US Airways' plans shift in travel slump
TEMPE, Ariz. -- In 2007, it was going to be a global behemoth.
Yet, in 2009, it is neither. US Airways is the nation's sixth-biggest airline, not the biggest. It flies a conventional network of routes and has high operating costs contrary to the low-cost-carrier operating model.
Instead of remaking itself, the airline today is concentrating on surviving one of the sharpest drop-offs in air travel in history, overcoming concerns about cash liquidity, competition and an unsettled labor dispute, and eking out a profit by the end of this year.
Doug Parker, US Airways' CEO, is nothing if not confident, however. He says much of the concerns industry analysts have about US Airways are overstated. And, he says, the airline is positioned to withstand all but a total collapse in demand for air travel.
The airline has cut the number of seats it offers by as much as 10% from a year ago in response to lower demand. It's generating an extra $160 million a year by charging fees for services such as checking bags and choosing preferred seats.
"We think we've got our house in order well enough that we could still be profitable, even with a 15% drop in revenue this year," Parker says.
Improvements tempered by concerns
US Airway has improved customer service from two years ago, when it ranked at or near the bottom in on-time arrivals, mishandled bags and complaints.
Today, it's at or near the top in all those categories, though research, both internal and external, indicates that most consumers have yet to change their poor opinion of the carrier.
Still, the airline has worries:
•Rising liquidity concerns. Despite raising $700 million from the credit markets in the fourth quarter of last year, US Airways' cash balance at year's end — $1.3 billion — was virtually unchanged from its cash balance on Sept. 30. Accordingly, investors are pricing the company's shares — which have lost 93% of their value in the last two years, vs. the industry's average stock value decline of 70% — as if they expect it to start running tight on cash by fall.
