QUOTE AND NEWS
Insurance Journal  Sep 20  Comment 
Willis Towers Watson has named Charles Shay leader in financial and executive risk in North America’s West region. The financial and executive risk practice delivers tailored risk management and risk transfer solutions to help companies protect...
Flightglobal  Sep 13  Comment 
The US Air Force has invited Boeing to submit a detailed proposal to supply and modify two passenger-carrying 747-8s to replace the 747-200-derived VC-25A fleet in the 2024 timeframe.
New York Times  Sep 8  Comment 
“Sully,” Clint Eastwood’s film about US Airways Flight 1549, largely involves what happens after he, his crew and his passengers are plucked from the Hudson.
The Economist  Aug 31  Comment 
AS PRESIDENT of US Airways, Scott Kirby (pictured) cut costs by eliminating free non-alcoholic drinks for coach passengers. This week, he was probably popping the cork on something fizzy. On Tuesday, American Airlines, which took over US Airways...
The Hindu Business Line  Aug 18  Comment 
Indo-US cooperation in Defence technology and trade initiatives will be the focus of the US Air Force Secretary’s upcoming visit to India during which she will also discuss with top Indian officials ...
Flightglobal  Aug 15  Comment 
US air taxi company JetSuite has begun a major interior revamp of its 11-strong fleet of Embraer Phenom 100s, in a move designed to extend the operational life of the entry-level business jets.
Clusterstock  Aug 13  Comment 
The US Defense Department's latest financial-management report on reimbursement rates offers a glimpse of how much it costs to fly America's Air Force and Navy planes per flight hour. The annual report from the Office of the Under Secretary of...
newratings.com  Aug 4  Comment 
WASHINGTON (dpa-AFX) - The F-35A Lightning II fifth-generation fighter aircraft was declared "combat ready" Tuesday by Air Force Gen. Hawk Carlisle, commander of Air Combat Command. Defense Secretary Ash Carter offered his congratulations to the...
Flightglobal  Jul 13  Comment 
US air taxi company JetSuite is showcasing a refurbished Embraer ERJ-135LR at Farnborough to illustrate the benefits of giving the out-of-service regional jet a second lease of life.
Forbes  Jun 2  Comment 
American Airlines has reinstated the practice of distributing plastic aircraft wings to children, a practice that both American and US Airways discontinued early this century




 
TOP CONTRIBUTORS

US Airways (NYSE: LCC) is a major domestic air carrier, which as of April 2008 operates 3,800 flights to 230 destinations across the U.S., Canada, the Caribbean, Latin America and Europe[1]. The company’s finances suffered considerably due to reduced air travel following September 11th, forcing the airline to declare bankruptcy in 2002[2]. However, unlike other carriers that improved and emerged stronger following Chapter 11 protection, US Airways never fully recovered. The combination of high fuel costs and tough labor negotiations forced the company into a merger with America West in 2005. While the US Airways name was maintained for brand purposes, the merger actually left America West executives and stockholders with more control over the new company[3].

US Airways has responded to the low fare revolution in domestic air carriers by attempting to cut costs and revise its route structure. The company has adopted increased point-to-point flights along the east coast and instituted fees for basic amenities (headphones, food, etc.). The airline's ability to continue to manage its costs is less certain, however. In 2008, the company's 30,000+ employees formed a coalition to demand higher wages and better benefits. Normally, airlines negotiate with their employees through separate unions (flight attendants, pilots, service workers, etc.). By forming a single body to negotiate on their behalf, the employees will be able to exercise greater bargaining power. During the same period, fuel prices reached an all time high.

Business Overview

Business & Financial Metrics[4]

In 2009, LCC incurred a net loss of $205 million on revenues of $10.46 billion. This represents a whopping 90.7% reduction in net income against a 13.7% decrease in total revenues from 2008, when the company lost $2.22 billion on $12.12 billion in revenues.

Business Segments[5]

US Airways operates through a single reportable segment. 79.2% of the company's revenue in 2009 came from flights in the United States.

IMAGE:LCC-Geography2009.jpg[5]

Key Trends and Forces

Competition from Low Cost Airlines

US Airways has long been structured as a legacy carrier; the company has existed for decades, operating a hub-and-spoke network as well as a separate regional airline. This business strategy was the industry standard until the middle of the 1990’s, when US Airways and other legacy carriers began to face pressure from low cost airlines. US Airways responded by adopting a new “Metrojet” service, which operated limited single class no-frills flights quite similar to those offered by Southwest. However, the company’s broader business model remained the same, and the “Metrojet” service proved to be short lived. Thus, the competition from discount airlines remained, forcing US Airways to search for new ways to cut costs, especially as operating profits dropped in the post-September 11th period. In an attempt to reduce expenses, US Airways moved away slightly from the hub-and-spoke structure and began offering more point to point flights. However, the high costs continued and will continue, especially with respect to labor expenses. Moreover, the company has announced plans to introduce improvements to their in-flight service, which brings into question the carrier’s ability to sufficiently reduce costs.

Increased Government Regulations

The Federal Aviation Administration (FAA), an agency of the federal government, is charged with providing oversight for airlines operating in the United States. In 2008, it was revealed that the FAA was not active enough in ensuring airline compliance with safety inspections. As a result, there has been a strong Congressional backlash, which will likely force the FAA to become stricter in guaranteeing airlines perform safety checks. [6]. While US Airways has not been forced to cancel flights in order to comply with the new demands from the FAA, the increased intensity of inspections will probably result in an enduring increase in expenses for the airline and the industry in general.

Competitors

US Airways's competitors include:

References

  1. US Airways 10K, Item 7, pg. 34
  2. US Airways 10K, Item 1, pg. 5
  3. US Airways 10K, Item 7, pg. 38
  4. LCC 2009 10-K pg. 31  
  5. 5.0 5.1 LCC 2009 10-K pg. 104  
  6. “Fliers Fume as American Airlines Grounds Another 595 Flights Friday” Fox News April 11, 2008
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