update - AFA USAirways

UPDATE
Transforming … our cost structure
Entire business plan hinges on lower expenses
US Airways’ Transformation Plan hinges on successfully
lowering our cost structure.
Consumers are demanding lower, simpler fares and carriers
like Southwest, America West, AirTran and JetBlue have been
successful because they are able to provide what customers
want. Budget airlines now account for nearly a third of
domestic capacity, up nine percentage points just since 2000
and are expected to top 40 percent by the end of the decade.
To maintain current market share and to even entertain notions of
growth will require US Airways to be competitive in this low-fare
environment. But without lower costs, the initiative to provide
10.02
CASM excluding fuel, Q1 2004
9.04 8.61 8.46 8.39 7.85 7.73
6.57 6.42 6.08 5.86
4.88
US DL AS UA NW CO AA WN FL HP TZ B6
simpler, lower fares cannot be sustained. And without changing the
fare structure, de-peaking our schedule and remaking the network
would only result in larger financial losses.
Cost savings will come primarily from two important sources
— more efficient operations and labor savings.
US Airways Web site are designed to attract more online
bookings and use of e-tickets, thereby lowering distribution
costs.
· Advertising low fares. With advertising driving more
consumers to usairways.com, the amount of fees the company
pays to CRS systems will drop.
These are radical changes to the US Airways business model,
but without them, the company will not be able to compete on
price. Regrettably, as productivity increases are realized, some
of these changes will result in furloughs. But once US Airways is
cost-competitive, growth and recalls can become a reality — a
situation that simply cannot occur
under the status quo.
Employee costs will need to be
compared along five dimensions: rates
of pay; seniority; benefits; productivity
and scope. President and CEO Bruce
Lakefield said the approach to lower
labor costs must be fair. No single work
group will subsidize another’s lack of
marketplace competitiveness, nor can
employees subsidize waste or mistakes
made by management, he said.
The new US Airways labor cost
structure must be based on that of our
profitable competitors, such as
America West, which operates a
network system, and JetBlue, which
operates point-to-point.
Every employee group will need to compare itself to the
industry’s “best practices” for their respective group.
Management has acknowledged that profit sharing with all
employees must be a part of the plan so that employees can
share in the upside of success.
Management actions will provide the structure required to
compete. These include:
· Increased aircraft utilization. This will improve productivity
of employees both in the air and on the ground.
· De-peaking hub schedules. This also will improve
employee productivity and lead to fewer misconnected
passengers, lost bags and flight delays.
· Lower, simpler fares. With a less complex fare structure,
Reservations talk time goes down and productivity rises. The
sales department will have fewer complex contracts to
manage, resulting in lower selling costs. And customers will
have fewer complaints.
· Automation. In airports, increasing use of kiosks results in
lower costs and higher productivity, as will gate readers when
they begin to be installed this year. Improvements to the
4
UPDATE
US Airways Corporate Communications
2345 Crystal Dr. Arlington, VA 22227
Tel: 703-872-5100 Fax: 703-872-5104
Comat code: DCA H/850
Lotus Notes/PROFS: usnews
Email: usnews@usairways.com
Editor: John Bronson, director of Corporate
Communications
Publisher: Office Services - Pittsburgh
Contributors: Amy Phoenik, manager of Employee
Communications