US Airways may spin off frequent flier plan: CEO

[N965VJ]

US Airways may spin off frequent flier plan: CEO
Carrier's chief executive cautions that he remains 'skeptical' of benefits

By Laura Mandaro, MarketWatch
Last Update: 5:22 PM ET Oct 25, 2007

SAN FRANCISCO (MarketWatch) -- US Airways joined the swelling ranks of senior airline executives considering spinning off their frequent flier programs, though the carrier's chief executive Thursday cautioned that he remained "skeptical" of the benefits of such a deal until major industry mergers occur.
"If it makes sense for shareholders, we'll probably do it," CEO Doug Parker said on a conference call to discuss US Airways'

Parker said management at the nation's fifth-largest carrier has begun talking to investment banks and Air Canada, whose parent company in 2005 spun off its loyalty program into Aeroplan Income Fund LP, which is traded in Toronto.

Parker, one of the industry's biggest advocates of mergers between the major carriers as a way to cull excess capacity, warned that frequent flier program spinoffs "could slow consolidation efforts."

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[PHX PHLyer]

Does ANYONE ever recall Doug Parker EVER mentioning Customers as his first priority? EVER as in since he took over America West??

Piney, I think you have said you are a salesman, but it doesn't sound like you were ever in business school. What is the #1 thing that you learn in business school, and is always the end goal??? Not increasing profits...not being the most innovative...or customer friendly...Increasing SHAREHOLDER value. It's what your job and number one responsiblity is as a financial manager of a corporation. It shouldn't come as a surprise to anyone that he would say this, because it's what his job is. If he said "Well it would increase shareholder value immensely, but we don't think it would be best for our customers, so we won't look into it" the board of directors and shareholders would want his head on a plate.

 

[hp_fa]

He doesn't have the fiduciary responsibility to customers that he does to shareholders, does he?

 

[wings396]

Bob, the shareholdes have been the #1 priority since the Wolfe days at the old US East. They come before the customers, and way before the frontline employees. If I had a dime for evertime I heard W&G mention "Shareholder value", I could have been retired long ago. Please don't forget that they were as well as Doug is a major shareholder, so as ususal they are looking to line their own pockets.
He should just say, "If it means a quick buck for me and my cronies, I will probobly do it". <_<

 

[wings396]

He doesn't have the fiduciary responsibility to customers that he does to shareholders, does he?

Are you both a bunch of knuckleheads with your comments here?? Isn't the first chaper of Business 101 to keep your customers happy, so they will return? Then we have the good old "Happy employees=productive employees" chapter. If these modern day CEO's would just follow these 2 simple items, the shareholder value would follow right along. If you have an outfit like this that runs a shoddy unrelialbe operation with thousands of P-O'd emplyoyess and passengers, your sharholder value will go south in a hurry. Ever since we got these CEO types that were more focused on the shareholders than anything else, things have gone to the dogs. I don't remember the shareholders being the #1 priority back at PI, or even the old US and I think that they all faired pretty well on their investment. If you are starting to think like Doug and those of his trye, we are in worse shape than I thought.

 

[PHX PHLyer]

Are you both a bunch of knuckleheads with your comments here?? Isn't the first chaper of Business 101 to keep your customers happy, so they will return? Then we have the good old "Happy employees=productive employees" chapter. If these modern day CEO's would just follow these 2 simple items, the shareholder value would follow right along. If you have an outfit like this that runs a shoddy unrelialbe operation with thousands of P-O'd emplyoyess and passengers, your sharholder value will go south in a hurry. Ever since we got these CEO types that were more focused on the shareholders than anything else, things have gone to the dogs. I don't remember the shareholders being the #1 priority back at PI, or even the old US and I think that they all faired pretty well on their investment. If you are starting to think like Doug and those of his trye, we are in worse shape than I thought.

Sorry if the reality hurts. But that is the name of the game. Some CEO's may mask their decisions by saying "This is what is best for the customer" or "This decision was made to offer the customer a better __" but in reality, none of those "customer" enhancements would EVER be approved if they did not show an increase to the bottom line, namely shareholder value. Putting in new business class seats or enhancing the ___ of the experience is not a gift from management to the customer. The number crunchers sat in their office showing the cost of the project and the revenue that would be gained from being able to charge more for the seat, the revenue gained from keeping customers, revenue from attracting new customers, etc. All of that HAS to be greater than the cost of the project. If putting a bunch of money into an enhacement is only going to keep current customers who wouldn't have left anyway and those customers will still only pay the same amount they were paying before, it would never go through. Now, if customers are not happy and start to go elsewhere and that begins to show a negative impact on the bottom line and shareholder value, then they will work on getting the customer back. But until then the first chapter of Business 101 will always be that your number one responsibility and obligation is to your shareholders. Pure and simple. It's not even really debatable.

And if I may add: You say that shareholder value was not the #1 concern at PI or the old US?!?!?! THEN WHY DID THEY MERGE?!?!?! The mergers went through because the two management teams at those companies saw that a merger created more shareholder value than as standalones. You think they merged because the customer would benefit. You may not realize that every decision that a company makes, past, present, and future is towards increasing shareholder value. You may get the masked version....but it underlies everything

 

[Boeing4me]

I have been lucky. I spent most of my career working for a company that treated it's employees lavishly well. By treating the employees well, our management knew that we would treat our customers well. When our customers were happy they tended to do more business with us - and that made our shareholders happy as we turned in record profits quarter after quarter and year after year. It was really that simple.

