Us Airways Says It Will Fight Southwest In Phl

[USA320Pilot]

It's Official

ARLINGTON (theHub.com) - As employees have probably seen by now, Southwest Airlines yesterday made it official. The low-fare carrier will begin service at Philadelphia -- US Airways' key Northeast hub -- in May. Southwest said it will begin with up to 14 daily flights, but that fares and destinations will be announced later. Dave Siegel called Southwest’s decision a "direct assault on our principal hub,â€￾ adding that the company faces two choices -- to either stand and fight or cut and run. “I prefer to stand and fight,â€￾ he said responding to reporters following an address to the Aero Club in Washington yesterday. Siegel said that to defend its position, US Airways needs a more competitive cost structure. “We have the same challenges as every other major network carrier. We have to protect our markets and compete for business. Ultimately, the marketplace will tell us who the winner is."

Southwest said delivery of five new aircraft from Boeing will allow it to expand to Philadelphia, a destination that surprised some observers. The Wall Street Journal called it a "bold and unusual move for an airline that tends to avoid busy airports dominated by another major carrier." Analysts said US Airways' cost structure, which even after emerging from bankruptcy remains significantly higher than low-cost carriers like Southwest, created an opening. "That gives an excellent opportunity for a carrier like Southwest to move in there and get some market share," said Jim Corridore of Standard and Poor's.

 

[wings396]

From what I have read, they plan to start up with "40" flights in PHL. As far as fighting SWA, this remains to be seen. This Company has yet to put up a fight with anyone anywhere. We have seen both SWA and DL run us out of town in many a city over the past 10 years. DL continues to serve several medium and small stations with 757's and MD-88's, while we put our puny RJ's up against them. There have been many post on this board saying that passengers prefer a real full size jet over the RJ's. In my station we have nothing but negative feedback from the passengers about the switch to them. They are getting tired of wathcing us pull 15-20 of their bags off due to weight restrictions on a full flight. In know that you keep inflating the greatness of the coming 70 seaters, but they will never be the A/C of choice. :huh:

 

[KCFlyer]

I would expect them to fight. It remains to be seen just exactly how they will fight. If they fight by "outsouthwesting southwest", then they might as well say goodbye.

But...the comment Siegel said that to defend its position, US Airways needs a more competitive cost structure leads me to believe that they will "defend" their turf by aiming for the all important "leisure traveller" by offering fares that are consistantly lower than Southwest, but the problem remains that to actually DO that, they'll need to get a more "competitive" cost structure. What he should have said, IMHO, is that they need to get a more competitive REVENUE structure. I'm sorry, but US employees could work for free and this "plan" would still fail.

 

[USA320Pilot]

Flyer:

The company needs three things to fight Southwest: More revenue, lower costs, and management and labor working together.

I do not like it, but as long as Siegel is here we need to work with him because there is no other CEO.

The reason Siegel and other network airline CEO's keep bringing up costs is that Southwest's entry will drive down revenue. If they use their patented strategy, they will fly from Philadelphia to Florida and to their focus cities, e.g. Manchester, Providence, Midway, Nashville, Raleigh, etc.

Many of these cities already have low fares.

The good news: Europe, the Caribbean, and Central American fares will be untouched.

There is no question that Philadelphia revenue was going to come down anyway and there are other LCC's already there. The Southwest Philadelphia problem will occur throughout the country and either network airlines lower their unit costs to compete or they will fail.

Regards,

Chip

 

[bigbusdrvr]

Chip,

I believe in one of your other posts you said we needed lower Domestic operation costs. The Europe, carribean, Etc. will not help here. I believe all the options to lower costs are management driven, ie. longer stagelength more point-to-point Etc. They will be lucky to get any employee help with productivity, forget cash!! Luck is what we need. We have an entirely demoralized employee group that frankly just does'nt give a hoot anymore!! I'd say either Bronner pulls a rabbit out of a hat or our goose is cooked!

 

[AOG-N-IT]

U had better get a plan together quick...and someone with vision to execute the plan.

According to an article in the Charlotte Observer , WN has orders for 400 B737NG's to take delivery of between now and the end of this decade.

Those facts plus currently offering service to 31 of the 50 states at present..will make WN more of an actual "US"Airways than U could have ever hoped to be.

WE continue to answer this growth with brow beating the employee's..and making excuses...then our only expanse is outside the US and ordering RJ's which is a plan that's over 10 years overdue.

I believe the RJ's are a must...but I believe U needs to offer service to much more of the continental US as well.

United is moving on the carribean inspite of the codeshare agreement...why are we not shooting towards Hawaii and the pacific rim in kind? Those are passengers that we have handed DL out of ATL and others out of our own markets for years.

We also have made no actual moves toward South America...yet the hispanic population is growing un-checked by the day in a hub city such as CLT.

The USAir name was changed to USAirways to relieve us of the regional stigma or stereotype...yet we are rolling back to that exact business model excluding talk of greater expanse to european destinations....I wonder if this to shall change with our European Gateway coming under direct assault from an LCC???

 

[shaka]

I believe United will be holding on dearly to their assets at IAD & MIA. The industry is on its way to turning and it looks as though United is poised better than others, especially Dave & Co, to take full advantage of it.

While United is still in chapter 11, they seem to be faring much better financially during this period than US.

It will be very interesting to see the acutal numbers but this indication says that United is getting back on its feet.

With that being said I highly doubt Bonner will make any kind of play for United's assets. His house is in desperate need of repair and with Southwest coming into the neighborhood all of his attention should be on his house.

The next 6 months will be extremely interesting. I firmly believe MDA and the expansion of Europe and the Caribbean is the key to Dave's success.

