in the industry. He said old-line dinosaur carriers must restructure.
Raising prices won't work, he said. The market won't even support a fuel surcharge. It's evolve or die, and every blizzard brings extinction closer for the dinosaurs.