US Airways not so ugly after all!

 

Old May 27, 10, 12:31 pm
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US Airways not so ugly after all!

Philadelphia generates more European revenue each day than American's hubs at either New York Kennedy or Chicago O'Hare, and more connecting traffic per European destination that Continental at Newark, he said.

US Airways should earn $2.55 a share in 2010 and set a price target of $18, or about seven times earnings.
http://www.thestreet.com/story/10767...r-analyst.html
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Old May 27, 10, 11:59 pm
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#'''While American has expressed precisely zero public interest in a merger , McAdoo notes that in 1993 partner British Airways paid $400 million for 25% of US Airways, an arrangement that continued until 1997.''#

Quoted from that article. That US air is different from this US air.
BA lost money. Warren Buffett lost money on that as well.
This US air is AW with old US problems.


I for one hope AA buys it just so I do not need to get SPg to AA for status
But then all my hard bought US miles will be OW and not Star.
Or rather al my Euros will be Pounds!
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Old May 28, 10, 4:13 am
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Maybe the point is that PHL is not so ugly after all

Frankly I've always been puzzled watching merger speculation over the past few years on FT by the folks that immediately dismiss the value of a PHL hub for a merged airline. They always posit that PHL would be de-hubbed in favor of XXX by whatever airline merged/acquired US. PHL is simply too large a market to ignore as a hub, regardless of the proximity of JFK, EWR, or IAD.
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Old May 28, 10, 8:25 am
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Interesting. I have been speculating abot whether US is an 'Ugly Girl' or not and whether they are a potential merger candidate, on my blog. The comments I am getting seem to say - Yes, US is an Ugly Girl and will probably not be picked up for a merger. Gary Leff does a good quick analysis of US vs. AA hubs in his comment.
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Old May 28, 10, 9:27 am
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Originally Posted by PHLGovFlyer View Post
Maybe the point is that PHL is not so ugly after all
PHL-not so ugly

US-one of the uglies for sure
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Old May 28, 10, 10:49 am
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This writer doesn't seem to understand the picture of operations that a merged AA-US would provide. While I would love for AA to merge with US as a PHX-based flyer, it would be an immensely stupid combination.

PHL - beyond the fact that it deservedly possesses one of the worst reputations among hub airports for terrible customer service, thievery, union issues, poor taxiway layouts, long weather delays, etc., it is too close to the existing, superior operation at JFK. In a combined AAUS, it would be drawn down. (Kudos to Doug, though, for the massive improvements that US has made in its own areas of responsibility and authority within PHL.)

PHX - beyond the fact that it primarily has low-yield vacation traffic, and that WN is a huge and powerful presence, it is too close to the existing, superior operation at LAX. In a combined AAUS, it would be drawn down. AA has already shown that it refuses to compete the WN - eg. SJC.

CLT - This one might actually be useful. However, remember RDU?

Union issues - probably not a deal-breaker, since US is making a profit while the unions engage in internecine warfare. However, can you imagine adding the uncooperative AA pilots to the mix? No fun.

Fleets - US got funding from Airbus to stay in business, while AA is part of the Boeing brotherhood. Again, not a deal-breaker, but another challenge.

As long as AA can't make a profit on their own, why would they lay out cash to buy an airline for which they would turn around and shut down two of its three main hubs, add more labor unrest, and maybe strain their relationship with Boeing?

Sadly, no.
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Old May 28, 10, 11:15 am
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Originally Posted by Wilbur View Post
As long as AA can't make a profit on their own, why would they lay out cash to buy an airline
While I agree with much of what you said, on this point, I would offer the following:
--no cash is needed
--it must be hard to have been #1 for so long and now be relegated to #3 (and perhaps less in the future)
--as Parker would say: "synergy" (there should be some at the management level, at least)
--US is expected to make money [at least this year], so it has real value

Last edited by GaryZ; May 28, 10 at 11:20 am
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Old May 28, 10, 11:49 am
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Originally Posted by GaryZ View Post
While I agree with much of what you said, on this point, I would offer the following:
--no cash is needed
--it must be hard to have been #1 for so long and now be relegated to #3 (and perhaps less in the future)
--as Parker would say: "synergy" (there should be some at the management level, at least)
--US is expected to make money [at least this year], so it has real value
US may have real value as an independent airline, but at AA's payrates, US would lose hundreds of millions. AA's labor costs are about the highest in the industry. If US is profitable this year, it's only because of the poverty-level wages paid to its pilots and FAs.
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Old May 28, 10, 12:37 pm
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I don't believe that's completely correct. US pays [for equivalent a/c] it's captains better than UA, whereas DL pays as good as AA.