The wonderful company that I used to work for was so successful that it was bought for an obscene premium on it's stock value. Yes, the new company thought that all of the employees were fat, dumb and over paid. So they set out to make us all unhappy campers. The new company now has a stock value that has not moved in 6 years. The employees that are still there are unhappy, they have no faith in management to do the right thing, and they are languishing in there own misery. Management of the new company continues brag about how well everyrthing is, yet they continue to go nowhere and they have provided no shareholder value in the last 6 years.

Sounds an awful lot like our favorite airline.

 

[PHX PHLyer]

Management of the new company continues brag about how well everyrthing is, yet they continue to go nowhere and they have provided no shareholder value in the last 6 years.

Sounds an awful lot like our favorite airline.

Except for the "have provided no shareholder value" part. I think Dougie has shown that he can add an awful lot to shareholder value.

 

[hp_fa]

Are you both a bunch of knuckleheads with your comments here?? Isn't the first chaper of Business 101 to keep your customers happy, so they will return?

Go look up fiduciary duty and/or fiduciary responsibility of a CEO and get back to me.

 

[Boeing4me]

Except for the "have provided no shareholder value" part. I think Dougie has shown that he can add an awful lot to shareholder value.

Excuse me? The 52 week range for LCC stock is $24.26 - $63.27. The stock is currently trading today for $27.53. That is not what anyone would call adding shareholder value. If you purchased shares last December, you lost your ass.

 

[PHX PHLyer]

Excuse me? The 52 week range for LCC stock is $24.26 - $63.27. The stock is currently trading today for $27.53. That is not what anyone would call adding shareholder value. If you purchased shares last December, you lost your ass.

As opposed to pennies it was trading at when Doug arrived. And do you want to know the reason that LCC hit $63.27? Look at the date when it hit its peak....right before the Delta deal fell through. I think Doug was looking at creating "longterm" (that one is directed at Piney) shareholder value with the takeover. And the only reason that LCC is trading so low now (so are all the airline stocks compared to where they were in January) is because merger talks (which Doug started) have stalled and fuel has rallied immensely to over $90 a barrel. With fuel this high the airline sector will never reach the January highs they saw....regardless of how much shareholder value is created.

 

[Boeing4me]

As opposed to pennies it was trading at when Doug arrived. And do you want to know the reason that LCC hit $63.27? Look at the date when it hit its peak....right before the Delta deal fell through. I think Doug was looking at creating "longterm" (that one is directed at Piney) shareholder value with the takeover. And the only reason that LCC is trading so low now (so are all the airline stocks compared to where they were in January) is because merger talks (which Doug started) have stalled and fuel has rallied immensely to over $90 a barrel. With fuel this high the airline sector will never reach the January highs they saw....regardless of how much shareholder value is created.

I agree with your point, however....

Since the announcement of the Delta deal (and including the Delta deal) management and operations at US have been a complete and total train wreck. We all know about all of the events that have transpired over the last 12 months. My point is that the current management has been at the helm while far more shareholder value has been lost (based on the max share price) than currently exists based on todays share price.

The bigger point is that management is focused on all the wrong things to improve shareholder value. If US management would improve the condition of all of its employees everything else will follow.

 

[cynic]

While spinning off the dividend miles program may be a short term benefit to the shareholders, it isn't in the best interest of the company. It doesn't make the company stronger or more robust in any way. In fact, the opposite can be said.

 

[BoeingBoy]

In all fairness the stock opened post merger at $15.00 and a gain to $24.26 is not to shabby.

It actually opened @ $20.40. Those who got in at $15-$17 were the outside investors and AWA shareholders who got their shares before public trading began.

If you got in late then your assessment is correct.

"Late" meaning after Nov 1 or 2, 2005 - a little over a month after the stock started trading. That's when the price was about the same as today, $27 to $28 per share.

Obviously, "good for shareholders" is something that a CEO is supposed to be mindful of (bankruptcy excepted, when shareholders generally come last). However, "good for shareholders" is one of those non-descriptive comments that could be used to justify anything (other than bankruptcy).

Is a short-term jump in stock price or cash dividend "good for shareholders" if it would worsen the long-term prospects for the business? If so, Doug better announce a $30/share cash dividend shortly or he's not fulfilling his fiduciary responsibility (in round numbers, the $2.7 Billion unrestricted cash divided among the 90 million shares outstanding).

Or is something that's good for the long-term prospects of the business "good for shareholders"? If so, wouldn't it be better to say "We'll do it if it benefits the prospects of the company going forward"? After all, that's been the basis of WN's "happy employees = happy customers = happy shareholders" formula for decades.

Jim

 

[BoeingBoy]

As opposed to pennies it was trading at when Doug arrived.

And Doug's arrival benefited those who owned the "old" US stock exactly how? They sure haven't seen those shares appreciate in value since they're only useful as outhouse wallpaper.

Jim