AWA320
Veteran
The last sentence pretty well sums it up; but I guess we each knew this all along. Just substitute the word "most" for "a lot" and he would be exactly right.
US Airways' rough ride
By DAN CHAPMAN
Cox News Service
Monday, January 28, 2008
ATLANTA — When the marriage was announced in May 2005, Wall Street blessed the union.
US Airways, a bankruptcy-bruised East Coast airline, and America West, a low-cost carrier working the other side of the Mississippi, would meld into a coast-to-coast juggernaut competing with United, Continental and Delta - the Atlanta-based airline now involved in merger talks.
US Airways' stock struggled to reach $20 before the deal was approved. Fourteen months later, it soared beyond $63.
"A lot of people made a lot of money in that huge run-up," said Michael Derchin, an airline analyst with FTN Midwest Securities. "Wall Street absolutely loved it."
That was then. US Airways stock closed at $12.66 Thursday.
US Airways' rags-to-riches-to-ragged saga offers a cautionary tale for Delta Air Lines, expected soon to complete its courtship of either Northwest or United. Mergers often look good on paper - and can boost shareholder profits in the short run - but the successful union of two geographically and culturally different airlines saddled with their own problems isn't guaranteed.
Delta and its partner must blend fleets, maintenance and reservation systems, tackle union demands, combat high fuel costs, garner congressional and regulatory approval, and stitch together a web of domestic and international flights.
"Forget Wall Street types who say there's very little overlap and that the merger will be smooth," said Michael Boyd, who runs an aviation consultancy in Evergreen, Colo. "Putting an airline together is not like snap, crackle, pop."
US Airways zipped along during the merger's first year. Bankruptcies - two for the old US Airways, one for America West - and money woes offered a streamlined, bare-bones operation at the outset. Sixty planes were mothballed. Separate headquarters were combined in Tempe, Ariz. Flights were scrubbed. Per-flight profitability rose.
The nation's fifth-largest airline, with 36,000 employees, unveiled a hostile takeover of Delta on Nov. 15, 2006. By the time the bid was withdrawn 10 weeks later, US Airways' stock had plunged sharply.
US Airways, though, suffered more fundamental problems. International flights - the biggest moneymakers and the industry's future - account for only 20 percent of US Airways' business. And customer service took it on the chin: lost reservations, delayed flights, long check-in lines.
Boyd, the airline consultant, says he won't fly US Airways again after a Denver to Charleston, W.Va., flight last fall. He missed a connection in Charlotte while his plane waited on the tarmac for a gate to open up. He spent the night in a hotel.
"It was absolutely one of the messiest operations I've ever seen," Boyd said. "A merger does not enhance customer service; it makes it more difficult. Passengers pass on their problems to every employee they meet. That makes their job harder. That's another reason why a lot of these alleged synergies don't exist."
For the first half of 2007, US Airways logged the worst on-time performance of any of the 20 airlines tracked by the U.S. Department of Transportation. Lost baggage, ticketing problems, consumer complaints - US Airways ranked near the bottom among major airlines in most categories last year, according to the DOT.
"We're not proud of that," said Mike Flores, president of the company's East Coast chapter of the flight attendants' union, which is involved in a contract dispute with the airline. Flores' group, for example, can only work old US Airways routes until a contract is signed - a scheduling inefficiency.
"It's not a seamless system," he said. "One of the key components of any airline merger is the merging of labor groups. US Airways hasn't done that. They're essentially still running two airlines."
The Federal Aviation Administration, though, granted US Airways a single operating certificate, the license airlines need to fly.
"We've definitely turned the corner and think we're headed in the right direction," US Airways spokesman Phil Gee said Tuesday. "Systems integration is behind us. Everybody is operating on the same system now."
But unions representing pilots, mechanics, ramp and baggage handlers and flight attendants remain without a contract more than two years after the merger was announced. Dueling east-vs.-west pilots' unions trouble investors.
"They still have not been able to get the unions to agree on meshing seniority lists. They're still being run separately, and that's the big, overhanging problem right now from Wall Street's perspective," said analyst Derchin.
US Airways reached an accord with some customer-service workers last summer. It also hired 350 pilots and 200 flight attendants in 2007, although some were rehires.
No airline survived unscathed as the price of oil doubled. US Airways announced Thursday $79 million in losses during the fourth quarter of 2007. Yet the airline notched $427 million in net profit for the year. US Airways carried $3 billion in cash and investments.
"For the last 2 1/2 years we've been focusing on integrating the airlines," spokesman Gee said. "Now we're able to move forward. We've created a stable airline built to be able to withstand an economic downturn."
Analysts and others aren't convinced, citing a managerial culture clash between West Coast regional-minded executives and their more globally focused East Coast colleagues.
Flores said cold-weather fliers who needed to stow their coats, for example, complained when some first-class storage space was eliminated. When the catering manager cut back on supplies for international flights in an effort to reduce weight, passengers got cranky.
America West "was a Kool-Aid culture when it started: everybody did everything," said analyst Boyd. "US Airways was the result of a bunch of mergers and several years of horrible losses and reverses and layoffs, so this wasn't, from a morale standpoint, the Good Ship Lollipop. But in fairness to Doug Parker, if he hadn't stepped in, a lot of those US Airways people would be out of jobs today."
