Second restructuring plan in 12 months aims to reduce costs by 40% as airline fights to stave off liquidation

US Airways president and chief executive David Siegel is urging employees to accept major changes to the airline's operations, including massive cost cuts, a pricing system overhaul and a revision of its network, to stave off liquidation.

The restructuring should reduce the airline's costs by 40%. "We are currently a ¢10 [cost per available seat mile] carrier. We will become a ¢6 carrier," says Siegel.

The move follows a recent warning from the airline's auditor KPMG in a US Securities and Exchange Commission filing that US Airways' current state "raises substantial doubt about its ability to continue as a going concern". That statement was enhanced by Siegel's own threat that a probable credit downgrade would end the airline's current restructuring plans.

US Airways' second restructuring in 12 months involves a complete overhaul of the carrier's operations, intended to mirror the business plans adopted by low-cost carriers. Significantly, US Airways will simplify its fare structure, akin to that offered by low-cost carriers. Siegel cites America West Airlines, once a loss making major until it reduced the number of fares offered. "Customers like the simplified fares, they're easier to buy, to sell, to use. It's common sense," says Siegel.

The low-cost carriers' reliance on non-traditional distribution channels, specifically the internet, is a basic part of US Airways' new plan. "We need a better website, which is more reliable and has better punctuality," says Siegel. "We want to use the internet more, technology more, to make it easier for the customer. We plan to dramatically increase sales through the internet."

Other changes will see the replacement of the airline's remaining turboprop aircraft with regional jets, but also a continued investment in new aircraft. "We began to renew the [mainline] fleet, and changed about a third of the fleet. But we had to stop that because we can't finance [any more purchases]," says Siegel.

US Airways initiated a programme in 2001 to replace some of its ageing Boeing 737s, MD-80s and McDonnell Douglas DC-9s with Airbus A320s. Around half of the cost cuts must come from labour. Formal negotiations with unions begin in April.

"I'm hearing from the unions that some employees are not prepared to handle [the cost cuts]. I don't think it's up to them to make that decision, it is up to the individual employee," he says.


Source: Flight International