Checking in on US Airways
'Putting together two airlines isn't easy'
JEFFERSON GEORGE
jgeorge@charlotteobserver.comFares are down. Customer complaints are up.
Bankruptcy yielded to profit, yet the stock struggles.
An airline and more than 36,000 jobs -- including more than 5,200 in Charlotte -- were saved, but labor disputes linger and could threaten service.
Approved by each company two years ago, the merger of US Airways and America West Airlines will get the government's endorsement this week, one of the final steps in combining the carriers.
The mere fact that US Airways still exists, much less is profitable, is a major accomplishment. Yet challenges remain for the airline, which is now based in suburban Phoenix but has its largest hub in Charlotte.
"Putting together two airlines isn't easy," US Airways chief executive Doug Parker said last week, "and we've certainly been evidence of that."
CustomersCheaper fares please travelers but not the price: ServiceCharlotte resident David Morgan doesn't hesitate to give his take on the postmerger US Airways.
"It's greatly improved," said Morgan, 49, who flies to Florida every week for his job as an information technology consultant. Employees seem happier, he said, and fares are cheaper.
"Before," he said, "it used to be anything and everything out of Charlotte was expensive."
Brian Bechtel is less enamored. He flew from Las Vegas to Charlotte last month to visit family, but his return flight was canceled. In a scathing letter to US Airways, Bechtel called the airline's employees in Charlotte "blatantly rude and unprofessional."
"Not only did the employees have us running around in circles," he wrote, "but they lacked the knowledge to answer our questions."
In general, US Airways passengers now spend less money on tickets but seem less satisfied with service.
In July, US Airways had by far the most consumer complaints filed with the U.S. Department of Transportation -- despite being the fifth-largest domestic carrier. That came a month after a Consumer Reports survey on airlines ranked US Airways last out of 18 carriers.
When US Airways combined two reservation systems in March, a software glitch led to check-in problems, long lines and delayed flights. On-time performance plummeted and is only now returning to the industry average.
Executives said combining the reservation systems was harder than expected, but that bumps are typical with any merger. "They're painful at the time," said Scott Kirby, US Airways president. "Once you can get through them, it's worth it."
But Mike Flores, president of the US Airways chapter of the Association of Flight Attendants, said the snags reflect a management team that hasn't adapted from running a regional carrier to a national airline with international destinations.
Still, passengers have seen lower fares, which has boosted boardings. Flights this summer were about 85 percent full.
This summer, the airline hired 1,000 employees to improve service, although some replaced departing employees. Nearly 50 ticket agents were hired in Charlotte. In addition, US Airways stretched its operating day by 30 minutes and added spare planes for some routes.
As for raising consumer ratings, "perception tends to lag reality," Kirby said. "You can't change it any other way than running a good airline."
Employees
2 pilots' union groups face off with each other, airline
Combining two work forces with more than 36,000 employees always was going to be the hardest part. And despite the same name on all of the planes, the old US Airways and former America West Airlines have essentially operated as separate airlines.
Among employees, the roughly 4,400 pilots appear the furthest from forming one group and agreeing on a joint contract with the company.
Pilots are fighting among themselves over seniority -- key for quality of life factors such as when they work and where they fly. Pilots from the old US Airways, referred to as the East pilots, say a proposed seniority list sets them back relative to the West pilots.
In addition, both groups are battling management for better pay. The dispute is so heated that East pilots walked out of contract talks -- scheduled to resume Monday -- and are threatening to form their own union.
"We're done with seeing upper management lining their pockets on our backs," said Jack Stephan, chairman of the US Airways chapter of the Air Line Pilots Association.
The potential concern for passengers, and ultimately the airline, is that disgruntled pilots can deliberately make flights late and otherwise disrupt service.
US Airways CEO Doug Parker said he understands that employees want something back after sacrifices during two US Airways bankruptcies, but returning billions of dollars in concessions isn't possible.
"We can go on indefinitely" without a joint contract, he said. "It's not a requirement."
Turning a profit
Delta takeover bid gave stock a lift, but failure brought price back downIn 2005, many analysts gave the merger a slim chance due to high oil prices and falling fares, with Ray Neidl of Calyon Securities calling it "a very, very big job in a tough atmosphere."
This month, though, he deemed the deal a success. "By airline merger standards," Neidl said, "it's gone fairly smoothly."