US Airways' rough ride
By DAN CHAPMAN
Cox News Service
Monday, January 28, 2008
ATLANTA — When the marriage was announced in May 2005, Wall Street blessed the union.
US Airways, a bankruptcy-bruised East Coast airline, and America West, a low-cost carrier working the other side of the Mississippi, would meld into a coast-to-coast juggernaut competing with United, Continental and Delta - the Atlanta-based airline now involved in merger talks.
US Airways' stock struggled to reach $20 before the deal was approved. Fourteen months later, it soared beyond $63.
"A lot of people made a lot of money in that huge run-up," said Michael Derchin, an airline analyst with FTN Midwest Securities. "Wall Street absolutely loved it."
That was then. US Airways stock closed at $12.66 Thursday.
US Airways' rags-to-riches-to-ragged saga offers a cautionary tale for Delta Air Lines, expected soon to complete its courtship of either Northwest or United. Mergers often look good on paper - and can boost shareholder profits in the short run - but the successful union of two geographically and culturally different airlines saddled with their own problems isn't guaranteed.
Delta and its partner must blend fleets, maintenance and reservation systems, tackle union demands, combat high fuel costs, garner congressional and regulatory approval, and stitch together a web of domestic and international flights.
"Forget Wall Street types who say there's very little overlap and that the merger will be smooth," said Michael Boyd, who runs an aviation consultancy in Evergreen, Colo. "Putting an airline together is not like snap, crackle, pop."
US Airways zipped along during the merger's first year. Bankruptcies - two for the old US Airways, one for America West - and money woes offered a streamlined, bare-bones operation at the outset. Sixty planes were mothballed. Separate headquarters were combined in Tempe, Ariz. Flights were scrubbed. Per-flight profitability rose.
The nation's fifth-largest airline, with 36,000 employees, unveiled a hostile takeover of Delta on Nov. 15, 2006. By the time the bid was withdrawn 10 weeks later, US Airways' stock had plunged sharply.
US Airways, though, suffered more fundamental problems. International flights - the biggest moneymakers and the industry's future - account for only 20 percent of US Airways' business. And customer service took it on the chin: lost reservations, delayed flights, long check-in lines.
Boyd, the airline consultant, says he won't fly US Airways again after a Denver to Charleston, W.Va., flight last fall. He missed a connection in Charlotte while his plane waited on the tarmac for a gate to open up. He spent the night in a hotel.
"It was absolutely one of the messiest operations I've ever seen," Boyd said. "A merger does not enhance customer service; it makes it more difficult. Passengers pass on their problems to every employee they meet. That makes their job harder. That's another reason why a lot of these alleged synergies don't exist."
For the first half of 2007, US Airways logged the worst on-time performance of any of the 20 airlines tracked by the U.S. Department of Transportation. Lost baggage, ticketing problems, consumer complaints - US Airways ranked near the bottom among major airlines in most categories last year, according to the DOT.
"We're not proud of that," said Mike Flores, president of the company's East Coast chapter of the flight attendants' union, which is involved in a contract dispute with the airline. Flores' group, for example, can only work old US Airways routes until a contract is signed - a scheduling inefficiency.
"It's not a seamless system," he said. "One of the key components of any airline merger is the merging of labor groups. US Airways hasn't done that. They're essentially still running two airlines."
The Federal Aviation Administration, though, granted US Airways a single operating certificate, the license airlines need to fly.
"We've definitely turned the corner and think we're headed in the right direction," US Airways spokesman Phil Gee said Tuesday. "Systems integration is behind us. Everybody is operating on the same system now."
But unions representing pilots, mechanics, ramp and baggage handlers and flight attendants remain without a contract more than two years after the merger was announced. Dueling east-vs.-west pilots' unions trouble investors.
"They still have not been able to get the unions to agree on meshing seniority lists. They're still being run separately, and that's the big, overhanging problem right now from Wall Street's perspective," said analyst Derchin.
US Airways reached an accord with some customer-service workers last summer. It also hired 350 pilots and 200 flight attendants in 2007, although some were rehires.
No airline survived unscathed as the price of oil doubled. US Airways announced Thursday $79 million in losses during the fourth quarter of 2007. Yet the airline notched $427 million in net profit for the year. US Airways carried $3 billion in cash and investments.
"For the last 2 1/2 years we've been focusing on integrating the airlines," spokesman Gee said. "Now we're able to move forward. We've created a stable airline built to be able to withstand an economic downturn."
Analysts and others aren't convinced, citing a managerial culture clash between West Coast regional-minded executives and their more globally focused East Coast colleagues.
Flores said cold-weather fliers who needed to stow their coats, for example, complained when some first-class storage space was eliminated. When the catering manager cut back on supplies for international flights in an effort to reduce weight, passengers got cranky.
America West "was a Kool-Aid culture when it started: everybody did everything," said analyst Boyd. "US Airways was the result of a bunch of mergers and several years of horrible losses and reverses and layoffs, so this wasn't, from a morale standpoint, the Good Ship Lollipop. But in fairness to Doug Parker, if he hadn't stepped in, a lot of those US Airways people would be out of jobs today."
