Why are old news items about USAirways, such as this article, being posted to the list? Regards, JCK ---- >From: JFK Airport News <avialot@xxxxxxxxx> >Reply-To: The Airline List <AIRLINE@xxxxxxxxxxxxxxxxx>, JFK >Airport News <avialot@xxxxxxxxx> >To: AIRLINE@xxxxxxxxxxxxxxxxx >Subject: Siegel Interview >Date: Fri, 1 Aug 2003 14:17:02 -0700 > > > At the helm of US Airways for just over a year, CEO David Siegel on >March 31 > > guided the airline out of bankruptcy after seven months of >court-supervised restructuring. > > Business Travel News editors David Jonas and David Meyer last week spoke >with Siegel about US > > Airways' emergence from Chapter 11 and its future prospects. > > > > BTN: Considering the extremely rough road that lies ahead, was emerging >from bankruptcy last > > month a mixed blessing? > > > > David Siegel: It feels better to be out than in, but I guess it is a >mixed blessing. We feel > > good about having accomplished all that we could in the courts. We fixed >the balance sheet, took > > a lot of money out of our cost structure and improved liquidity. Now we >can focus on growing the > > business. While everybody else is distracted trying to do some of the >things we have done during > > the past seven or eight months, we can stay ahead of the rest of the >industry and continue on > > the path of implementing our business plan. > > > > BTN: You seem to have garnered nearly universal praise for the >restructuring thus far, but > > competitors and analysts still question if US Airways' unit costs are >low enough to allow for > > effective competition. > > > > Siegel: It is a fair criticism. Yet, before we restructured we were the >number-six network > > carrier with the number-one highest cost structure, and now we are now >the number-six carrier > > with the number-six cost structure. We'll still lose money this year. >The industry will lose > > money this year. The revenue environment is uncertain. > > > > While we dramatically have improved our relative position, the whole >industry continues to be > > under pressure. That just says our work is not done. We still need to >reexamine our business > > model. Yet, if you look at it as a horse race, we were dead last and now >we are kind of toward > > the front. > > > > BTN: Certainly strides have been made on the cost side. What sorts of >strategies are you seeking > > to employ in terms of revenue generation? > > > > Siegel: We are doing several, broad-brush things. We are trying to >optimize the existing > > network. We have right-sized the fleet, down to 279 mainline shells. We >are about to deploy over > > the next two or three years a very large number of regional jets. We >have the United partnership > > domestically and are going to join the Star Alliance and do more on an >international basis later > > in the year. And we are bringing in best practices on analytical >decision-making tools for > > pricing, revenue management, scheduling and planning. > > > > We are implementing a different strategy with the network by making the >hubs work together on a > > more complementary basis and better capitalizing real estate positions >we have at the preferred > > airports in New York, Boston and Washington. > > > > BTN: Please explain your capacity reductions and the overcapacity >problem still facing the > > industry at large. > > > > Siegel: If you look at August 2001 and today, industry revenue is down >about 30 percent and our > > capacity is down about 30 percent, so we have been the only disciplined >competitor matching > > capacity with demand. The rest of the industry, with the more recent >cuts, is down maybe 12 > > percent to 15 percent. In simplistic terms, if revenues are down 30 >percent?half in capacity > > reduction and half in yield?you would say that another 15 percent of >industry capacity needs to > > come out. > > > > The math is obvious, but everyone has a different definition of excess. >Some people say one > > competitor that has about a 15 percent marketshare and currently is >operating in Chapter 11 > > should go away. Some people would say that everybody has a marginal hub. >We have Pittsburgh, > > Northwest has Memphis, Continental has Cleveland, American has St. Louis >and Delta has their > > position in Dallas and I argue in Cincinnati and Salt Lake. So another >way for capacity to come > > down is for everyone to shut down their uneconomic hub positions. > > > > A third alternative is everyone pares back capacity 15 percent around >their networks because > > they do not want to shut down a hub, but it is not clear what the new >level of demand is. Even > > though the war is over, demand still is depressed. What is the new >baseline? It appears to be a > > permanent drop in demand and we are trying to assess if we have to take >additional capacity out. > > We continue to evaluate our marginal hub position in Pittsburgh. > > > > BTN: Back to alliances, how is the United partnership currently >performing, and what is the > > vision for the next few years? > > > > Siegel: It is tracking ahead of forecast and we are very pleased with >the results as we have > > pursued a fast-track implementation. By summer, we expect to see >meaningful value. It takes > > three or four years for these alliances to mature. One reason is the >customer needs time to > > become enfranchised and understand the network opportunities. Yet, there >also is the practical > > issue of creating, in our vision, a seamless product with United. Some >of that will take time. > > > > Also, you have joint corporate sales and joint promotions to leisure >customers, and there is a > > purchasing cycle: training the salesforce, putting together new >corporate opportunities and then > > selling in. But once the alliance is mature, the numbers we laid