America West Becomes US Airways Tuesday

[venture]

The day is here...and its definitely a good thing. Look for signage changes over the next few months and the new paint scheme in town eventually. Should hear more on Charlotte service after the cross network code-sharing goes into effect. This will be very similar for those that remember when American bought TWA, but operated TWA seperate for about 18 months or so.

New websites are slowing coming together:

http://www.usairwaysinfo.com/usair/default.aspx

http://www.usairways.com/

http://www.americawest.com/awa/

[Patrick]

Personally, I wasn't that big of a fan of this. I'm never a huge fan of mergers, as they only provide less competition in the national market.

[mranderson]

Personally, I wasn't that big of a fan of this. I'm never a huge fan of mergers, as they only provide less competition in the national market.

In addition, the successor more times than not, lays off hard working people in favor of jucing the wallets of the executive staff.

[venture]

I think the key thing here is both airlines have already cut back a lot as is. The combined company is down nearly 30,000 employees since Sept 2001, and they are reaching a point that is comfortable. The America West operation was actively hiring for the last year, and will provide opportunities for furloughed US Airways network employees to come back if they choose.

They will continue to remove 60 aircraft from both fleets through early next year, but no layoffs are expected due to attrition at US Airways - a huge chunk of pilots are preparing to retire due to their age. The only other major areas to watch for cutbacks will be the elimination of Crystal Palace - the US Airways HQ - as it moves out to the lower cost Tempe location. There may also be some maintainence cut backs, depending on the outsourcing agreement with part owner Air Canada.

Patrick - on your point, mergers and consolidation in the industry are needed badly right now. We are stuck in a period where travelers feel they are owed cheap travel and don't want to pay extra for the record fuel costs. Just to throw a number out there. US Airways lost $14 million for the month of August, this was after their fuel expenses topped nearly $150 million for the month. Considering fuel costs are roughly double what they were a year ago, US Airways would have made money - and this is just the east coast operation. Expect to see more M&A activity over the next couple years as airlines need to find ways to spread these costs out. Of course it would be easier if the flying public would just pay a little bit more for their tickets and not complain...OR...the Federal Government reduce the extremely high taxes they place on air travel. I think the true telling point here will be in about a year when Southwest and their great fuel hedging program expires. This will take them from fuel costs around $30 a barrell to market values in the mid 60s. If they paid market value now, they would be bleeding cash like everyone else.

[BDP]

Of course it would be easier if the flying public would just pay a little bit more for their tickets and not complain...OR...the Federal Government reduce the extremely high taxes they place on air travel.

That's the inetersting thing about market manipulation. If the government is used to "save" or subsidize an industry because consumers will not share the risk or costs of that industry, then they end up just paying it in taxes anyway, which is actually much less effecient in absorbing those costs and risks. It's amazing how powerful the consumer disconnect is.

Also, it seems to me that Southwest isn't as cheap as it used to be, or at least they do not sell as many cheap seats. I have been able to match or beat Southwest on other airlines a lot more recently, and I certainly am not going to fly Southwest for anything other than price. I wonder if they are anticipating their future cost increases.

There was an article on the Delta Orlando flights today in the DOK (http://newsok.com/article/1628845/?t...=business/main). From that article:

"We're extremely excited to have this market, since it now gives us 11 of our top 15 markets that have nonstop service."

Venture, do happen to know what those 15 markets are and to which ones we still do not have non-stop service? Thanks.

[venture]

Also, it seems to me that Southwest isn't as cheap as it used to be, or at least they do not sell as many cheap seats. I have been able to match or beat Southwest on other airlines a lot more recently, and I certainly am not going to fly Southwest for anything other than price. I wonder if they are anticipating their future cost increases.

Southwest, the last few years, has rarely been the "low fare" airline in a lot of markets. What they live off of is everyone was use to them being the "$29 one way" kings and just expect Southwest to have the lowest. Now those fares are restricted to very few seats. Still enough to give them a marketing edge, but it would shock you how quickly those $29-49 one way seats turn into $299 oneway.

Venture, do happen to know what those 15 markets are and to which ones we still do not have non-stop service? Thanks.

Of course.

I even went ahead and put together a quick page with all the info. You can get it at http://www.usaflying.com/okc_od_2005q1.htm

Top 15 are, in order: Houston, Dallas/Ft Worth, Las Vegas, Phoenix, Chicago, Denver, Kansas City, St. Louis, Atlanta, Washington DC, Orlando, New York, San Antonio, Los Angeles, and Baltimore.