Even then, a 15% raise would put US in line with AA, and although that would certainly have an effect on the bottom line, last I recall, fuel was the single major factor in profitability.
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Old May 28, 10, 3:06 pm
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US Airways from a financial perspective is pretty solid. Sadly IMO that's where the good news ends.

Actually Herb Kelleher in an interview described the problems that both AA and US would face during a merger.

According to Mr. Kelleher,

“You put your employees first. If you truly treat your employees with respect, they will treat your customers well, your customers will come back, and that’s what makes your shareholders happy. So there is no constituency at war with any other constituency. Ultimately, it’s shareholder value that you’re producing”.

Neither carrier has ever grasped this simple approach that has made WN wildly profitable. The Tempe Frat Boy Society (DP & Co.) has never met an employee or customer they gave a damn about and near as I can tell AA isn't much better.

US does a credible job delivering shareholder value. However they do it at the expense of employees and customers. This simple fact makes another smooth merger between two dinosaurs unlikely.

Last edited by Sparrow_Hawk; May 28, 10 at 5:06 pm
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Old May 28, 10, 3:57 pm
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Originally Posted by Sparrow_Hawk View Post
US Airways from a financial perspective is pretty solid. Sadly IMO that's where the good news ends.

Actually Herb Kelleher in an interview described the problems that both AA and US would face during a merger.

According to Mr. Kelleher,

“You put your employees first. If you truly treat your employees with respect, they will treat your customers well, your customers will come back, and that’s what makes your shareholders happy. So there is no constituency at war with any other constituency. Ultimately, it’s shareholder value that you’re producing”.

Neither carrier has ever grasped this simple approach that has made WN wildly profitable. The Tempe Frat Boy Society (DP & Co.) has never met an employee or customer they gave a damn about and near as I can tell AA isn't much better.

US does a credible job delivering shareholder value. However they do it at the expense of employees and customers. This simple fact makes another smooth merger between to dinosaurs unlikely.
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Old May 28, 10, 5:41 pm
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Well stated Sparrow_Hawk ....

Very succinct and accurate !!
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Old May 29, 10, 10:12 am
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I'll add in that Continental having less connecting traffic over EWR is probably not a bad thing from their vantage point, given that their flights to Europe are pretty full - O&D traffic tends to have a yield premium over connecting traffic.
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Old May 31, 10, 7:46 am
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Aggie, thanks for the link. Interesting indeed.

As to this merger stuff . . . who cares? It is all out of our hands and whatever flying any of us do is gonna be predicated upon the sort of individual flying experience we receive from any carrier ( and this is itself influenced by from where we fly and where we need to go -- not all shoes fit do they? ). If US can play the game and play the game well, then so be it .... they get my business. Nothing new under the sun here at all.

Originally Posted by Wilbur View Post

PHL - beyond the fact that it deservedly possesses one of the worst reputations among hub airports for terrible customer service, thievery, union issues, poor taxiway layouts, long weather delays, etc., it is too close to the existing, superior operation at JFK.

Whether it's Greek mythology or airline mythology, every airport has its own issues. You gotta tell one hell of a whopper to suggest that any of those airports in that northeast corridor will fare better in terms of weather ops as it rains, thunders, and lightnings in BOS, JFK, LGA, EWR & PHL and things go south real quickly when it happens.

The other mythology is that PHL is a medieval airport with Neandertal employees ( you got them confused with Eagles fans ). PHL has made incremental improvements, both in the wider airport sense and in terms of US. No, it ain't perfect by any sretch of the imagination. But when one wanders around the concourses and watches how things function both for US and the airport in general, improvements abound and things do run better. So I gotta push back and debunk that myth about rotten service and ignorant employees. But for those who love to exist in nostalgic times, you will indeed find a diva with a PHL attitude who can spew the words and defend herself with her fists if need be -- comes in handy if she's your girlfriend and Bruno is chasing after you .

I guess the fact that Europe ops out of PHL are doing OK should be of no real surprise when one ponders the wide, clean, and expansive A-West terminal from which most US TA flights depart, the (usually ) smoothly run customs area, and international baggage which in our own experiences over countless flights these past several years is more usually quick and efficient.

Don't worry, none of this is sufficient for me to switch my loyalty from the Steelers to the Eagles. But that's why we keep flying US because things have indeed gotten better with both the airline and PHL airport.

Barry
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Old May 31, 10, 9:14 am
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It wasn't that long ago (less the two years?) when a lot of people on this forum were telling everyone to use their US miles ASAP because they were certain US was unlikely to be in business for long!! Funny how things change...
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