US Airways traces its history to All American Aviation Inc, a company founded by du Pont family brothers Richard C. du Pont, Alexis Felix du Pont, Jr. and CEO Steven Gardner. Headquartered in Pittsburgh, the airline served the Ohio River valley in 1939. In 1949 the company was renamed All American Airways as it switched from airmail to passenger service; it became Allegheny Airlines in 1953.
Allegheny's first jet was the Douglas DC-9 in 1966; it absorbed Lake Central Airlines in 1968 and Mohawk Airlines in 1972 to become one of the largest carriers in the northeastern United States and sixth largest airline in the world as measured by passenger boardings.
But with expansion came growing pains: by the 1970s Allegheny Airlines had the nickname "Agony Air" due to customer dissatisfaction with the carrier's service.
Allegheny's agreement with Henson Airlines, the forerunner to today's US Airways Express carrier Piedmont Airlines, to provide service under the Allegheny Commuter banner, is regarded as the industry's first code-share agreement, a type of service now offered throughout the industry.
1970s: Deregulation and rebranding
Allegheny changed its name to USAir in 1979 following the passage of the Airline Deregulation Act the previous year, which enabled the airline to expand its route network into the southeastern United States.
USAir was a launch customer for the Boeing 737-300, as the airline needed an aircraft with greater capacity to serve its rapidly growing Florida markets. USAir was the world's largest operator of DC-9 aircraft at the time and approached McDonnell Douglas to negotiate a new airplane design. However, in the late 1970s, the McDonnell Douglas' proposed successor to the DC-9-50 did not suit USAir's requirements. After the negotiations with McDonnell Douglas broke down, Boeing came forward with a proposed variant of the 737. USAir selected the new 737 aircraft, and the company worked closely with Boeing during its development, taking delivery of the first plane on November 28, 1984.
1980s: Mergers and expansion
Source:Air Transport World
USAir expanded in the late 80s purchasing San Diego-based Pacific Southwest Airlines (PSA) in 1986 and Winston-Salem, North Carolina-based Piedmont Airlines in 1987. The PSA and Piedmont acquisitions were completed in 1988, and 1989, respectively.
The PSA acquisition gave USAir its first routes on the West Coast, while the Piedmont acquisition gave USAir a strong east-coast presence and hubs in Baltimore and Charlotte, which remained key hubs for USAir in later years. The Piedmont acquisition in 1989 was the largest airline merger until then, and USAir became one of the world's largest airlines, operating more than 5,000 flights daily. Following the acquisitions, USAir closed down PSA's hubs in California and Piedmont's hubs in Dayton and Syracuse.
Crystal Park Four, former headquarters in Crystal City, Arlington County.
By 1990 the airline had consolidated its headquarters, moving from Washington National Airport to a new building at Crystal City in Arlington County, Virginia, near the airport. Maintenance and operations headquarters stayed at Pittsburgh International Airport.
1990s: Rebranding, fleet modernization, and failed sell-off
In the early 1990s, USAir expanded its service to Europe with flights to London, Paris and Frankfurt from its four primary hubs. The company formed partnerships, marketing the Trump Shuttle as the "USAir Shuttle" and accepted a large investment from British Airways that started one of the first transatlantic alliances, which resulted in several 767 aircraft were painted in the British Airways livery, but operated by USAir.
In 1996, the alliance between USAir and British Airways ended in a court battle, once British Airways announced its intentions to partner with American Airlines.
On November 12, 1996, the airline announced that it would change its name to US Airways and introduce a new corporate identity in early 1997. The new logo, a stylized version of the Flag of the United States, would be adopted. The new branding was to be applied to terminals and ticket jackets. The airline planned to paint aircraft in deep blue and medium gray with red and white accent lines. It also invested in a new terminal at its hub in Pittsburgh.
That same year, the airline also introduced a single-class subsidiary service known as MetroJet, which competed with low-cost carriers expanding into the East, in particular Southwest Airlines. MetroJet operated Boeing 737-200 aircraft, the oldest aircraft in the fleet, and this allowed the aircraft to achieve the maximum utilization possible before being retired.
On November 6, 1996, immediately prior to the re-branding to US Airways, the airline placed an order for up to 400 Airbus A320-series narrow body aircraft, with 120 firm orders at the time of the order signing. At the time, the order was regarded as the largest bulk aircraft request in history. In 1998, the airline followed with an order for up to 30 Airbus A330-series wide-body aircraft, with an initial firm order for seven of the Airbus A330-300 airliners. These orders enabled US Airways to replace its older aircraft with newer, more efficient aircraft, and it helped with the re-branding and repositioning efforts of US Airways.
