USA320Pilot said:
As negotiations continued US Airways needed to seek deeper cuts from labor due to passengers booking away from the company, which created lower revenue and coupled with the increase in oil prices, hurt liquidity. The updated version of the Transformation Plan could support oil prices probably in the mid-$40 range, but not prices at nearly $55 per barrel.
Do tell, exactly what caused passengers to book away from the company? Could it have been statements in the press about a potential liquidation made by the Chairman of the Board?
Fare increases – This would seem to be a logical solution, but in today’s low fare environment that is not an easily obtainable solution, to simply pass the increased cost onto the consumer. LCC’s like Southwest, who is hedged in 2005 with its total fuel cost equal to oil prices at about $30 per barrel, and jetBlue are not increasing fares. However, the recent initiative by Northwest to increase short-haul round trip fares by $10 and long-haul fares by $20.
It’s unclear how much this initiative will raise revenue, but it’s a significant number.
Didn't US more-or-less destroy some of the benefit it might have seen from the fare increases initiated by Northwest when the company chose to start yet another fire sale this week?
For discussion purposes, lets assume that US Airways increased its round trip fares for about 75,000 customers per day by $10 and not include those long-haul flights where the increase was $20 per round trip. That would boost the company’s revenue by $750,000 per day or about $22.5 million per day. If this number is accurate, the increase in revenue would offset about a $11.25 increase in crude oil prices and its effect on the carrier’s jet fuel expense over budget.
This is too simplistic an analysis, since it fails to account for the possibility that US Airways may see fewer tickets purchased in total given higher fare levels. And, again, the fire sale initiated earlier this week will cut into increased revenue as well.
Boost revenue – Earlier this week according to US DAILY, usairways.com again has set a new record for both ticket sales and revenue, thanks in large part to the systemwide fare sale. In overwhelming response to the low fares available across US Airways’ network, close to 331,000 customers visited usairways.com yesterday. By midnight, almost 21,000 tickets were sold. This represents a 54 percent increase week over week and is almost double the volume of tickets sold during the same time frame last year. This also drove a 46 percent increase in revenue year over year.
Note the section I highlighted. US sold nearly double the number of tickets versus a year ago with a 46 percent increase in revenue. Assuming "almost double" is a 90% increase, that says that yield on those tickets was down 23% year-over-year -- a catastrophic fall given how high energy prices have climbed.
Further cut costs – US Airways announced that it would remove 11 B737s from its fleet beginning in May. The average lease expense on these aircraft is about $85,000 per month or about $1 million per year. These aircraft are scheduled for millions of dollars in refurbishing and overhauls and burn much more fuel than a similar size Airbus aircraft.
Isn't much of the Airbus fleet due for overhauls in the next year or two? How do monthly lease expenses on the Airbuses compare to those on the Boeings? How much higher are landing fees for the heavier Airbuses, and what sort of impact does this have on the short-haul routes that are so common in the US Airways route system?
Looking forward at the next several months is probably a better indication of the issues we are facing. PTY and SAL have advance bookings in the 25% range for April (i.e., % of seats booked now for travel in April) compared to an average of just under 50% for Caribbean destinations. For May, the markets are booked in the 3% range, compared to about 30% for the average Caribbean destination.
Those kinds of numbers are not encouraging. It is always possible that the markets will book up late and we would get an pleasant surprise. But they are not performing to our expectation and it is far more likely we will lose money on them if we continue to fly them.
What hurts US here is a lack of experience in these markets. Arguably, many Caribbean routes fill up early because blocks of seats are purchased by consolidators or vacationers who plan several months in advance. It's possible that many of the "VFR" travelers buy their tickets closer to the actual date of travel. That sort of info (booking patterns) is probably very closely guarded at AA and CO. Losing BBB probably didn't help US in this respect since he came to the company from TACA.
As US Airways marches towards its March 15 deadline to file its plan of reorganization with the bankruptcy court the company will continue its efforts trying to raise money, talk to all interested parties, and see what shakes out, which could lead to some sort of corporate transaction or other means to deal with fuel prices. US Airways is “thinking out of the box†to address its financial problems, but the company will probably have to do things focusing on the short-term rather than long-term. Thus, expect more significant news in the not-so-distant future.
I find it troubling, with four business days to go before the GE-imposed (and already extended once) deadline for filing a plan of reorganization, US management still has no one (publicly, at least) to provide the additional financing the company requires for bankruptcy emergence. Even as troubled as United is, they have had several parties express interest in providing equity sponsorship for UAL's emergence.
In order for you to be privileged enough to know what he has to say, you would have to become his employer. 320 are you willing to meet or exceed his current annual salary and bonus until he retires? 
