The airline is reportedly considering selling off key assets to survive, rattling employees who have refused to make more concessions.
By STEVE HUETTEL
Published January 9, 2004
US Airways' prospects of surviving an airline industry slump and increased pressure from low-fare competitors took a turn for the worse Thursday with reports the carrier is considering selling its East Coast shuttle, one of its three hubs and other assets.
The airline emerged from bankruptcy protection last spring with lower costs, mostly through concessions from workers, and $1-billion in financing backed by the federal government.
But employee unions have refused to discuss further labor concessions that US Airways says are needed to meet new threats, such as Southwest Airlines invading its Philadelphia hub in May and JetBlue Airways expanding on its East Coast turf.
US Airways may sell its shuttle serving New York, Washington and Boston, gates at New York's LaGuardia and Boston's Logan airports, its small-aircraft arm called US Airways Express and a hub in Philadelphia, Charlotte or Pittsburgh, the New York Times reported Thursday.
The airline hired Morgan Stanley to find possible buyers, the newspaper reported. US Airways and Morgan Stanley declined comment.
The news rattled employees, airport executives and airline experts who follow US Airways. Failed carriers such as Eastern, Pan Am and TWA all sold off pieces of their businesses en route to oblivion.
US Airways could be trying to force the unions back to the bargaining table or raise cash to pursue the revised business plan, said Jon Ash of Global Aviation Associates, airline consultants in Washington, D.C. "It's a clear recognition there are some very ugly options out there and they've got to take them seriously," he said.
Once the biggest airline at Tampa International Airport, US Airways cut local flights in half since the Sept. 11 terrorist attacks, said Louis Miller, the airport's executive director. US Airways carries 11.3 percent of passengers at Tampa International, ranking third behind Delta Air Lines and Southwest.
"US Airways is very important to Tampa, although every flight they've dropped has been picked up by someone else," he said. "You often wonder when an airline talks about selling major assets if they can survive."
Just shopping parts of the airline will hurt US Airways, said Terry Trippler, airline expert for the travel Web site CheapSeats.com. Customers who think US Airways might fold will buy tickets elsewhere - a practice called "booking away," he said.
"This is a self-fulfilling prophesy if you let it (get) out," Trippler said. "If people are booking in July, what have they told them? Be cautious."
He said consumers should buy US Airways flights from its partner, United Airlines. United would be responsible for rebooking them if US Airways isn't flying, Trippler said. US Airways frequent fliers should redeem award miles quickly, preferably on United flights, he said.
US Airways lost $90-million in the three months ending Sept. 30. That was a big improvement over its $335-million loss for the same quarter of 2002 but disappointing in a period when several airlines earned small profits thanks to heavy summer travel and government refunds of security fees.
Chief executive David Siegel has repeatedly and bluntly told employees the airline must further reduce costs to compete with low-fare carriers.
While US Airways gets some of the highest average fares, Siegel says, that will change as low-fare competitors move into more markets. Fares to Philadelphia will likely drop 30 percent when Southwest arrives, he said.
Siegel warned employees in a telephone message last week that US Airways must repay the government-backed loan to stay solvent. Loan covenants require the airline to meet specific liquidity and earnings targets beginning June 30.
But unions refused to consider more concessions, arguing that labor costs are at or below the industry average and management squandered the savings achieved during bankruptcy. The pilots' union last month called on company directors to remove Siegel and his chief financial officer.
"We certainly hope the reports aren't true," said Tim Baker, a spokesman for the pilots. "You can't shrink to profitability."
A spokeswoman for the union representing US Airways flight attendants dismissed talk of selling parts of the airline as "a bullying tactic" to squeeze workers for more concessions.
Darryl Jenkins, a professor at Embry-Riddle Aeronautical University in Daytona Beach, disagrees. He thinks managers at the Retirement Systems of Alabama, which bought 37 percent of US Airways in bankruptcy and holds voting control, wants to sell the carrier and recoup at least part of its $240-million investment.
"I do not consider this a bluff," Jenkins said. "The options are becoming less and less. This is serious now."
