US Airways Dividend Miles (Pre-FlightFund Merger) - Long-term viability of US Air

What is the future of Div Miles? Since the AA agreement ended and the United deal fell through, I haven't traveled USAir much. Can this program survive without a major partner?



------------------
CO Plat; AA Plat; US Gold; Hyatt Diamond

Yes, more so than if the UA deal hadn't fell through (since it looks like UA might be in worse shape than US at this point).

Analysts were recently surprised at how much cash US has on hand and are now staying that the future of the airline looks better if they can turn things around with the cost cutting measures they've implemented. Quite frankly, I think they've gone a little too far with the cuts, but if it means that the airline has a future, then I certainly can't complain. Wolf had promised an alliance by the end of the year, so we're still waiting to see what happens with that. They've got to do something with the demise of Swissair and Sabena.

One of the reasons I'm asking is b/c I'm sitting on a pending reservation for my Honeymoon in March.
I'm going to Tahiti and have enough US miles for a pair of biz class tickets if they partner with most of the airlines that fly there. I'm holding refundable paid biz class tickets on Air France now but would love to see a partnership come together so I can cancel those tickets and score a pair of reward tickets...Not likely, but...

I wouldn't hold my breath on that for sure! Credit the miles to Delta, and that should be almost enough to get you Silver Medallion though, to back up US (even if DL's program is crap compared to US).

I listened to and viewed Rakesh's slides from his recent Solomon-Smith-Barney presentation (available on the usairways web site) and was impressed, from the financial point of view. I still think he and Wolfe are bloodsuckers and greedy pigs, and I really feel for the USAirways family of employees. But, the fact of the matter is that US has always been a 2nd class airline in terms of global visibility and breadth of service.

That being said, I listened to him with no prior reservations. Almost as if he just took the helm of the airline. This was the only way I could be objective. A few goods have happened in the past few years:

1.) fleet modernization/simplification. Having just 737/757 and A319/320/321 models in the single aisle family, and 767/A330 in the widebody family GREATLY reduce the annual maintenance. So much, that these this factor alone could put US on the road to profitability sooner than we wish. What the heck were they doing with F28/F100/DC9/MD80/727 variants, and why didn't those bozos from the early 90's work to simplify the fleet sooner?! This has been an airline piecemealed together through acquisitions, and the fleet has really shown that....until now.

2.) Intl. Expansion - the European destinations over the past 4 years have greatly enhanced PHL's position as a hub, along with CLT and PIT. If you had told me 6 years ago I'd be able to fly to Brussels, Rome, or Madrid from PHL nonstop on US I would have laughed. Now I smile.

I look ahead 1-5 years and see positive rewards for the airline with a few assumptions:

1.) Get a global alliance(as alluded to in the 8/15 meeting) that covers more of Asia and South America. Wouldn't it be great if we got BA back - I remember seeing awards on my US statements in the late 80's with CONCORDE awards! Brings a tear to my eye.
2.) Keep it simple stupid - no more aircraft variants. Continue the single aisle growth with new orders as needed. Rakesh confirmed this, so hopefully we don't see them bring the MDs or Fs from the desert if the market picks up.
3.) Stick to the West expansion(AUS, PDX, SAT)
4.) Utilize more RJ's. I know this is a hot topic with the unions, but we have to look at the whole industry and see how they are handling the shorter hauls to small markets.
5.) Continue treating your DM members like champs. The perks are still a level above some of the other programs, including the bonuses and SWUs.

A month ago I was thinking of either using my large US point balance, or award guarding it. I'm doing neither for the near term because I have some confidence.

The future for an airline like this is limited. Without a true national footprint, they will always have to hand over their best customers to somebody else once they fly beyond the Pittsburgh hub, when they need to travel beyond the spoke destination. Last time I looked, PIT, which is the western most hub in the system, is less than 400 miles from the east coast.

Notice how they are discontinuing partner awards so quickly? I guess it will be easir to be absorbed or to streamline with another alliance, ie. OneWorld or StarAlliance. You couldn't have US join UA and then have everyone use their miles on Qantas to Australia instead of UA now would you?

I am just hoping for an alliance soon as it is November and others said we should know something by now. Without an alliance, US will become a regional airline again.

------------------
"Fly me to the moon and let me earn alot of miles."

From a yahoo article on the likelyhood of airlines folding:

US Airways Liquidation likelihood: 80% Sales: $9.4 billion Income: ($333 million) Cash: $1 billion Daily losses: $6 million Share price: $4.49 (down 89% YTD) Estimated Q4 break-even load factor: 88% Actual load factor for October: 62.4% Long-term debt: NA

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by worldbanker:
Notice how they are discontinuing partner awards so quickly?</font>

What have they dropped outside of Swissair and Sabena (which don't exist anymore) and AA (which killed that program over the UA merger)?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by deelmakur:
Last time I looked, PIT, which is the western most hub in the system, is less than 400 miles from the east coast.</font>
Actually, the CLT hub is ever so slightly West (and alot South) of PIT.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by harold:
From a yahoo article on the likelyhood of airlines folding:</font>

Actually, it was a yahoo link to an article in Forbes that tossed out those stats... I read the article and found it wickedly statistically flawed. How could they possibly do ANY analysis of an airline's financial situation without knowing how much debt they have (or how it is structured)????