In 1997, US Airways bought the remains of Trump Shuttle. US Airways also steadily expanded its flights to Europe through the end of the decade. Although the airline returned to profitability in the mid-1990s, its route network's concentration in the U.S. Northeast and high operating costs prompted calls for the company to merge with another airline.
2000–2004: September 11 and financial woes
Beginning in 2000, US Airways started retiring aircraft in an attempt to simplify its fleet and reduce costs, replacing many of its older planes with the new Airbus A320-family aircraft.
On May 24, 2000 US Airways announced plans to be acquired for $4.3 billion by UAL Corp., the parent company of United Airlines, the world's largest commercial carrier at the time. The complex deal drew immediate objections from labor unions, consumer advocates and antitrust regulators. Negotiations stalled; with both airlines losing money, and the deal all but certain to be blocked by the federal government, UAL withdrew its purchase offer on July 27, 2001, paying US Airways a $50 million penalty for withdrawing from the deal.
As the largest carrier at Washington National Airport, US Airways was disproportionately affected by that airport's extended closure following the September 11 terrorist attacks. The resulting financial disaster precipitated the closure of the airline's MetroJet network, which led to the de-hubbing of the subsidiary's primary operating base at Baltimore-Washington International Airport and the furloughing of thousands of employees. The airline entered Chapter 11 bankruptcy on August 11, 2002, but received a government-guaranteed loan through the Air Transportation Stabilization Board and was able to exit bankruptcy in 2003 after a relatively short period. The airline made major cost reductions during its bankruptcy, but it still encountered higher-than-average per-seat-mile costs. On October 19, 2005, the airline repaid the government-guaranteed loan by refinancing the debt with other lenders.
In 2003 US Airways began exploring the availability of financing and merger partners, and after no financing was available, US Airways filed for Chapter 11 bankruptcy again in 2004 for the second time in two years.
The airline merged in 2005 with America West Airlines; The merger was treated as a reverse takeover of US Airways by America West Airlines under FASB rules and regulations. Under harsh financial conditions, America West initiated a merger with the larger carrier that took them out of bankruptcy and created what is today the 5th largest US based airline in terms of revenue. After the merger, the new airline retained the US Airways name. The name choice was based on studies indicating that the US Airways name had better brand recognition worldwide than the America West name.
In early 2003, US Airways management liquidated the pensions of its 6,000 pilots by releasing their pensions into the federal pension program Pension Benefit Guaranty Corporation. The company was one of the first major airlines to eliminate pilots' pensions in order to cut costs.
Following a trial run of selling in-flight food in 2003, US Airways discontinued free meal service on domestic flights later that year.
2003–2004: Pittsburgh hub conflict
US Airways operations in Pittsburgh following hub elimination.In late 2003-early 2004, US Airways lobbied for lower operating fees at Pittsburgh International Airport, citing its economies of scale as the primary carrier and largest tenant at the airport. US Airways attempted to leverage its adverse cash position and "red ink" in the years following 9/11 to negotiate better financial terms with the airport. The Allegheny County Airport Authority rejected US Airways' demands for reduced landing fees and lower lease payments, in part due to antitrust and FAA regulations that required the airport operator to extend the same financial terms to all carriers if it accepted US Airways' demands. US Airways threatened to move traffic to rival hubs in Philadelphia and Charlotte, and the airline made good on its threat in November 2004, reducing its flights at Pittsburgh International Airport from primary-hub to secondary-hub status. The airline, led by former ExpressJet Airlines CEO David N. Siegel, continued to demote Pittsburgh International Airport in subsequent years until it became only a focus city airport for the company. As of 2010, Pittsburgh is no longer listed as a US Airways focus city. US Airways now operates an average of only 39 departures a day exclusively to domestic destinations, compared to 2001 when it was a hub with 500+ flights a day with service across the United States and to Europe.
Western Pennsylvania leaders, and most notably the designer of the 1992 modernization of Pittsburgh International, Tasso Katselas have pointed out that the reason for the fees and payments being higher than average is expressly because U.S. Airways requested the most modern and advanced airport in the world in return for basing its hub there. Katselas has also been vocal that the issue of negotiable fees and payments are irrelevant to the three biggest costs of any airline, namely fuel, time and labor, all of which his redesign of PIT in 1987-1992 created the most efficient, least costly and least financially wasteful airfield in the world. Although conceding that those updates cost more, they are more than offset on Pittsburgh's vast built in nonnegotiable fuel, time and to a lesser degree labor savings.
