QUOTE AND NEWS
Financial Times  Sep 14  Comment 
Treasury secretary faces inquiry over requests to use government aircraft
Flightglobal  Sep 13  Comment 
American Airlines is evaluating the future of its Airbus A350-900 commitments, as it continues to deal with the varied orderbook it gained through its merger with US Airways four years ago.
Flightglobal  Aug 4  Comment 
Gulfstream has its sights set on a pair of US Air Force special mission aircraft opportunities with the G550, which could provide it with secure revenue for decades to come.
TechCrunch  Jul 16  Comment 
 Today, for most of us, air travel consists of series of unfortunate lines, embarrassing checks, and obscure ticketing rules that leave us in a confined space where we’re uncomfortably attempting to open tiny packages without disturbing our...
BBC News  Jul 13  Comment 
Akbar Al Baker called US flight attendants “grandmothers” and boasted his had an average age of 26.
Forbes  Jul 6  Comment 
Satellite and other datasets clearly illustrate how July 4th fireworks degraded air quality across the United States this week.
The Economic Times  Jun 29  Comment 
22 stocks including Rasoya Proteins, LCC Infotech and Sezal Glass have touched their fresh 52-week lows.
The Hindu Business Line  Jun 27  Comment 
JM FinancialTech Mahindra (Buy)CMP: ₹380.15Target: ₹470Tech Mahindra (TechM) bore the brunt of what we see as a strategic misstep (LCC acquisition) over FY16-17. We also believe the management has la...
The Hindu Business Line  Jun 21  Comment 
Tech Mahindra today said one of its subsidiaries will sell shares in LCC Pakistan to Talkpool AG, Switzerland, for $5.2 million (₹33.54 crore). “One of the company’s step down subsidiary viz LCC Mi...
Channel News Asia  Jun 9  Comment 
Inside the control tower at John F. Kennedy International Airport, air traffic controllers can track planes traveling hundreds of miles away.




 
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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