 

[USA320Pilot]

Shaka:

Shaka said: "The next 6 months will be extremely interesting. I firmly believe MDA and the expansion of Europe and the Caribbean is the key to Dave's success."

Chip answers: You are absolutely correct, but do not forget during the next couple of years the business plan, audited by Fitch Rating and approved by the ATSB, projects about $600 million per year in new revenue from the alliances and RJs. This will help tremendously and limit the required cost cuts to return to profitability.

Right now the Southwest announcement is more psychological than anything else. The company will not start Philadelphia flights for six months, it will take time to build their operation, and US Airways can respond.

In fact, I believe the Southwest Philadelphia news is a "shot across the bow" to those parties concerned about the success of US Airways. The news will increase MDA efforts, the only true network carrier LCC competitive response, and US Airways must focus on its high yield international traffic.

Moreover, the dramatic LCC growth will increase the need for network carriers to consolidate to obtain economies of scale and reduce costs in areas like joint purchasing, joint advertising, use of common facilities, and to increase employee productivity. Therefore, I believe the odds of a UCT or merger just went up to lower costs, as a means to fight the LCC's.

Regards,

Chip

 

[737nCH11]

Would it be possible for UAL to move some of their LCC aircraft to PHL to combat LUV? This would keep much needed revenue within the Star Alliance.

 

[Pacemaker]

Chip, you keep saying labor and management must work together - what more can we, as employees, do? The vast majority of people I come in contact with are upbeat, outgoing, and treat customers and fellow employees with respect and courtesy. We can do little more to change the cost structure or revenue picture for this airline. For example, what do you suggest ALPA do to materialy lower unit costs further?

 

[unit4clt]

Does this mean that MDA will be based in PHL? If so what will happen in the future when something has to be done, due to congestion of all the small planes USairways will be flying around? Remember LGA a few years ago?
Will this be the competative response?

 

[mrman]

Company has yet to put up a fight with anyone anywhere.

How about Braniff, American at Love, Continental in Houston, United and Shuttle in the West, Northwest at DTW, The Battle of Midway, Delta in FLA, just off the top of my head

 

[phillyguy]

The other thing U needs to do is provide some level of differentiation from the LCC.

While the fares are important, if you want to maintian you business traveler population, we need to see some value.

I think most of the other business travelers who would not mind paying a slightler higher price for a 'slightly better' product.

I certainly understand at some point you might need to cut some of the frills for survival but if you lose the distinction the only thing you can compete on is price.

For the most part 99.9% of the employees at U are fantastic and keep many of us coming back, but day by day even they can only do so much.

Remember not everyone flying to Florida is going to see Mickey Mouse.

Phillyguy
US1

 

[AOG-N-IT]

Chip, you keep saying labor and management must work together - what more can we, as employees, do? The vast majority of people I come in contact with are upbeat, outgoing, and treat customers and fellow employees with respect and courtesy. We can do little more to change the cost structure or revenue picture for this airline. For example, what do you suggest ALPA do to materialy lower unit costs further?

Pacemaker,

How dare you go there with Chip in regards to his/ALPA's possible contributions to this solution.

Chip has already taken a 40% wage cut...and had his pension tossed to the curb by these people.

Do you now how dangerously close he is to be earning below 6 figure sums?

This problem is going to have to be resolved on the backs of those making between 20K and 70K per year....we have all the room in the world to save this place for those whom already benefit the most.

Let's see...F/A positions cut to the absolute FAA minimums in regards to staffing levels....salaries slashed to wages on line with truck stop waitresses.

Mechanics and related jobs sent to third party corporations...and those that remain can take a 40 to 50% cut as well.

Ramp agents can be cut in half via increased productivity gains...and salaries can easily be reduced into the $7.00 an hour range as they are at some express affiiliates.

Lav Servicing can be outsourced to the lowest bidder.

OK...where else can non-management people help save Chip's neck?

I guess a sound business plan has not a prayer of happening ...and why should it? I have just outlined a way to keep Chip flying...and our leadership sitting on thier thumbs for the next 10 years.

Yo can kindly forward my check for $600.000.oo plus bonuses and benefits...and I will go on my merry way.

 

[ClueByFour]

Chip answers: You are absolutely correct, but do not forget during the next couple of years the business plan, audited by Fitch Rating and approved by the ATSB, projects about $600 million per year in new revenue from the alliances and RJs. This will help tremendously and limit the required cost cuts to return to profitability.

[..........]

In fact, I believe the Southwest Philadelphia news is a "shot across the bow" to those parties concerned about the success of US Airways. The news will increase MDA efforts, the only true network carrier LCC competitive response, and US Airways must focus on its high yield international traffic.

A couple of notes, since the spin in here is running at around 12k RPMS:

The US business plan, audited by Fitch and approved by the ATSB clearly did not anticipate the move of LUV into the market from which U finds 25% of it's revenue. Let's also not forget that US will end up spending lots of capital that was not programmed into the business plan in order to attempt to fight off a carrier with a relatively infinite cash reserve, and loads more operational and strategic acumen. Given the unforseen, unforcasted, and completely unanticipated assault on the "crown jewel," and the fact that the same management suite that drew it up is already clamoring for more cost savings (instead of getting what was needed in Chapter 11, when it made sense), it's a fairly resonable conclusion that the business plan, Fitch or no Fitch, is clearly worthless.

I also think that Leo Mullin would take issue with the statement that only MDA is a true network carrier LCC response. Unlike MDA, Song is already up and running, and not a hypothetical in the aforementioned business plan (that is already full of holes).

Stop the spin.