In August 2004, US Airways attempted to build a Latin American gateway at Ft. Lauderdale/Hollywood, announcing service to 10 cities in Latin America and the Caribbean. The attempt was largely unsuccessful and short-lived, in part due to Fort Lauderdale's proximity to American Airlines’ hub at Miami International Airport and its extensive Latin American network. US Airways also began a process of de-emphasizing its hub-and-spoke system to capitalize on direct flights between major eastern airports such as Washington National Airport and New York-LaGuardia.
The airline became the 15th member of the Star Alliance on May 4, 2004.
Fuel costs and deadlocked negotiations with organized labor, chiefly the Air Line Pilots Association, traditionally the first group to come to a concessionary agreement, forced US Airways into a second round of Chapter 11 bankruptcy protection proceedings on September 12, 2004. Widespread employee discontent and a high volume of employee sick calls were blamed by the airline for a staff shortage around the 2004 Christmas holiday, a public relations disaster which led to speculation that the airline could be liquidated; the USDOT found that the problems were caused primarily by poor airline management.
US Airways/America West merger
Even before the second bankruptcy filing of 2004, one of the alternatives US Airways Group explored was a possible merger with America West, as the two airlines had complementary networks and similar labor costs. The parties held preliminary discussions and conducted due diligence from February through July 2004. Ultimately, these talks ended due to issues related to labor, pension, and benefit costs.
By December 2004, US Airways had cut labor costs significantly. Its investment adviser, the Seabury Group, suggested putting the airline up for sale. The following month, US Airways Group and America West Holdings resumed their discussions. On May 19, 2005, both airlines officially announced the merger deal, structured as a reverse takeover. Financing for the deal was supplied by outside investors including Airbus, an aircraft manufacturing subsidiary of EADS, the European aerospace consortium. Air Wisconsin Airlines Corporation, operator of numerous US Airways Express flights, and ACE Aviation Holdings, the parent company of Air Canada, also bought shares in the combined airline. The merged airline retained the US Airways name to emphasize its national scope, as well as to capitalize on US Airways' worldwide recognition, Dividend Miles frequent flyer program, and Star Alliance membership. On September 13, 2005, America West shareholders voted to approve the merger agreement, and three days later the U.S. Bankruptcy Court for the Eastern District of Virginia approved US Airways' emergence from bankruptcy, allowing the merger to close on September 27.
Since the merger, US Airways has been headquartered at the former America West corporate offices in Tempe, Arizona, and America West executives and board members are largely in control of the merged company. The company's aircraft merged FAA operating certificate includes America West's airline call sign "CACTUS."
During 2006, the airline began consolidating its operations under the US Airways brand. Operations were not fully integrated until October 2008, when government approval was obtained to allow the airlines to operate under a single operating certificate.
On February 9, 2006, US Airways announced that it would become the first American "legacy" carrier to add the Embraer 190 to its mainline fleet.
In May 2006, the US Airways and America West web sites were merged. The new US Airways web site unites the two brands using graphics and styles reflective of the airline's new livery and services.
In July 2006, US Airways and America West ordered 20 new Airbus A350 aircraft.
The end of 2006 saw US Airways making a bid for competitor Delta Air Lines, which opposed this bid, treating it as a hostile takeover by US Airways. The final bid was valued at $10 billion but was withdrawn on January 31, 2007, since US Airways failed to secure backing from Delta's creditors. The airline has stated that it will no longer pursue a possible takeover of Delta.
Aircraft were equipped with Verizon Airfone in every row of seats. Since Verizon ended this service, the airline has deactivated the service and as of 2007, has removed the phones or has covered them in all aircraft.
Overnight on March 4, 2007, the US Airways and America West computer reservation systems merged. US Airways, which previously used the Sabre airline computer system, switched to the new QIK system, an overlay for the SHARES system, that had been used by America West. A few of the features from the Sabre system were incorporated into the new joint system, with the most prominent being the continued utilization of the Sabre ramp partition "DECS" for all computer functions related to weight and balance, aircraft loading and technical flight tracking within the company.
