Power Point Hi-lights of “Going
Forward Plan” as
Presented to the Labor Advisory
Council
Financial Update
First Quarter Industry Comparison Transformation Plan
How Did We Get Here?
We projected costs and revenues in a plan that would have paid back the
ATSB
loan and provided returns to stakeholders, including employees
Mainline
Cost Reductions averaging $2 billion/year
Mainline Capacity Reductions and Network Realignment
More and Larger Regional Jets
Star Alliance / United Alliance Participation
In Q4 ‘02, US Airways, RSA, ATSB, And GE
Agreed Upon A Conservative Outlook
Modest improvement in domestic industry revenue vs. GDP
No war in Iraq
Low Cost Carriers (LCCs) make gradual inroads over
next 5 years
Legacy carriers would not quickly match or beat our costs
Regulatory environment unchanged
Fuel returns to 80¢ level
Our Forecast Outlook
Industry tracking below plan, pricing remains weak
War in Iraq persists
Explosive LCC growth, including Southwest direct assault on PHL
Legacy carriers have matched and beaten our cost reductions
LCCs obtaining slots and gates
Spot fuel prices above $1.00
Airline Tickets Used To Be A More Significant Piece Of The American Economy
(Nominal Domestic Industry Revenue Percent Of Nominal GDP)
US Airways Revenue Performance Is Currently Comparable To Other Network
Carriers
LCC Carrier Fleet Growth Undermining High Fare Strategy Of Legacy Carriers
LCCs Are Attracting New Investors Because Their
Business Model Works
Customers are demanding low prices and getting them
Regulators and Politicians are pushing for more LCC presence
Legacy carriers are losing money
Recap
Our 2002 Restructuring Program cost reduction and revenue enhancement goals
were achieved, but the bigger revenue picture has changed
The problem, faced by US Airways and other legacy
carriers, is a revenue
shortfall driven by explosive LCC growth
Revenue pressure will be intense for the next several years
Restructuring our operations and cost structure is a necessity for survival
Restructuring Goals
Offer a product that customers want to buy
Coupled with cost reductions that are Immediate (next few months)
Comprehensive, including all aspects of the operation in addition to
employee costs
Large
enough to make us competitive with LCCs
Fair for employees - - and other stakeholders
We Need To Transform Our Entire Business
Simplified Lower Fare Structure
Direct to Consumer Distribution
Limited Use of Discounting
It Starts With The Customers’ Viewpoint
Customers In Large And Medium-Sized Cities Increasingly See Advantages Of
LCCs…And They Are Not Willing To Pay More
(Example: PHL-MCO)
Customers In Small Cities Are Faced With A Different Choice: Pay Legacy
Rates Or Drive
Our Schedule Must Be Focused In Larger Local Markets
Local Market Yields Are Higher Than Connect
With Small Local Markets, CLT & PIT Rely More on Connecting Traffic
Philadelphia Will Continue To Be
The Core Of US Airways’ Network
We Currently Capture 48% of Local Traffic
We have the single largest number of gates including modern International
and Express facilities
PHL has good geography as an International Gateway to Europe and the
Caribbean
PHL is our only true US Airways Northeast Connecting Hub for Domestic
Traffic
PHL is the 5th Largest Metropolitan Area in the U.S.
LaGuardia, Boston, And Washington DCA Will Grow
Point-to-point Service With Minimal Connections
Non-stop Service in All Key Business and Leisure Markets
Turn Time and Aircraft Utilization at LCC Standards
US Airways Shuttle Core of Operations
As We De-Peak Our Schedule,
We Reduce Many Operational Costs
Fewer gates and less ground equipment required
Reduced taxi-out and enroute delays
Fewer passenger and bag misconnects
More attractive schedule for local passengers
More efficient crew pairings
More and better maintenance opportunities
As We Simplify Our Complex Fares,
We Reduce Many Distribution Costs
Reservations Talk Time falls from nearly 5 minutes per call to under 3
minutes per call
Sales Department will not continue to manage complex contracts intended to
retain ever-shrinking high fares
Change fees and rules eliminated, reducing airport processing delays and
passenger complaints
Customers will trust online sales to get lowest fares
New “Unbelievable” Advertising Campaign Is Underway In PHL
New Campaign that Pokes Fun at US Airways’ Previous “High-Fare” Practices
Works for Radio and TV
Management Actions Will Provide The Structure Required To Compete
These Structural Changes Are Imperative…
We will not be able to compete on price without changing our business model
radically
Some of these changes will result in furloughs as
productivity increases are
realized
But once the airline is cost-competitive, growth and recalls become a
reality
Our Employee Costs Need To Be Compared Along Five Dimensions
Rates of pay
Seniority
Benefits
Productivity
Scope
Our Collective
Approach Needs To Be Fair
One employee group can not subsidize another’s uncompetitiveness
Nor can employees subsidize waste or mistakes made by management
We all need to compare ourselves to industry “best practices” in our
respective work groups
How we get there is the subject of negotiations
Transformation Plan Summary
We have largely
achieved our 2002 cost goals
But revenue is down for US Airways and all legacy carriers, and will
continue to move downward
The Transformation Plan will fundamentally alter the airline’s schedule and
pricing, with resulting alterations to employee productivity and asset
utilization
At the same time, we will need to dramatically lower and simplify our fares
And achieve employee cost savings required to bridge the gap with LCCs
Employee Cost Reductions Summary
Based on profitable
LCCs: America West (network) and JetBlue
(point-to-point)
Will be fairly applied (i.e., relative to relevant competition) across all
labor groups
Creative solutions are required to offset seniority and scope differences
between US Airways and LCCs
The New US Airways Will Offer
Significant Rewards
Ability to Grow Again
Resources to Invest in the Company
Plan Offense, Not Only Defense
Add International Destinations
Be the First Legacy Carrier to Truly Adapt to the New Relations
Share in the Upside with Both Equity and Profit Sharing
Re-establish the Leadership, Confidence, and Pace-Setter Position in the
East