Thinking of Flying US Airways?

Watch These Dates

Scott McCartney
Wall Street Journal
December 28, 2004

Is one disastrous holiday weekend -- where employees called in sick, stranding travelers on airport cots for Christmas -- reason enough for consumers to stop buying tickets on US Airways?

Yesterday, it was for some travelers.

Nervous customers were already calling GTI Travel Inc., a suburban Philadelphia travel agent, first thing yesterday morning asking worried questions about US Airways reservations. The agency's advice to customers: Avoid US Airways if you can until the dust settles at the airline, which is currently operating under bankruptcy-court protection.

"Why take a chance if you don't have to?" says Susan Cunningham, director of operations at the travel agency.

For consumers, the next three weeks are make-or-break time for US Airways. It faces a tough labor-concessions deadline in two weeks, and a big financial hurdle on Jan. 14. As a result, travelers would be wise to wait to see if the airline gets over its bankruptcy hurdles before buying tickets for future travel.

US Airways passenger whose flight was canceled Saturday.

"They are very close to the edge, and it doesn't take a whole lot to go wrong to push them over," says Daniel Kasper, an airline-industry consultant with LECG LLC who is working for US Airways and who testified on the airline's behalf in recent bankruptcy-court proceedings. One bad weekend isn't enough to wreck the company, he said, "but if it continues, it would be a very serious problem."

US Airways isn't the only airline in January limbo. FLYi Inc.'s Independence Air, based in Washington, D.C., also faces tough financial hurdles next month, and consumers need to watch closely before buying tickets weeks in advance. Also, US Airways wasn't alone in its Christmas operations disaster: Comair, a Delta Air Lines subsidiary, ended up grounded by a computer crash.

For travelers, key dates are coming up early next month. US Airways has until Jan. 6 to get mechanics and ground workers to agree to new contract concessions. If not, a bankruptcy judge can cut pay and benefits and write new work rules. Other unions have already tentatively agreed to cuts with the company. If mechanics and baggage handlers protest, travelers could face delays, lost bags and canceled flights.

Eight days later, US Airways faces sizeable financial hurdles. It must come up with another $100 million in new cash or cost cuts to satisfy terms of a deal with General Electric Co. And the U.S. government, which has been letting US Airways use cash held as collateral for a government-guaranteed loan, could pull the plug on the loan on Jan. 14, although analysts consider that unlikely. If the labor situation is ugly, however, the financial forbearance could end, and the airline could be at risk of shutting down.

US Airways has repeatedly said its financial situation is precarious. Yesterday, a spokesman said the company is first trying to stabilize its operation before accessing any financial fallout from its trouble over the weekend.

The fiasco at Christmas doesn't help. The airline says about 300 flight attendants called in sick, about triple the usual number. In Philadelphia, sick calls by baggage handlers were double or triple the expected level. Some employees may have been protesting pay cuts and work-rule changes, although unions say no organized sick out was afoot.

The several hundred workers who called in sick are a small percentage of the total work force. But in a business where there is little margin for error and teamwork is essential, problems compound rapidly.

Bad weather in the Midwest left US Airways in a hole on Thursday. Planes were diverted and crews were out of place. On Friday -- Christmas Eve -- sick calls came in heavy, the company says. Flights were canceled for lack of flight attendants. Some flight crews waited so long for baggage to be loaded on to their planes that they ran up against limits on how long they can be on duty. In fact, in some cases, planes simply took off without their baggage so that pilots and flight attendants could operate the flight before running out of duty time, spokesman Chris Chiames said.

In all, US Airways says it canceled more than 350 flights on Friday, Saturday and Sunday because of sick calls. Thousands of bags were mishandled, piling up at airports. A spokesman for Philadelphia International Airport says stranded customers were sleeping in terminals from Thursday night through Sunday night, and bags were still sitting at US Airways yesterday.

"You have to run a reliable airline if you want to survive, and right now, US Airways is not running a reliable airline in Philadelphia," said Goldman Sachs analyst Glenn Engel. But, he adds, "My guess is a year from now, we will still be saying the same thing: Is US Airways going to make it?"

US Airways says it is "embarrassed" by its reliability problems in Philadelphia and elsewhere, and on Christmas issued a statement apologizing to customers.

This weekend's sick calls weren't something new at US Airways. Sick calls have been an issue for some time, particularly at the airline's hub in Philadelphia. Baggage handlers have been calling in sick at elevated levels. And flight attendants have been resisting a tougher sick-leave policy imposed this year.

Some analysts and labor leaders have questioned whether the airline was too-thinly staffed for the busy Christmas weekend. US Airways says its staffing was appropriate, but it never planned for record numbers of sick calls. Yesterday, the Department of Transportation said its investigation would examine "whether the carriers properly planned for the holiday travel period and responded appropriately to consumer needs in the aftermath."

A US Airways spokesman said the company has been frequently in contact with the DOT and is cooperating with any investigation.

Historically, travelers have returned to airlines after one-time labor or operational disruptions, especially if the price is right. "When things settle down, people will continue to use US Airways," said Lee Rosenbluth, chief executive of Rosenbluth Vacations in Philadelphia.

Indeed, troubled carriers typically offer a big sale after major service disruptions to win back customers once they get their operations straightened out. As a result, Christmas may come in January for US Airways customers.

Before then, however, the airline has considerable work to do with its employees, lenders and consumers if it is going to return to health.