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Aviation History
2003
2003 - 1152.PDF
AIR TRANSPORT STRATEGY PAUL LEWIS / MONTREAL US Airways rebuilds with regional jets Emerging from Chapter 11, the carrier is taking a bold stance with deals for 170 50- and 70-seaters US Airways chief executive David Siegel has made the acquisition of new regional jets one of the princi pal pillars on which he plans to financially rebuild the carrier, in addition to pursuing cost-cutting and an international alliance. Only six weeks after emerging from Chapter 11 bankruptcy pro tection, the carrier took a bold step in this direction by announcing orders for 170 50- and 70-seat regional jets, worth $2.2 billion, plus another 380 options worth potentially $4.3 billion. During the seven and half months US Airways was in Chapter 11, the mainline fleet shrank from over 400 aircraft to just 279 today, making the regional jet an indis pensable tool if the carrier is to rebuild its network and generate new revenue. Speaking at the order announcement at Bombardier's headquarters in Montreal, Siegel said that "an important part of this requirement is meeting the demand of small and medium- size communities. This order for 50- and 70-seaters is a milestone for the company in achieving that." The airline had first to overcome two major hurdles: raising the nec essary cash for such a large aircraft deal at a time when financing is hard to come by, and securing enough early delivery positions to ALLIANCE Carrier reaches for Star US Airways hopes to be elected to the Star Alliance at the end of May, after signing a memorandum of understanding on a strategic alliance with lead member Lufthansa. The two airlines plan to begin codesharing between their respective German and US hubs in October, and their alliance is expected to generate $50 million in annual revenues for each carrier. US Airways chief executive David Siegel says the potential for a tie-up with Lufthansa was one of the reasons the carrier chose Star member United Airlines as its US domestic codeshare partner. Lufthansa chief execu tive Juergen Weber says the two airlines' networks are an "ideal fit", while United, US Airways and Lufthansa "make a very strong triangle...over the North Atlantic". Weber says Lufthansa and United will "strongly support" US Airways' elec tion to the Star Alliance at a meeting of chief executives this year. Siegel says membership will generate around $25 million a year in additional revenues. begin catching up with competing carriers already equipped with large and growing regional jet fleets. This, in turn, presented a formida ble challenge to both Bombardier and Embraer, which were compet ing for US Airways business. Siegel, as former head of Continental Express, enjoyed a close association with Embraer, making the Brazilian company a favourite, but balanced against this was a large fleet of Bombardier Dash 8 turboprops that US Airways Express wanted to offload. "Bombardier could not deliver 100% of the aircraft in the time I needed," says Siegel. However, neither could Embraer "satisfy US Airways' speed of deliveries", con cedes Embraer chief executive Mauricio Botelho. The solution was to split the deal and have lessor GE Capital Aviation Services (GECAS) supply from its own portfolio 36 of the 60 Bombardier CRJ200s and 30 of the 85 Embraer 170/175s ordered by US Airways. The surprise was the order for 25 CRJ700 Series 705s, which is actually the larger CRJ900 model recertificated as a 75-seater with a reduced maximum take-off weight of 37,460kg (82,5001b) to keep the aircraft under the new scope clause ceiling agreed with US Airways pilots. This allows the car- Model Bombardier CRJ200 CRJ705 Total Embraer ERJ-145 170/175 Total Orders 60 (36) 25 85 (36) • 85 (30) 85 (30) Grand total 170 (66) Reconfirmable options *90 90 - - 90 Options *100 ' - 100 140 50 190 290 Figures in () indicate aircraft previously ordered by GECAS *Can be exercised for a mix of CRJ200 or 700 models Siegel (left) can thank US Airways pilots for scope to add regional jets rier to take delivery of all 170 aircraft ordered from the two suppliers in under three years. The Series 705s, in addition to promising to pro duce 25% lower seat-kilometre cost relative to the 50- seat CRJ200, pro vides US Airways with a "hedge" when considering exercising its 50 170/175 options, says Siegel. The carrier, for the same reason, has options on 140 50-seat Embraer ERJ-145s as leverage when its comes to firming up some of the 190 Bombardier options. It is unlikely to need both, given the new scope- clause ceiling set at 465 regional jets, which includes affiliate carriers such as Mesa and Chautauqua increasing from 70 up to 140 their allotted number of aircraft. The CRJ200s will go exclusively to US Airways' wholly owned sub sidiary PSA Airlines, starting in October at a rate of two a month, increasing to three in the first half of 2004 and four by mid-year, with the last 50-seater arriving in April 2005. The 170s will be operated by US Airways' new regional jet divi sion MidAtlantic Airlines, starting in November. Deliveries will run at a rate of three aircraft a month in 2003/4, reducing to two a month in 2005 and finishing in September 2006, according to Daniel McDonald, US Airways vice- president fleet planning. A decision on whether PSA, or its two sister carriers Allegheny or Piedmont, operate the Series 705s hinges on local pilots agreeing to the aircraft being operated under the US Airways jets-for-jobs pro gramme. Whereas the 50-seaters will be flown on a 50/50 ratio by existing PSA and furloughed main line pilots, the deal struck with the unions requires the larger regional jets be operated 100% by fur loughed crews. To simplify support, the Series 705 will be kept separate from Mid Atlantic's 170s. The new jets will completely replace PSA's 30 Fairchild Dornier 328 turboprops which are due to be withdrawn by December, and will allow US Airways Express to reduce its 110 Dash 8-100/200/300 fleet to around 60 by next year. The Series 705 will initially be Charlotte- based and used on high-volume and long-haul routes and, like the Embraer 170/175s, will provide a lower-cost alternative to larger Airbus A320s and Boeing 737s on thinner routes, says Andrew Nocella, US Airways vice-president planning and scheduling. 18 20-26 MAY 2003 FLIGHT INTERNATIONAL www.flightinternational.com
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