USAirways’ Recovery Plan

USAirways has a plan to return to profitability, but I’m skeptical — both that they can pull it off and that it will matter if they do.

USAirways wants lower costs. All airlines and almost all employers want lower costs, and employers facing strong unions have a hard time achieving those costs. Even after $1 billion in union concessions, USAirways has costs that by some measures are 2/3 higher than Southwest’s.

Increased productivity by changing work rules. This is probably the most important thing that USAirways needs to do, and it will face some of the toughest union opposition.

Leveraging strenght in the Northeast. If this is new, then I wonder what the airline has been doing for the past decade.

Sell new amenities. Amenities have helped create the JetBlue brand, which has garnered fierce loyalty. JetBlue began selling access to satellite TV but now gives it away for free. USAirways can offer new services, but it’s unlikely to profit significantly on the services themselves. The real question is whether, at a reasonable cost, they can become a preferred carrier. No airline is in a worse position to do that — they’ve had filthy planes and broken seats for two years and the mindset of a deteriorating airline won’t be easy to change.

Simple pricing is something tried by others in the past. It has worked for America West and Alaska is trying it. But in order to survive as a low average revenue carrier, they must first achieve low average costs — and that’s their biggest challenge.

Reduce ticket distribution costs by encouraging booking online. All airlines are doing this. USAirways website is poor, making the carrier less well positioned to achieve this than their competitors.

Reverse market share losses is an important goal, but not steps in a plan, and is really just the same thing as leveraging the airline’s strengths which they’ve been trying unsuccessfully for years.

Build a franchise that can grow westward. It’s unclear what this means. If it’s “capitalize on the United codeshare” that’s valuable but not new. If it means adding another codeshare partner (perhaps America West?) that could be valuable. But if it means expansion, that would entail unnecessary costs. There may be specific routes worth expanding into, but that’s a route by route issue and doesn’t necessarily imply the West Coast.

It’s a long shot, but good luck to them.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Leave a Reply

Your email address will not be published. Required fields are marked *