Clue:
In March 2002 US’ RPM was 93 to 94% of other network carriers, and Siegel told investors at Tuesday’s Merrill Lynch Airline Conference, US has a revenue premium.
Moreover, Barbara Beyer, AVMARK airline analyst, reported the following Yield RPM (revenue per passenger mile):
Airline – Yield RPM
US – 13.05
AA – 11.86
CO – 11.57
WN – 11.54
DL – 11.33
NW – 10.76
UA – 10.54
From this report, US has gone from below average to number 1 of the legacy carriers in 15 months since Siegel arrived at the company.
The business plan is increasing revenue in four parts:
1. Optimize core network with the PIT & CLT hub restructuring.
- In PIT the traffic flow was directionalized with an East-West focus and with the dramatic increase in RJ feed, will become similar to DL in CVG. The company anticipates its two-class EMB170-/175, which will be the only RJ in the U.S. industry with a First Class cabin, will add to this revenue premium in PIT, provided an acceptable agreement can be reached with PA. officials to restructure costs (which I believe will occur).
- The CLT hub has become "omni-directional" and has larger, higher frequency banks due to the regions geography and is now similar to scope to DL’s ATL operation.
When fully implemented with other strategic initiatives, these changes are expected to dramatically improve revenues. According to Andrew Nocella, vice president of planning and scheduling, the changes reflect the capacity reduction of 13% (this was the 32 unit aircraft reduction from 311 to 279 mainline aircraft), will result in an annual improvement of an estimated $400 million in additional revenue and cost reductions.
This information was included in the POR and Disclosure Statement that the unsecured creditors committee approved. Obviously, this has provided a significant RASM improvement.
2. US anticipates in UAL, LH, Star, and GoCaribbean code share agreements will yield more than $300 million per year in revenue, with no increase in costs. Furthermore, at the May 31 Star Alliance CEO meeting the chief executives reached an agreement to focus in alliance cost reduction synergies, which will further improve bottom line results. The LH bilateral alliance will begin in Q4 and the Star Alliance in Q1 2004 (after US completes required IT and employee training, which must be complete by December 31).
3. The US network has 84 affiliate RJs in service and this number is expected to grow to around 300 by the end of 2006. US has 170 RJs on firm order, of which 110 are 70-seat aircraft and above and 60 are 50-seat CRJs and all of these aircraft will be delivered within the next 39 months. These aircraft will lower costs and become a weapon where Siegel has said the EMB-170/175 will be "revolutionary". The affiliate airline and US Airways Group RJs are expected to add over $300 million in annual revenue.
4. According to AVMARK, US has the highest Yield RPM and Siegel told analysts last week US held a revenue premium over the industry. Moreover, Siegel said the company is focused on having "big airline revenues" at the Merrill Lynch Conference as the number 7 major airline.
In conclusion, with all due respect, I disagree with your comments.
Best regards,
Chip