DAVID FIELD WASHINGTON
US Airways, distracted from working out its latest survival plan to fight for its life, represents a real victim of the 11 September terrorist attacks.
Even before this day of infamy, the carrier's stock price had fallen so steeply that US Airways was worth less than it was when Stephen Wolf arrived in early 1996 to take it over, clean it up, make it profitable and sell it.
Within a week of the attacks, it had a market capitalisation of less than $400 million. Easy pickings for anyone who wanted to buy it, though in an industry that lost more than $10 billion in value in its first day of trading after the attacks, no buyers emerged.
But US Airways surely deserves more than scorn. Its predicament of self-inflicted suffering and outright misfortunes of war sums up that of the industry. Already suffering from manageable miscalculations of its own, it became a victim of the larger unpredictable economic slowdown and then the victim of what can only be called an act of force beyond anyone's control.
Immediately after the attacks, one of its primary assets, Reagan Washington National Airport, was shut and remained shut for more than a week, accelerating the airline's cash haemorrhage at an alarming rate. "We have never seen such a cataclysmic fall off in revenue," Wolf told company shareholders on a day when the airline was carrying about 87,000 passengers, compared with its average of 164,000 a day. That came a day after he announced the elimination of 11,000 of the airline's 46,000 jobs and a 23% cut in capacity - slightly sharper cuts than those taken by others, and cuts that immediately drew pilot union objections that the actions were harsh.
Outsiders estimated US Airways was losing $20 million a day; the airline had about $1.2 billion on hand at the end of June, an amount that had dropped to around $900 million at the time of the crisis. Reagan National, where US Airways had a 45% market share, features its most valuable assets, its northeastern shuttle and its landing slots.
The shuttle brings in some $270 million a year in revenues. Though it transferred its shuttle flights to Washington's other airport, Dulles International, that schedule was less than a third of the frequencies on a route that attracted the highest yields in the nation. US Airways also moved to shut its long-vulnerable MetroJet low-fares unit.
By then, US Airways was a symbol for Transportation Secretary Norman Mineta, who pointedly told a House committee that "a major airline" he would not name - clearly US Airways - would be forced out of business if National airport was not reopened.
Meanwhile, as the airline bailout was debated in Congress, representatives and senators alike demanded reassurance that no federal funds would be used for a $45 million payout for the carrier's three key managers - Wolf and long-time management colleagues Rakesh Gangwal and Larry Nagin. They were to have been eligible for the payout, arranged in relation with the failed United Airlines merger, were they to leave the airline before the second week in November.
Wolf told the US Airways shareholders that they will be there: "I have an obligation to the company," he said. But he would not address more than just the next few weeks, except to say "the bad thing that could happen is not filing Chapter 11 bankruptcy. The end bad thing that could happen is the elimination of our company if we don't have the cash to operate."
According to George Washington University Aviation Institute Director Darryl Jenkins, "there's very little that they can do" in terms of management options. Except perhaps to be a history lesson and a symbolic legacy.
Source: Airline Business