And that Q4 break even load factor is missleading. That's how full the planes would have to be during the Q4 for the airline to break even for the entire year. Very misleading.



[This message has been edited by geo1004 (edited 11-08-2001).]

What are the chances that OneWorld or the Star Alliance would take USAir?
Can someone educate me on the economics of these partnerships? When I redeem USAir miles for a flight on a partner airline, does USAir pay the partner airline based on the cost of the ticket or the miles flown (or redeemed) or do the partnerships just use flat payments for the right to transfer an unlimited number of miles?
Thanks---

------------------
CO Plat; AA Plat; US Gold; Hyatt Diamond

US is toast, unfortunately.

The fact is that they are easily undercut in their dense routes by WN, AirTran and start-ups such as JetBlue. These companies have lower costs by far and trounce US.

They are not going to be saved by trans atlantic routes, or a better fleet, or anything else.

I think they will be broken up and sold off in bankruptcy. I am going to use my US miles as quickly as I can.

I wish I could be optimistic but I cannot.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by richard:
US is toast, unfortunately.

The fact is that they are easily undercut in their dense routes by WN, AirTran and start-ups such as JetBlue. These companies have lower costs by far and trounce US.

They are not going to be saved by trans atlantic routes, or a better fleet, or anything else.

I think they will be broken up and sold off in bankruptcy. I am going to use my US miles as quickly as I can.

I wish I could be optimistic but I cannot.</font>

Yeah, those carriers are killing them on their most profitable routes from CLT and DCA ...

US's demise has been greatly exaggerated ...

Yeah, those carriers are killing them on their most profitable routes from CLT and DCA ...
---------------------------------------
Or to Europe and the Carribbean...

I agree, I have never felt better about US survival since the merger fell through.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Beckles:
Yeah, those carriers are killing them on their most profitable routes from CLT and DCA ...</font>

I hear they lost a lot on the Shuttle routes too. http://www.flyertalk.com/forum/wink.gif




[This message has been edited by geo1004 (edited 11-09-2001).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by silverpie:
What have they dropped outside of Swissair and Sabena (which don't exist anymore) and AA (which killed that program over the UA merger)?</font>

I heard Qantas was the last partner dropped.
Now it appears only NW is available for international awards. At least we still have Alitalia for Europe awards but how long will they remain now that they are joining SkyTeam.

------------------
"Fly me to the moon and let me earn alot of miles."

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by worldbanker:
I heard Qantas was the last partner dropped.
</font>

That's incorrect from my understanding, they just dropped the JFK routing, you can still fly Qantas from LAX.

The thing about that is, I'm not sure if that was US or Qantas, although everyone seems quick to blame US for it, I would think that chances are just as good that Qantas caused that change for whatever reason.

Does anyone have an answer on my previous question about how the economics of the partner programs work?
Thanks

As an example, today's Palm Beach Post ran a grid comparing the number of seats per month, by carrier, between PBI and other destinations. Comparing this November with last, American has more, Delta is down a few thousand, but USAirways went from 90,000 to 60,000, with a reduction in flights from 942 to 514. Meanwhile, Southwest went from 0 to 43,000 seats (315 flights), and JetBlue will shortly be up to 5 daily flights between PBI and JFK. Next will no doubt be a closing of the Club, and so on. You cannot shrink yourself to profitability, and you clearly can't get there with a workforce that is unhappy. I close my eyes, and I see Eastern all over again.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by johnsmith:
What is the future of Div Miles? Since the AA agreement ended and the United deal fell through, I haven't traveled USAir much. Can this program survive without a major partner?
</font>

a most interesting question. there has to be a lot of redundancy keeping those expensive planes servicing such close together hubs (PIT,PHL, CLT, and mini DCA, and mini BWI)-- redundancy that others *will* exploit over time.

Yes, US has always made a killing on its highly profitable captive-audience monopoly routes from its hubs (and shuttle too!). But if the bleeding increases too much on the other routes, at some point the system has to give. Despite the fleet simplifications, I am not sure there is enough "there" to ensure independent survival, particularly under the current labor contracts which were adopted under the assumption they would become UA management's problem!....

In terms of Network, asssuming the UA ship has sailed, and a merger with AA or DL would be blocked, whither US? Geographically, they have least overlap with HP (hubs at PHX, LAS, and mini CMH). Tough to see that working real well operationally though. NW? doesn't offer much in the way of westward expansion except to the great lakes region-- access to Japan hub would provided long run interest.

More intriguingly, US has considerable overlap geographically with CO (hubs at EWR, CLE, and IAH, oh and Guam too). Two hubs of the combined entity could be shuttered...

Merger is difficult to envision, though, due to a shortage of available capital to make it happen. Who's rich enough to buy US when they can't pay their employees?

So Alternately, US could be broken up and its profitable bits fed to the jackals in bankruptcy court a la TW. DL would surely covet the caribbean routes and try to embrace and extinguish the CLT ops, AA or UA would want the shuttle and perhaps the juiciest bits of the PHL operation. PIT could be abandoned.

One more time...Does anyone know how the economics of these partnership FF programs work?