America West Airlines and the US Airways merged FAA certificates on September 25, 2007. Former America West employees (including pilots, fleet service personnel, flight attendants) remain on their original America West union contracts and did not fully combine work forces with their pre-merger US Airways counterparts. Until October 2008, former America West aircraft flew with their respective crews and used the call sign "CACTUS", while the pre-merger US Airways crews primarily flew with their respective aircraft and used the call sign "US AIR". In October 2008, the company began operating under a single operating certificate (that of the former US Airways.) This required operation under a single call sign, and that of America West ("CACTUS") was chosen. In addition, flights operated using former America West aircraft and crews are numbered 1-699, whereas flights operated by pre-merger US Airways aircraft and crews are numbered 700-1999. (Flights numbered 2000-2199 are shuttle services, and those 2200 and higher are operated by express subsidiaries.) Aircraft operated by pre-merger US Airways crews or former America West crews flew under two different United States Department of Transportation operating certificates until September 25, 2007. However, until pilot and flight attendant union groups from both sides successfully negotiate a single contract, each group of crewmembers will fly only on its pre-merger airlines' aircraft and the flights will be marked accordingly.
Now that the computer systems are merged, former America West-operated flights are marketed as though America West was a wholly owned carrier. This marketing is common practice for airlines that have code-share agreements with other airlines operating aircraft for feeder or regional routes, and although the practice is uncommon for major airlines, it greatly simplifies the process for passengers connecting between historically US Airways-operated flights and former America West-operated flights.
In summer 2007, US Airways began upgrading its in-flight services, from food and entertainment to the training of flight attendants. The airline was planning to test-market a new seat back entertainment system in early 2008, however the 2008 fuel crisis has ended those plans. As a further result of the skyrocketing fuel costs, the airline is now rolling back the planned summer 2007 service upgrades as well as ending its existing in-flight entertainment on all domestic routes.
A Consumer Reports survey of 23,000 readers in June 2007 ranked US Airways as the worst airline for customer satisfaction. The survey was conducted before the airline's March 2007 service disruptions. A follow-up survey polling a smaller sample size, conducted in April, found that US Airways remained in last place, with its score dropping an additional 10 points. Also in 2007, the Today/Zagat Airline Survey rated US Airways as the worst airline overall in the United States, ranking it 10/30 for comfort, 5/30 for food, 10/30 for service, and 15/30 for its online reservations system.
On August 1, 2008, US Airways ceased providing its passengers with complimentary beverages. Passengers were required to purchase bottled water or soda for $2 US, or $1 US for coffee and tea. However, the Shuttle flights between LGA, DCA, and BOS continued to offer free beverages. US Airways resumed serving complimentary drinks in March 2009.
US Airways ranked last out of 20 domestic airline carriers for systemwide on-time performance in March, April and May 2007, according to DOT figures. According to the Bureau of Transportation Statistics June 2008 report (using data from May 2008), US Airways ranked 7th for percentage of on-time arrivals.
US Airways is the leader in service complaints with 4.4 complaints per 100,000 customers. US Airways rate of customer complaints is 7.5 times the rate of JetBlue (0.59 complaints per 100,000 customers) and 11 times the rate of Southwest Airlines (0.4 complaints per 100,000 customers). US Airways has a very poor record of addressing customer complaints, answering only 50% of the telephone calls to its customer service department.
As of September 2007, US Airways continued to downgrade Pittsburgh International Airport's status from 500 flights a day (with 12,000 employees) in 2001 to just 68 flights a day (with only 1,800 employees). CEO Parker stated his frustration at the economics of Pittsburgh, and referred to the possibility of service further decreasing. This represents a further deterioration of a strained relationship with Allegheny County, with which the airline shares significant historical ties. US Airways Group Inc. said October 3, 2007 it would cut mainline flights at Pittsburgh International Airport to 22 a day from 31 and reduce regional flights to 46 a day from 77, beginning January 6, 2008, essentially reducing the airport to a destination spoke in its network. Pittsburgh is no longer a focus city for the airline as of its most recent annual report and January 2008 flight schedule reductions.
US Airways East pilots took steps to relinquish their ALPA membership and form their own in-house union. "East" pilots were dissatisfied with the results of binding arbitration when the arbitrator's ruling placed all active former America West pilots, including their most junior pilot, who had been hired only three months previous to the merger, ahead of furloughed US Airways pilots with up to seventeen years of service. The former US Airways pilots petitioned the National Mediation Board to conduct a vote to determine whether to replace their union. East pilots (3,200) outnumbered west pilots (1,800) and the proposed union's president stated that the union has a sufficient number of requests to call a vote according to National Mediation Board regulations. The new union would be called the US Airline Pilots Association (USAPA). On April 17, 2008, USAPA was voted in as the sole bargaining agent for the pilots of US Airways, East and West.
It took more than a year to correct problems stemming from the merger and by 2008, US Airways was one of the best performers among the legacy carriers. The carrier had the best departure and arrival performances among the other major US carriers. It finished with strong On-Time departure and On-Time arrival performances good enough to be number one among all major carriers. Northwest was the only other carrier that had better performances but became a part of Delta during that year.
