QUOTE AND NEWS
CNNMoney.com  17 min ago  Comment 
Three days after the companies said they were cutting ties, American Airlines and Orbitz came to a new agreement.
CNNMoney.com  Aug 26  Comment 
The nation's largest airline is cutting ties with online booking agent Orbitz.
The Hindu Business Line  Aug 17  Comment 
Kurdish Peshmerga forces operating with US air cover Sunday regained ground from the Islamic State jihadist group near the northern Iraqi city of Mosul, local media reported.The Peshmerga c...
Financial Times  Aug 11  Comment 
Under the cover of US air strikes, peshmerga fighters have regained the towns of Gwer and Makhmour – part of territory they lost to Isis – southwest of Erbil
The Hindu Business Line  Aug 11  Comment 
Oil prices rose in Asia today as dealers monitor sustained US air strikes on extremist militants in Iraq who are threatening the crude-rich Kurdish region, analysts said. US benchmark Wes...
SeekingAlpha  Aug 8  Comment 
By Marc Chandler: The key driver of the global capital market is the heightened geopolitical risks ahead of the weekend. These now include the US air strikes in Iraq, as well as a sense that the situation in the Ukraine is reaching an inflection...
Financial Times  Aug 8  Comment 
Wall Street shrugs off concerns about US air strikes in Iraq as reports claim Russia has ended military exercises on Ukraine border
Wall Street Journal  Jul 23  Comment 
Delta Air Lines and the US Airways unit of American Airlines Group said Wednesday that they will extend their suspension of flights to Tel Aviv through Wednesday.
Benzinga  Jul 22  Comment 
The Federal Aviation Administration banned U.S. airlines Tuesday from Israel's Ben Gurion International Airport in Tel Aviv for a period of up to 24 hours. The agency said it issued the ban in response to a rocket strike which landed about a...
newratings.com  Jul 19  Comment 
WASHINGTON (dpa-AFX) - American Airlines Group (AAL) said that Mechanics and Related, Fleet Service, and Maintenance Training Specialists workgroups at US Airways, represented by the International Association of Machinists or IAM, ratified three...




 
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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