From the title, you might think that last week’s media day that US Airways held in Phoenix was a total bust, but that’s not true. It WAS boring, but that’s because US Airways is running a good airline these days. There were a couple of announcements about expanding wifi and new Washington service, but for the most part, it was another chance for US Airways to tell its always-consistent story. For those of us who go to US Airways media day every year, it was another affirmation of a strategy that has served the airline well. Boring? Yes, in a sense. But it was refreshingly boring.
CEO Doug Parker and the team weren’t stupid. They knew that many of the questions of the day would revolve around consolidation and whether a US Airways-American merger was in the cards. Of course, there was no way that Doug could comment on anything like that despite repeated questions asking the same exact thing. Doug did address it right at the beginning, however. Doug reiterated his belief that consolidation has been very good for the industry, and he is not averse to participating. He was, however, quick to make the distinction that consolidation is now “no longer a strategic imperative.”
In other words, while the industry needed consolidation to get healthy in the past, there has been tremendous benefit from what’s happened to date and US Airways doesn’t need to participate to remain viable. That being said, US Airways isn’t shying away from it. You know that it was difficult for Doug to say “no comment” every time someone mentioned a certain AAirline, because he would have loved to talk about it. But he just couldn’t. We’ll have to wait to see how that plays out.
Back to running the airline at hand, we were given five goals for the year, and as it was noted, they haven’t changed must from past goals. Consistency was certainly the theme of the day. The goals were:
- Ops: Industry leader in operating reliability
- Revenue: Maximize value of existing assets
- Costs: Maintain strategic cost advantage
- People: Actively engage employees
- Long-term strategy: Control our destiny through sustained profitability better than our peers
In short, US Airways needs to continue to run a great operation and keep its costs lower than other legacy carriers because its network will continue to produce less revenue than the other guys. To do that, it needs to make sure to keep explaining this strategy over and over to employees so that everyone understands the situation at hand.
Much of the discussion of the day touched on the cost of fuel. The point was made that in 2008, US Airways actually paid a little less for fuel than it did in 2011 ($3.11 per gallon vs $3.09). In 2008, however, the airline lost over $800 million while in 2011 it made over $100 million. The difference? The airline could pass along over 85 percent of the increase in 2011 while 2008 saw demand crash so quickly that it was a bloodbath. Some of that new revenue is from fare increases, but ancillary revenue plays a big part as well. In fact, nobody seemed to think that the industry would exist today in its current form if it weren’t for ancillary revenue, of which US Airways brought in $537 million in 2011. Oh, and let’s not forget the benefit that comes from the industry collectively keeping capacity under control.
The operations discussion was an easy one. On time percentage is way up, baggage mishandling is way down, and complaints are way down as well when looking back toward the dark days of 2007. This year, thanks to benign winter weather, things have been going even better. On January 31, US Airways hit an all time record for the airline with 96.1 percent of flights arriving on time. The airline also has already had more days without a cancellation in 2012 than in any previous FULL year.
Irregular Operations Recovery
While the mantra used to be about reliability, convenience, and appearance, the latter has now been switched out to “recovery.” The airplane interiors are in much better shape these days and a lot of work is underway to create more opportunities to fix problems when things go wrong. One tool that we were shown was Sensis Aerobahn, which is a real-time ground radar program that shows where all airplanes are while on the ground at an airport. It will help identify short connecting opportunities where there is risk of misses, and it will allow the airline to more easily switch gates around to help make connections. This is being rolled out to all the hubs.
Capacity and More DC Flying
This year effectively marks the end of the US Airways transition to focus its flying on its Phoenix, Charlotte, and Philly hubs along with its Washington/National focus city. In 2006, only 83 percent of flying touched these cities, but with the completion of the LaGuardia slot swap with Delta that gave US Airways more slots in Washington, it’s now up to 99 percent. All non-hub flying from Vegas is gone. Same goes for LaGuardia except for the Shuttle to Boston along with Pittsburgh flights. Nearly all Pittsburgh and Boston flying is gone with the exception of a few random markets like Boston to Buffalo and Pittsburgh to St Louis. In its hubs, US Airways is the number 1 airline, so it’s playing to its strengths. The comparison to American’s weaker position at three of its five hubs was not lost on anyone.
As part of this discussion, US Airways announced what it would do with the remainder of its Washington/National slots that it acquired from Delta. It will begin flying to Augusta (GA), Minneapolis, Northwest Arkansas (Wal-Mart), Montreal, Quebec, and Toronto. In addition, it will use its newly-earned long haul flight exemption to start a San Diego flight. This comes at the expense of a DFW flight. Interestingly, San Diego will be operated with an A320 – I really didn’t think that airplane could make it that far off National’s short runway, but apparently, it can.
US Airways has effectively committed to no fleet growth in the near future. It will take delivery of 12 new Airbus narrowbody airplanes this year, but those will all be replacements for old 737s. The 737-300s will be gone by the end of this year with the 737-400s being gone a year or so after. Meanwhile, fleet refurbishment is going well. All the big regional jets now have First Class seating onboard, and the A330-300 Envoy (business) Class upgrade to the flat bed will be completed by the summer.
There actually was a really interesting discussion about everything US Airways does to communicate with employees. There are a surprising number of tools in the arsenal. Some are publicly available, like an employee Twitter feed. Others, like webcast employee group discussions, are not. But it’s safe to say that US Airways does invest a lot of time into trying to communicate. (I’d be curious to know how current employees feel about its adequacy.)
While I was live-tweeting the event, the one tweet that got the most action was one talking about one of the employee-support programs that the airline offers. For every 50 hours an employee donates to charity, US Airways will donate $500 in travel to that group. I like it. There are a myriad of other incentive and award programs that the airline puts out for employees to be able to benefit personally as well.
US Airways has now started to sell premium services as an ancillary revenue benefit. So you can buy PreferredAccess for your flight, and that includes premium check in, security lines, and boarding.
US Airways also announced that it will expand wifi from just being on A321 aircraft to being on the entire Airbus narrowbody fleet. In addition, it will put it on the Embraer 170/175/190 fleets as well. The 737s won’t get it, but they’ll be gone soon enough. More interestingly, the only other large regional jet in the fleet, the CRJ-900s operated by Mesa, won’t be getting it either. I asked why that was the case, especially since those just got First Class along with the others, and the official line was that it’s easier to pick one new fleet type at a time. So we might see it later. But I will note that the contract for those Mesa jets comes up in just a couple years. Maybe there’s not enough certainty about whether they’ll be kept around or not.
As part of this, US Airways will also add GogoVision, the onboard offering that allows you to watch movies directly on your device. This, along with a better antenna, will be added to the fleet. Completion is expected by the middle of next year. Unfortunately, during that time there will be no indication of whether or not your flight has wifi so it will be a crapshoot until the fleet is done.
Like I said, not a ton of news, but just more of US Airways doing what it does best these days – run a good, profitable airline. With any luck, next year’s media day will be much more exciting. Maybe it’ll be in Ft Worth . . .