On April 25, 2008, it was reported that US Airways was in talks to merge its operations with either American Airlines or United Airlines, partially as a response to the recent Delta Air Lines and Northwest Airlines merger. Then, on April 28, 2008, reports stated that US Airways would announce its intent to merge with United within two weeks. At the end of May 2008, the airline announced that merger talks were formally ended.
On May 20, 2008, according to the annual American Customer Satisfaction Index by the University of Michigan, US Airways ranked last in customer satisfaction among the major airlines. However, it was making steady ground to bridge its gap with other airlines.
On January 15, 2009, US Airways Flight 1549, under the command of Captain Chesley Sullenberger, flying from New York City's LaGuardia Airport to Charlotte Douglas International Airport ditched into the Hudson River shortly after takeoff. It is believed that "multiple bird hits" from a flock of Canada Geese caused both engines to lose power. All 150 passengers and 5 crew members (2 pilots and 3 flight attendants) survived with only minor injuries. New York's Governor Paterson called it "the miracle on the Hudson." President George W. Bush said he was "inspired by the skill and heroism of the flight crew", and he also praised the emergency responders and volunteers.
US Airways received its first Airbus A330-200 in June 2009.
In mid-2009 it was reported that US Airways, along with American Airlines and United Airlines was placed under credit watch. Experts say several factors, including capital and revenue, played a role in the airline's addition to the list. On October 2, US Airways reported that it had a buyer for 10 of its 25 Embraer 190 Aircraft. The remaining 15 aircraft are scheduled to be redeployed to Boston where they will operate Boston to Philadelphia and the Boston to New York LaGuardia leg of the US Airways Shuttle service. On December 8, US Airways started the flight to Rio de Janeiro-Galeão airport operated by a Boeing 767-200. This is the first route to South America.
US Airways cut many routes to close its focus cities at Las Vegas, Boston, and New York LaGuardia. The airline was given tentative government approval to trade many of its LaGuardia takeoff and landing slots to Delta Air Lines in exchange for Delta's slots at Washington National. This exchange would strengthen each airline's presence at both airports. The DOT gave approval pending the carriers selling a small percentage of their routes to other carriers. US Airways and Delta disagreed with the decision and said they planned to sue the US DOT.
On April 7, 2010, the New York Times reported that US Airways was "deep in merger discussions" with United Airlines. The report stated that a deal would not be reached for several weeks, but indicated that a deal was close. Several weeks later, however, on April 22, 2010, the airline ended discussions with United regarding the merger. Shortly thereafter, United announced that it was merging with Continental Airlines instead.
On August 19, 2010, US Airways announced "FastPath", a new complimentary service for travelers flying between Philadelphia and Boston in all classes of service. Perks include dedicated check-in lines, priority security lane (shared with First Class, Envoy, Dividend Miles Preferred and Star Alliance Gold members), departure gates located closest to security, and the first and closest baggage carousel. Travelers will follow green "FastPath" signs at the airport.
US Airways (NYSE:LCC) ranked first in baggage handling for 2010 among the major network carriers according to the U.S. Department of Transportation's (DOT) December 2010 Air Travel Consumer Report. The airline's 2.6 mishandled bags per 1,000 passengers ratio for 2010 was US Airways' best baggage handling performance in company history. However, J.D. Power ranked US Airways last in all categories for which it judged airlines, never giving it more than two out of five points with the exception of “Boarding Experience”
In April 2011, US Airways earned the top spot in the 2011 Airline Quality Rating (AQR) report among "Big-Five" hub-and-spoke carriers. US Airways President Scott Kirby said that US Airways was the last viable airline in the U.S. to merge, and that any potential merger would be with one of three U.S. carriers: United Airlines, American Airlines or Delta Air Lines. Kirby also commented that US Airways' membership in the Star Alliance would make a merger with United Airlines easier, but added that "it's not meaningful enough to really be a factor."
Among the 10 largest domestic airlines, consumers scored US Airways last for overall customer satisfaction in a May 2011 Consumer Reports survey.
May 2011 Business Insider reported that ACSI ranked US Airways sixth in a list of “The 19 Most Hated Companies in America.”
July 2011 the pilots' union, USAPA, purchased a full page advertisement in the USA Today newspaper, questioning US Airways management's commitment to safety. US Airways pilots allege safety breaches US Airways transmitted a communication to all of its employees, on the same day as the ad, denying the accusations.