Out of those only Washington, San Antonio, Los Angeles, and Baltimore do not have nonstop service.

Hope this helps.

David

[Patrick]

You can blame a lot of the loss on success of low cost carriers. They're forcing major airlines to have to lower costs and thus the major airlines are losing money.


If the airlines are hurting that bad, then they need to restructure and raise prices. I'm tired of the government bailing them out. People will pay the higher prices, as many times, they'll have no other choice.

[mranderson]

I use to choose a higher priced airline because I got meals on the flights. Now hardly any airline gives meals, and I have to pop ten bucks for a Whopper at Buger King.

Today, I choose the lowest fare which is usually United. Lately, I have been flying America West to the west and United to the east. When the merger is complete, and US Air has more eastern routes, I may fly them so we can build to hub status.

It seems with the exception of United, for example, having nicer aircraft and some small perks, they are all alike.

[BDP]

I even went ahead and put together a quick page with all the info.

[venture]

You can blame a lot of the loss on success of low cost carriers. They're forcing major airlines to have to lower costs and thus the major airlines are losing money.
If the airlines are hurting that bad, then they need to restructure and raise prices. I'm tired of the government bailing them out. People will pay the higher prices, as many times, they'll have no other choice.

Yeah a lot of the blame can go to the LCCs, but they aren't doing all that well right now either.

NEW YORK, Sept 20 (Reuters) - JetBlue Airways Corp.'s (JBLU.O: Quote, Profile, Research) 18-quarter profit streak may end soon because of spiking jet fuel prices, its chief executive and founder said, Bloomberg News reported on Tuesday.

AirTran Airways, probably the #2 LCC in the country behind Southwest, report a modest Q2 profit of around $11 million, but they also saw their CASM rise over 9 cents for the first time, up from the 8.5 range. The key factor there was fuel...in fact when you break their numbers down in their 10Q, that was about the only factor for the increase.

I guess what I'm getting to, eventuallly the whole thing will blow up and air fares will have to come up. This currently battle of "Airline Survivor" is going to back fire. Northwest and Southwest probably have been the two biggest players in this. Southwest plays the fuel card with their hedging, and Northwest plays the 800lbs monster in the Midwest. Any LCC comes near their turf, fares go nose first and they flood the market with capacity.

There was also a lot of focus on running US Airways under, especially be Delta. Ooops. Look whose in bankruptcy now. UAL...well...they are just a joke. They have become experts in abusing the bankruptcy system and will remain in it now through early 2006 - now over 3 years since they went in.

I would keep an eye on UAL though. There is still some rumblings in the background that US Airways is not done with M&A activity yet. This is even coming from the West coast network's unions (ex America West). A lot of attention was grabbed by Air Canada, co-Star Alliance founder with United, pumped in millions to the new US Airways. The Air Canada CEO has also been expressing an interest in merging with the new US Airways. Throw in Airbus as a part owner now too...and the essential partners are coming together. We could yet see cherry picking take place on the weaker UAL Corp...such as the DEN and ORD hubs, along with various international markets...to become part of a combined US Airways/Air Canada company.

We aren't done yet in this crazy game.

Today, I choose the lowest fare which is usually United. Lately, I have been flying America West to the west and United to the east. When the merger is complete, and US Air has more eastern routes, I may fly them so we can build to hub status.

Haven't we been over the hub thing already? A *HUB* is a location where passengers can connect, but it also must be supported by a large amount of O&D passengers. The new US Airways has made it clear they intend to rely on their UAL code-share to serve within "Fly Over Country" (the Plains)...and has no desire to do anymore. The benefits of an OKC or any middle America hub is very low. The benefit would only be to those wanting to fly from Omaha to San Antonio that don't want to connect in some out of the way location. Unfortunately American, United and Southwest have it taken care of. The airline is not going to chase a couple passengers in a crowded market.

Also, there are many other cities with better O&D figures than OKC for a focus city or hub operation. Unfortunately, those too are under fire right now. Cincinnati was just DRASTICALLY sliced up by Delta - main reason...lack of O&D. American is now shutting down one of their concourses in St. Louis...main reason - lack of O&D.

If OKC can add about another million residents, then it may have the O&D to support are larger operation...but not before then. Also keep in mind, US Airways is CUTTING its fleet. There will not be any positive fleet growth for about 5 years when they start getting WIDEBODY aircraft delivered. So the potential for any new major operations opening up are VERY slight. They are going to focus on International expansion to Europe and Central/South America, and their core markets - PHX, LAS, PIT, PHL, CLT, FLL, LGA, BOS, and DCA. Sorry.