Michael Derchin of FTN Midwest Securities agreed. Despite integration issues and a looming labor struggle, he said, "we haven't seen any sign of a problem yet."
Fuel prices have been higher than expected, but the company has been profitable for the past six quarters and has $3.5 billion in cash and investments -- more than any other airline relative to size.
Early gains came from combining headquarters, cutting flights and getting rid of 60 planes. The company also has refinanced $1.6 billion in debt, saving $30 million a year in interest payments.
While US Airways' stock price is higher than in 2005, it has underperformed in the industry despite the company's profitability.
A proposed takeover of Delta didn't help. Initial investor excitement pushed US Airways' stock price above $60 a share in November, but the failure of that bid sent it spiraling downward. After closing below $26 in mid-August, the stock is now around $30.
The head of the flight attendants union for US Airways, Mike Flores, said that performance reflects US Airways' failure to combine separate work forces and route networks. "People invested in this company not to run two airlines," he said.
But Neidl and Derchin said the ups and downs aren't surprising in the airline industry. And airline President Scott Kirby said the drop from last year wouldn't have been as dramatic without Delta.
"It would have been less volatile," he said.
At the airport
More fliers lured by lower prices, but late arrivals soar
More people than ever are using Charlotte/Douglas International Airport, and US Airways remains the big reason.
Lower fares brought back travelers who were using other Carolinas airports, and passenger traffic is up 12 percent from last year. "We're swamped with people," said Jerry Orr, the airport's director.
The downside: US Airways' problems in March and other issues turned Charlotte from one of the nation's best airports for on-time landings to one of the worst. From No. 2 in 2004, Charlotte has tumbled to 27th out of 32 major airports this year, joining such notorious trouble spots as Chicago's O'Hare and New York City-area airports.
Orr acknowledged that US Airways' problems greatly affect the airport. Canceled flights mean that up to 50 passengers -- more than before, and most from US Airways flights -- may spend the night at Charlotte/Douglas. The reservations glitch in March also was difficult.
"Certainly we have no fun when their system breaks down," he said.
But that's a small price to pay considering the alternative, Orr said.
"If there hadn't been a merger," he said, "the airline would have gone away by now."
Looking ahead
Flight plan for future: Labor talks, new aircraft and perhaps, analysts say, another mergerFor now, the company is focused on finishing the merger and recovering from the troubles of earlier this year. To help with the latter, US Airways recently hired Robert Isom as chief operating officer, charged with making service more reliable and consistent.
"No one here is comfortable with US Airways' current operating performance," Isom said.
The big question is how labor talks -- or a lack of talks -- will affect that performance.
Chief executive Doug Parker and President Scott Kirby maintain that most pilots won't resort to measures that could increase flight delays, such as slower movement on taxiways or overly detailed equipment checks. "It won't have a customer impact," Parker said. "Our guys are really professional."
Yet last week saw rumors of a "sickout" by pilots, and 110 pilots called in sick Friday -- more than five times the usual number, Bloomberg News reported. That led the carrier to cancel 30 flights on the East Coast, or about 2 percent of all daily flights.
While coordinated campaigns to not work are illegal, some union leaders say pilots' lack of motivation could have consequences for customer service. "Our pilots are capable of going to great lengths to move this company along," Stephan said. "That's not there anymore. ... You just have to do your job."
Few new routes are planned, and despite a large aircraft order this year, the first new Airbus jets won't be delivered until 2009. Almost all of the planes are slated to replace older ones. Some wide-body planes, though, will mean more seats on international flights.
US Airways will refurbish its existing fleet and invest more money in airports -- counters, displays and other equipment. The carrier also is revamping its Web site.
After the failed Delta bid, executives say nothing's on the table, especially since all major carriers now are out of bankruptcy. Still, Kirby said, "consolidation makes a lot of sense for this industry."
Analysts also say that US Airways' aggressive management and room for growth within the route network -- strong in the East and West but weak in between -- mean another merger could happen.
"When the time comes," Neidl said, "that wouldn't surprise me."
About this Report
The merger between US Airways and America West Airlines was approved Sept. 27, 2005. To report on the successes and challenges since then, staff writer Jefferson George spoke with more than a dozen key players -- from executives at US Airways headquarters in Arizona -- under a curved roof resembling an aircraft hangar -- to pilots outside union meetings at the Hilton Charlotte Executive Park near Interstate 77.