September 2011, US Airways requested and was granted an injunction against the pilots, claiming the pilots union, USAPA was using their commitment to safety as a negotiating tactic. United States District Court, Western North Carolina, injunction regarding US Airways pilots.
October 29, 2011, a US Airways flight attendant was found murdered in the crew layover hotel in Mexico City. Mexican authorities are still investigating the circumstances of the murder.
In January 2012, US Airways expressed interest in taking over bankrupt carrier American Airlines. Tom Horton, CEO of American parent AMR Corporation, said in March that American was open to a merger. A Bloomberg News report dated March 23, 2012, stated that US Airways has been in talks with AMR's creditors about a takeover bid. On December 7, 2012, US Airways announced a merger proposal with American Airlines. The merger will still require approval from a bankruptcy judge but if the merger is successful, the combined airline will keep the American Airlines name and will be based in American's hometown of Fort Worth.
On February 14, 2013, US Airways and American Airlines announced that the two companies would merge to form the largest airline in the world. In the deal, which is expected to close in the third quarter of 2013, shareholders of American Airlines' parent AMR will own 72% of the new company and US Airways shareholders will own the remaining 28%. The combined airline will carry the American Airlines name and branding, while US Airways' management team, including CEO Doug Parker, will retain most operational management positions. The headquarters for the new airline will also be consolidated at American's current headquarters in Fort Worth, Texas.
Company affairs and identity
US Airways headquarters in Tempe, Arizona, formerly the America West Airlines headquarters
US Airways has its headquarters in Tempe, Arizona. The 225,000 square feet (20,900 m2) building was originally occupied by America West Airlines. Jahna Berry of the Arizona Business Gazette said in 2005 that the building "is one of the dominant buildings in downtown Tempe." The City of Tempe gave America West $11 million (about $15684769.29 when adjusted for inflation) in incentives and tax breaks so it would occupy what is now the US Airways headquarters, which cost $37 million (about $52757860.35 when adjusted for inflation) to construct. Construction of the building began in January 1998, although the official groundbreaking ceremony was held on February 19 of that year. As of 2006 over 700 employees work at the nine story building.
Previously US Airways had its headquarters in Crystal Park Four, a Class A mixed-use development in Crystal City, Virginia, near Arlington. Park Four is between Reagan National Airport, The Pentagon, and the District of Columbia. After the merger with America West Airlines, the company decided to close its Virginia headquarters and moved the employees into the former America West building in three to six months after the merger closed. Russell Grantham at the Atlanta Journal-Constitution said that the decision to move the headquarters to Tempe was not that difficult because the Crystal City facility "consisted of like two or three floors of people.
David N. Siegel takes over as US Airways president and CEO in March, naming other new members of the senior management team over the next several months and undertaking a proactive restructuring plan for the company. As part of the restructuring, US Airways enters Chapter 11 bankruptcy reorganization on August 11, with the stated goal to emerge as a leaner, more competitive carrier in March 2003. US Airways introduces service to six new Caribbean destinations, bringing the total to 35 destinations. With 21 mainline jet destinations, four US Airways Express Caribbean destinations and the additional nine islands served through the new GoCaribbean marketing relationship with Windward Island Airways and Caribbean Star Airlines in summer 2002, US Airways serves more Caribbean destinations than any other U.S. carrier. US Airways implements expanded check-in options for customers, rolling out both Web Check-in on usairways.com and nearly 250 self-service check-in kiosks at 46 airports across the U.S. and Puerto Rico. As a result, customers can book tickets, check luggage and obtain boarding passes in as little as 30 seconds. US Airways Express begins service out of a new 95,000-square-foot facility in Charlotte, having added approximately 64 percent more passenger seats at Charlotte since June 2000.
US Airways Group, Inc. files again for reorganization under Chapter 11 of the United States Bankruptcy code on September 14, seeking to restructure operating costs in light of ever-increasing fuel prices and cutthroat industry competition.
PBS News Report from Sep 13, 2004
MARGARET WARNER: Yesterday’s second bankruptcy filing by U.S. Airways was yet another blow to an already reeling industry.
United Airlines is struggling to emerge from nearly two years in Chapter 11. It has trimmed $2.5 billion in annual wage and benefit costs, and has stopped paying into its pension plan.
Last week, Delta Airlines announced plans to cut 10 percent of its total workforce, and warned it would be seeking wage concessions from remaining employees.
U.S. Airways President Bruce Lakefield said yesterday the Chapter 11 proceedings shouldn’t disrupt his airline’s current schedule of more than 3,000 flights daily. But he responded this way when asked about the possibility of job cuts.
