Buoyed by new financing, fresh cost cuts and resumed regional jet deliveries, US Airways is more confident about its prospects for survival.

The carrier is almost boastful about its progress, placing full-page adverts in major newspapers that declare "Clear skies ahead". And in a letter to frequent flyers, chief executive Bruce Lakefield is clearly confident: "We believe the most difficult days are behind us." In its second bankruptcy reorganisation since September 2004, US Airways "has reached a turning point" in its drive to transform itself into a competitive low-fares airline, Lakefield says. "US Airways is here to stay," he adds.

In mid-February, the airline expanded operations at Reagan Washington National airport, adding flights to Atlanta, Chicago, Cleveland, Dallas, Detroit and Houston, introducing dozens of flights from Florida's Fort Lauderdale International airport and moving to hire 200 new baggage handlers and customer service agents to support the extra operations. The schedule changes emphasise direct flights with more point-to-point flying.

Its schedule simplification, which added capacity equivalent to 20 narrowbodies, also depends on more rapid turnaround times that in most cases shave 5mins off the the previous 40mins. The February schedules were to have increased aircraft utilisation by a full hour from 10.5 to 11.5 daily hours per aircraft.

Those changes represent a dramatic reversal from the dark days at the turn of the year, when the airline suffered "an operational meltdown" at its Philadelphia hub that Lakefield blamed on a wildcat "sick-out" by disgruntled workers. Union leaders denied the charge, but pundits and analysts quickly pronounced the airline dying if not already dead.

Some of those critics have recanted, although long-term questions remain if US Airways is to win $250 million in financing to let it exit court protection in June. The airline has nevertheless attracted heavy advance bookings, something it could not have done in December as speculation on liquidation increased. Although it has attracted the bookings with deep discounts, it has still broken its own records, generating over $25 million in revenues on its website in a 48h sale in late January.

In court papers, US Airways has projected that it will not turn a substantial profit until at least 2008, with at best a $200 million deficit this year. Its last net profit was in 1999, when it made just under $200 million, although special gains from its first bankruptcy reorganisation earned it a 2003 profit of $1.4 billion. Union members are quoting US Airways officials as seeing possible profit in 2006, although the court papers put the loss for that year as at least $25 million.

When it does turn a profit, some of that money will go to the employees under a pledge made to persuade unions to accept the steep pay cuts. US Airways pledged that employees would get 10% of all profits on a profit margin of up to 5%, and 25% of all profits on a margin greater than 5%, an offer that helped win $1 billion in a new round of concessions. Profits are still an uncertain way off, and some analysts question its chances of survival, but US Airways says it now has "a fighting chance".


Source: Airline Business