Wednesday, October 28, 2009

28/10: US Airways tries downsizing to profitability

In a departure from usual protocol, I'd like to offer a few words regarding US Airways' afternoon announcement that it would pare flights in a bid of finding superior profitability as a smaller airline.

First off, I am highly skeptical of the general strategy of shrinking towards profitability, particularly in an industry with the lengthy lead-times towards changes in output that is airlines; and this skepticism extends to the current US Airways strategy.

US has decided to eliminate several international routes from its Philadelphia hub, including Beijing, which was to be the airline's flagship route (it was yet to launch) but is now stillborn. The other international flying on the chopping block has all been in service, unlike PEK, though it mostly features second-tier European cities or airports (e.g. Birmingham, Shannon, Stockholm, London-Gatwick). Also suffering will be Las Vegas, once a proud hub (before the housing bust, to be sure) for pre-merger America West Airlines, that is now headed to only 36 US Airways daily flights from a current 64; several cities will lose nonstop US service to LAS, including my home airport of O'Hare. One cannot but observe (somewhat cynically) how US has incrementally decimated LAS in the manner that, earlier this decade, it cut-off hub services at Pittsburgh.

This move makes US easy to summarize in only a few bullet points.
  • Focus on only four metropolitan areas: two, Charlotte and Washington, DC, are vibrant and recovering; one, Philadelphia, has an uncertain near-term fate and possibly decreasing relevance in the longer term; and the last, Phoenix, is on economic life support.
  • Strength in the Shuttle product between LGA-BOS, LGA-DCA and DCA-BOS.
  • Industry leading cost-cutting and de-bundling of services.
As a whole, US does not look like a particularly warm-and-fuzzy airline right about now. In fact, with its becoming ever-smaller, US does take on the appearance of a take-over target. Perhaps the Tempe, AZ management is just looking for a white knight to line their pockets (LCC stock, as always happens with airline shares in general, is in the pits). In any event, yet further cuts at US -- whether to the network, to the workforce number and/or compensation, or to the product -- make it even less likely that I would step onto a US aircraft by choice.

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