BRUCE LAKEFIELD: Our employees at U.S. Airways are some of the most dedicated and hard-working professionals in the marketplace.
Our job in management is to preserve as many jobs as possible as we go through the transformation plan to become a competitive carrier in the industry.
MARGARET WARNER: Why is U.S. Airways in trouble again, and what does it say about the airline industry as a whole?
For that, we turn to Darryl Jenkins, former director of the Aviation Institute at George Washington University. He’s now a visiting professor at Embry-Riddle Aeronautical University in Daytona Beach, Florida and Philip Baggaley, an airline industry analyst at Standard & Poor’s. Welcome, gentlemen.
So, Mr. Jenkins, answer that question for me. Why are they back in bankruptcy just a little more than two years after the last time?
DARRYL JENKINS: Well, the depth of the problems is really enormous, and both sides– labor and management– both underestimated how deep the revenue cuts were. In 1998 we had enormously high fares.
We had high costs but we were able to eke out a little bit of money. Since then, since irrational exuberance went away we haven’t been able to get fares anymore.
And we’ve seen airlines like Southwest and Jet Blue, which are very well managed and have very good products sell them to customers at very, very low and prices and are able to make money.
And because of Jet Blue and Southwest and others like them we’re not able to get fares like we used to. The revenue drop off has been enormous; it’s been much greater than anybody has ever anticipated.
MARGARET WARNER: All right. And Mr. Baggaley, what would you add on the cost side in terms of U.S. Airways problems?
PHILIP BAGGALEY: Well, U.S. Airways has a couple of problems. First, as mentioned, their revenue has been clobbered. They have much higher operating costs than these low- cost carriers.
They’ve also been stuck with a much higher fuel bill as is true across the U.S. industry. U.S. Airways is particularly vulnerable to low-cost competition because a very large portion of their root structure is in the domestic U.S. market.
And that’s where the low-cost carriers have been expanding. In fact even many of their international roots which run into the Caribbean now are also gradually coming under fire from the low-cost carriers. So they’re really in the line of sight of the Southwest, Air Trans and Jet Blues.
MARGARET WARNER: So, Mr. Jenkins, what is — what do their problems say about the industry as a whole?
DARRYL JENKINS: Well, this is a problem that everybody is suffering right now. Even Southwest in the last quarter complained about what the competition was doing to it. And they were also suffering from high fuel bills so these problems are pretty much industry-wide.
But the old carriers, American, United, Delta, U.S. Airways, Continental, Northwest, have outrageously high operating costs. In the next five to ten years I am pretty sure we will not have a time when we will not have at least one, perhaps two or more, airlines in Chapter 11.
And it’s my belief that the cuts needed are so great that some of them will have to go in two or more times.
MARGARET WARNER: Mr. Baggaley, explain why those six older airlines– sometimes they’re called legacy carriers– explain why it is they have much higher costs.
PHILIP BAGGALEY: Well, there are a couple of reasons. Their contracts grew up in a time of regulation and also during the period where organized labor was much more powerful.
During the late 1990s, there was a spiral upwards of labor costs in the airline industry, a contract would be signed at one airline and that would become the jumping-off point for the negotiations at the next airline. So going into the downturn after 9/11, they were stuck with very high labor costs.
In addition, these carriers also have a more veteran work force. And in the case of U.S. Airways that’s a big factor. Their employees have been on the job much longer. They’ve been… the company has been shrinking and therefore they’ve been laying off their relatively younger, lower-paid employees.
So if U.S. Airways were able to negotiate a contract just like Jet Blue Airways, they would still have higher costs because their employees are much more veteran and therefore higher paid.
MARGARET WARNER: Follow up on that, Darryl Jenkins. The immediate trigger for this was when the pilots union in U.S. Airways refused to even consider another cost-cutting measure that the airline proposed.
I mean, obviously no one likes to take a cut in pay but why is labor so resistant to any changes even when their employer is facing bankruptcy?
DARRYL JENKINS: For the last four years the employees at U.S. Airways have really done nothing other than negotiate with labor. First during 2000 when United tried to buy them out with wages and then after that they’ve been in two, this is the third discussion now.
They’re still in bankruptcy, so on their part this has to be very frustrating. I’m sure there is an awful lot of anger out there amongst these people that they’ve done nothing over the last four years other than negotiate and they still haven’t gotten to the bottom.
MARGARET WARNER: And give things away.
DARRYL JENKINS: Yeah. So they haven’t gone to the bottom yet. They’ve spent all of this time and they’re still negotiating.
