This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ IN AMERICA - NOMINATED FOR 6 INDEPENDENT SPIRIT AWARDS IN AMERICA has audiences across the country moved by its emotional power. This Holiday season, share the experience of this extraordinary film with everyone you are thankful to have in your life. Ebert & Roeper give IN AMERICA "Two Thumbs Way Up!" Watch the trailer at: http://www.foxsearchlight.com/inamerica \----------------------------------------------------------/ US Air Seeks Lower Costs to Fight Cut-Rate Rivals December 6, 2003 By MICHELINE MAYNARD US Airways, which emerged from bankruptcy protection this year, told employees yesterday that it must revise its business plan to combat the threat from low-fare airlines, the clearest signal yet that it faces a new crisis. Speaking on a telephone hot line recording, the chief executive, David N. Siegel, said yesterday that the action was prompted by an announcement by Southwest Airlines last month that it would begin service next year to Philadelphia, one of three main hubs for US Airways. "This new revenue environment is coming quickly," Mr. Siegel said in the recording. "To meet it we must adapt our business plan. That is the next and critical step of our transformation." He added: "We can certainly manage our business more efficiently, and we're going to do that. But having the right cost structure is going to be critical to our success." Mr. Siegel gave no timetable for developing a revised business plan, which would supplant the one the airline presented to a bankruptcy court and to a federal loan board as the basis for its restructuring, which was approved in April. US Airways, the nation's seventh-largest airline, filed for bankruptcy protection in July 2002, citing a rapid decline in travel after the September 2001 attacks in New York and Washington. Since then, UAL's United Airlines, the country's second-largest airline behind American Airlines, has sought bankruptcy protection. American narrowly averted bankruptcy court after its unions agreed to cuts in wages and benefits. Although US Airways went in and out of bankruptcy quickly, industry analysts and competing executives have lately voiced concern about the outlook for the airline, which is based in Arlington, Va. Though other major carriers posted small profits during the third quarter, helped by federal refunds of security fees and healthy summer traffic, US Airways lost $90 million, although that was a big improvement from its $330 million loss in the quarter a year earlier. A spokesman for the airline, David Castelveter, said yesterday that the airline was studying every aspect of its operations, from labor costs to its routes to the types of aircraft it deploys and the schedules it operates, to determine where savings can be found. "Everything is on the table," he said. "There is nothing that we are not looking at right now." But US Airways' unions, which granted the airline two rounds of concessions as part of its restructuring plan, reacted with alarm. The Communication Workers of America, which represents customer service agents, said yesterday that while it would participate in discussions to devise a new business plan, it did not intend to grant further cuts in wages and benefits. The International Association of Machinists and Aerospace Workers, which represents US Airways' mechanics, was more blunt. "The concessions stand is closed," the union, whose leaders met with company officials last month, said in a statement. But Mr. Siegel was equally frank. In the employee message, he said he expected that fares to Philadelphia would immediately drop by 30 percent once Southwest begins flights there in May, based on studies of other cities where Southwest has begun service. While US Airways might be able to charge 5 percent to 10 percent more than Southwest, given that it offers first-class and other premium categories of service on some routes, Mr. Siegel said it could not expect to yield any higher fares. And Southwest is not its only problem. US Airways faces a challenge from a variety of low-fare airlines, from AirTran to JetBlue as well as Song, which is operated by Delta Airlines. In all, low-fare airlines now carry about one-quarter of all passengers in the United States. Actually, Mr. Siegel said, US Airways' revenue is in step with that of its major competitors. US Airways is able to charge about 99 percent of what other big airlines charge for the same services, Mr. Siegel said, up from the 94 percent it had to charge to stay competitive at the start of this year. "Competitors like American and Delta have become less of a threat to us, while low-fare carriers have grown," Mr. Siegel said. Even if US Airways is able to attract more passengers by cutting fares, Mr. Siegel told employees that would not generate more revenue. "The airplanes will be full but there will be not as many dollar bills on the aircraft," Mr. Siegel said. http://www.nytimes.com/2003/12/06/business/06air.html?ex=1071743187&ei=1&en=70644bd1a02c04f3 --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! 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