US Airways offers a story of aimlessness searching for an identity. Its attempts to go low-cost in 2005 never panned not, nor did its hopes of being a global heavyweight two years later. Now, it sits uncomfortably in the middle and has the unfortunate goal of survival.
The CEO, Doug Parker, of course, has all the answers. He blames the industry analysts for making too much of the company’s woes … particularly as it has been able to squeeze an extra $160 million a year out of passengers – with 10 percent fewer seats – by implementing popular measures such as charging fees for preferred seats and checking luggage. Because of this, US Airways could turn a profit “even with a 15 percent drop in revenue this year.”
Fun!
Reasons for optimism must be balanced against, well, reality. Over the past two years, the airline has amped up its customer service. Why? It had nowhere else to go, ranking rock bottom (or close to it) on such trivial matters as on-time arrivals, customer complaints and mishandled bags. Nonetheless, progress is good!
Unfortunately, Wall Street‘s concerns aren’t dismissed with a $5 voucher for the food court and promises of a first class upgrade. After all, these are the same disgruntled passengers dismayed at having to pay for the “good” seats.
The company raised (and ostensibly burned through) $700 million it raised in credit markets in the fourth quarter of last year. While other airline stocks dropped an average of 70 percent, US Airways’ share price plummeted 93 percent.
If you invested $100 in this airline last year, you’d have $7 today. If you bought $100 in beer last year, you’d have: $100 in beer, a hell of a hangover and probably $7 from the deposits on the cans.
Which way would you go?