MARGARET WARNER: Mr. Baggaley, what would you add to that about why the employees, even when faced with the possibility that their employer may go bankrupt or even belly-up, resist… are still resisting in this industry — cuts?
PHILIP BAGGALEY: Well, I think it’s a battle of rational calculation against gut emotion. As Professor Jenkins indicated, they’ve been giving an awful lot.
They’re coming back already 18 months out of bankruptcy, having to give even more. On the other hand, the rational calculation is if they go into bankruptcy, as they have, it will only be worse.
And, of course, if they shut down, they could lose their jobs. In some cases there’s one other factor at work here. And that is labor politics. In the case of U.S. Airways’ mechanics, they’re represented by the International Association of Machinists. And that union has been under challenge to represent mechanics at various airlines around the industry.
United, for example, the IAM, was voted out by a rival union so they’re in a bit of a bind. If they give concessions, they’ll be called soft and if they don’t, their members may lose their jobs.
MARGARET WARNER: Getting back to politics again, do workers at, say, Jet Blue or Southwest, Darryl Jenkins, make a lot less than at U.S. Airways and United?
DARRYL JENKINS: Well, it’s not that they make a lot less; they make a livable wage. At Jet Blue every year they also get additional money from profit sharing.
So what you have here at Jet Blue is you have an airline where the employers are getting a little bit more money each year and you have U.S. Airways where they’re making more money than they are at Jet Blue but each year they’re making less.
MARGARET WARNER: So, Mr. Baggaley, what will it take for U.S. Airways to emerge from bankruptcy? We heard the CEO talk about a transformation plan.
PHILIP BAGGALEY: Well, first, if I could add just a bit to the labor cost comparison because I think it’s important. The wages at some of the low- cost airlines like Southwest and Jet Blue, as indicated, aren’t that different from the legacy carriers.
However, the work rules, the productivity, the benefits are dramatically different. So what U.S. Airways is proposing to try to emulate some of these low-cost carriers is a combination of pay cuts but also changes in work rules that would allow the airline to use its planes more hours per day, would have the flight crews fly more hours per month and so forth.
Now, as to the question of what will it take for them to get out of bankruptcy, the first thing they have to tackle is pursuing these labor cost contracts. They’ve indicated they will try to negotiate with the unions. If that fails, they’re prepared to go to the bankruptcy judge and ask to have the new contracts imposed.
And I would expect that they would succeed in that. If they can argue to the judge that the airlines’ survival is at stake, he would probably agree to impose those contracts. Beyond that, they have to seek agreements with various key creditors: The Air Transportation Stabilization Board, General Electric Capital, and others.
And one further hurdle and an important one, they’d have to raise financing to exit from bankruptcy. One of the longer-term problems they face is there’s no more federal loan guarantee program, which they used last time.
The retirement system of Alabama. Their principal shareholder is not likely to put in more money. So who do they turn to for more financing?
MARGARET WARNER: All right. And before we go, let’s talk about customers, consumers, Darryl Jenkins. We heard the CEO say there wouldn’t be any cuts in the schedule but it sounds like they’re talking about some revamping.
How far out can a person feel comfortable making a reservation on U.S. Airways right now?
DARRYL JENKINS: Well, certainly in the short run there will be no problem whatsoever so in the next three months to the end of the year I would have no problems booking on U.S. Airways whatsoever.
If they’re able to come in, if they’re able to get a quick agreement with their labor– and I agree with Philip that the bankruptcy court is the big lever on this one– then I think they will be good for a little bit longer after that as well.
MARGARET WARNER: What happens to people’s frequent flyer miles?
DARRYL JENKINS: As long as they’re flying their frequent flyer miles are good. It’s a nice autumn, a nice time to fly up to New England and other places. I would suggest people take advantage of it.
MARGARET WARNER: And use their airlines. Mr. Baggaley, briefly, what do you think are the prospects U.S. Airways will make it or versus the prospects that it may end up going belly-up?
PHILIP BAGGALEY: Well, unfortunately I think the odds are against them. They certainly have a chance, and the way to do it is to pursue those labor cost cuts and the other measures indicated but they go into bankruptcy with relatively limited cash and they’re going into the slow winter season. So it’s going to be difficult; possible but difficult.
MARGARET WARNER: Despite Darryl Jenkins advice to take advantage of the fall weather. Well, Philip Baggaley and Darryl Jenkins, thank you both.
DARRYL JENKINS: Thank you.
PHILIP BAGGALEY: Thank you.
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