out to >the Air Transportation > > Stabilization Board show a couple hundred million dollar benefit a year >to US Airways, and we > > think that is on the conservative side. > > > > BTN: We understand the joint corporate sales effort already has begun. > > > > Siegel: We already have made hundreds of presentations to corporations >to jointly sell and have > > had some good success. But it does take time because every corporation >has its own > > decisionmaking cycle. As we get out in front of corporations, every >quarter the product offering > > is that much more attractive and competitive because we have implemented >more codeshare cities > > and worked out more of the kinks. > > > > BTN: On the topic of corporate sales, we have been hearing more about >reciprocity at the most > > senior levels. Have you been getting requests for your attention to >reciprocal negotiations? > > > > Siegel: We have been proactive with that, more so than in the past. We >are an important customer > > to a lot of our vendors. Our new equity sponsor, the Retirement System >of Alabama, has great > > equity relationships. They have a portfolio of operating companies, >including a very large media > > company, for example, that has thousands of employees around the >country. We will make sure that > > we have competitive offers into those operating companies to get a >better share of their > > business. > > > > BTN: In your mind, are airfares at sustainable levels or is deeper, more >comprehensive reform > > necessary? > > > > Siegel: Absolute revenues are not at a level that can sustain the >industry. Something has to > > adjust to the marketplace. We have always said there needs to be changes >to the fare structure > > that are more consumer-friendly but also revenue-neutral to >revenue-positive for the industry. > > We continue to test ideas, as do other carriers. We would agree that the >fare structures need to > > be simplified. We think the low end needs to come up?and we tried to >initiate some things there > > last year that got unwound this year?and the high end needs to come >down. There needs to be a > > convergence, but how do you do that where you are not revenue-negative? > > > > Some of the experiments of other carriers, where they have tried to >simplify, have had a > > significant adverse impact to the industry. The reduction in price did >not sufficiently > > stimulate enough volume, and they were revenue-negative decisions. You >are seeing some of these > > experiments being dialed back. The industry will search for a structure >that works for the > > consumer and for the airlines. There will be a lot of experimentation to >test the elasticity of > > demand. > > > > BTN: How far off is profitability? > > > > Siegel: It is so hard to say because we are all trying to get a grip on >what the real revenue > > environment is and the extent of the war impact. There is a consensus >that the industry loses a > > significant amount of money this year. Given our restructuring, we will >outperform the other > > network carriers. People are thinking 2004 will be unprofitable and 2005 >is when we will make > > money. It is largely driven by what happens with revenues, and it is >hard to predict. > > > > Clearly, the whole industry is on an unsustainable path. We, being the >first to restructure, are > > extremely well-positioned relative to the rest of the industry. We are >the lowest-cost major > > network carrier, and we continue to bring in best practices and >challenge the business model. We > > have built into our plan significant cost reductions over the next two >to three years. We are > > not done. > > > > BTN: An important element of US Airways' restructuring is regional jet >deployment. What is the > > plan and how close is an order from a manufacturer? > > > > Siegel: The order will be very soon and very large. We will deploy RJs >in three ways: downgauge > > lowest load factor narrowbodies and redeploy them for other >opportunities; add new markets that > > were too far for a turboprop and too thin for a mainline jet; and look >at opportunities to > > replace turboprops based on passenger preference or for competitive >reasons. > > > > Of the 300 RJs we plan to add, they will fall roughly evenly into each >of those three > > categories. We have a pent-up demand for regional jets that has built up >during the past four or > > five years, so there is lots of catching up to do against the rest of >the industry. It will be > > positive from a marketshare perspective and positive from a customer >product perspective. And as > > you add regional jets, it brings in a lot more feed to the mainline. > > > > BTN: Do you expect additional airline bankruptcies among the major >carriers? > > > > Siegel: There are carriers that have a lot of liquidity. As a practical >matter, it is unlikely > > they would file, and it becomes an interesting bluffing game with labor. >Others clearly have > > cash-burn liquidity issues and are on the precipice. The industry will >restructure, but there > > will not be uniform success across carriers. You may have a situation of >haves and have nots. > > > > There are three of us who have had burn rates and a liquidity position >that forced us to do a > > significant out-of-court restructuring or go through the process. They >are obviously us, United > > and American. With Delta, Northwest and Continental, the question is, Do >they have sufficient > > liquidity and/or are their burn rates low enough where it would be >difficult for them to achieve > > the same degree of success in restructuring the cost base? It will be >interesting to see where > > we all are in a year or two. > > >__________________________________ >Do you Yahoo!? >Yahoo! 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