US Airways
Keith Alexander
Washington Post Columnist
Wednesday, September 15, 2004; 11:00 a.m. ET
US Airways recently filed for bankruptcy protection for the second time in two years. Company executives underestimated about $1.3 billion in revenue for operations. With many low-fare competitors around, analysts believe that the industry would barely be affected if the struggling carrier is forced out of business.
Ben Baldanza, senior vice president of marketing at US Airways, will be online Wednesday, Sept. 15, at 11 a.m. ET to discuss the second instance of US Airways filing for bankruptcy protection with Post columnist Keith Alexander.
Submit your questions and comments before or during today's discussion.
Editor's Note: washingtonpost.com moderators retain editorial control
over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
Keith Alexander: Ben,
Thank you very much for joining us today. I think the first question everyone has is what can travelers expect to see differently as result of the bankruptcy. How will this bankruptcy affect routes, frequent fliers miles and other types of operations.
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Ben Baldanza: Thanks, Keith. I'm happy to be here and look forward to the questions. I'd like to start with a quick clarification, though.
In your article a few days ago, you stated that we had "miscalculated" and had missed "what we needed" for revenue. To be frank, we have always been clear about what we need, but we underestimated the pace of industry change and now are competing in a marketplace dominated by low fares.
So, our Transformation Plan is all about offering more low fares, and lowering our costs so that we can be profitable in this declining revenue environment. Let's get started!
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Fairfax, Va.:
Just last week -- I used some of my miles to purchase a ticket for early October from DCA to San Diego. I am hoping that all will be ok.
I still have 20,000 more miles ... should I be in a hurry to use them as well? Ben Baldanza: Thanks for your question. We are working to rebuild the airline to be an airline that customers want -- low fares, flying where you want to go, without the compromises. To do this, we have to lower our costs and we're dedicated to that.
The negative news is top of mind right now, and so concerns about Dividend Miles are understandable. However, we plan to be here for years to come and so any rush to use miles would be premature. If you're saving up for a big trip, keep saving! If you're ready to go anyway, then go ahead and book. Enjoy your trip to San Diego.
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Washington, D.C.:
A very prosaic question: We have tickets to fly on USAir late next month. Should we be worried that the flights may not take place? Ben Baldanza: We are flying our full schedule and plan to keep doing so, so have a great trip next month!
Ben Baldanza: We are flying our full schedule and plan to keep doing so, so have a great trip next month!
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Keith Alexander: Thanks Ben, but your attorney in bankruptcy court said the airline missed its revenue projections and that was one of the reasons the airline was back in bankruptcy. Indeed, other airlines may have been caught off guard as well by the revenue miscalculations because of the increase in low-cost carriers, but US Airways is the airline now in bankruptcy.
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Washington, D.C.:
I have four free flight vouchers from US
Airways that I won during a promotion.
Will these still be honored? Ben Baldanza: Absolutely! Enjoy your trip.
Our flight schedule, Dividend Miles, and all other customer products are continuing to operate as normal. This reorganization is about lowering our costs to offer increasingly more low fares, and day to day service will continue as normal.
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Dulles, Va.:
US Airways seems like it is trying to be all things to all customers. They want to be a low-fare carrier in the same regard as Southwest/jetBlue, but also have a traditional frequent flyer program, clubs, transatlantic service, service to small cities with commuter airlines, codeshares and interline agreements. All of those things cost money, but US Airways doesn't seem to have a plan to generate a revenue premium from them. Will we see the end of those benefits or will the airline find a way to charge enough of a premium to stay alive?
Ben Baldanza: Good question. We believe that customers don't have to sacrifice the conveniences they've come to expect to get a low fare if we can get our costs in line. These features and benefits are in demand today. We expect to continue to earn a small premium as a result of these features.
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Crofton, Md.:
With the recent developments, what are the implications to valued customers with frequent flyer miles? Is there any benefit to redeeming these miles for future flights (for example 7 months from now) or should we just leave them where they are and hope for the best? Keith Alexander: As you can imagine Ben, this is a popular question. What are some of the options travelers have to use their frequent flier miles if their schedules won't allow them to fly.
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Ben Baldanza: There are many ways to use Dividend Miles. In addition to trips on US Airways and any of the 15 Star Alliance Partners, you can use miles to upgrade on a paid trip, golf packages, auctions, magazines, and many other ways. Go to www.usairways.com to see a complete list of options.
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Alexandria, Va.:
Ben,
Has US Airways had any discussions with other airlines about a possible sale?
What would you say the chances are that another airline might pick up the assets of US Air out of bankruptcy in exchange for assuming its liabilities?
Ben Baldanza: Our Transformation Plan does not include the sale of any assets. With the right cost structure, we want to keep what we have and continue to grow.
With all the talk of asset sales, I wouldn't be surprised if our competitors are "whispering" in people's ears!
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Washignton, DC:
Keith one thing you mentioned in your column yesterday was not accurate, at least in my case. You pointed out that US Airways frequent flyers are having a hard time redeeming their miles to fly anywhere they wish because of great demand. On Monday, I was able to use my miles to book international flights to Europe for January 2005 (hopefully, US Airways will not fold by then).
Thank you for your time
Keith Alexander: Thanks for your question. I'm sure Ben can speak to this, but I have heard from several travelers who have had difficulty in booking trips, but as I told them, it probably depends on their destinations, time and day of travel. Less popular destinations and more flexbile travel schedules often make it easier to book.
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Washington, D.C.:
Hi. Thanks for taking questions. My wife and I are going to NY for Thanksgiving. I just priced a flight which is SHARE-CODED with your partner, United Airlines. I called United and they wanted $106.70 for the flight. The same exact flight, same airplane, same seat, same everything on US Airways is $232.70 -- MORE THAN TWICE THE PRICE. I wanted to use our $120 credit we have with US Airways, but feel something is terribly wrong here. What gives? This is how to go out of business real quick, it seems to me. Ben Baldanza: There are a lot of reasons why this can happen, and we're working to minimize the number of price discrepancies. It does happen the same way in reverse too, and we're fixing it.
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Anonymous:
Could you please explain to me why ALL airlines can not be low-fare? The two most popular low-fare airlines post enormous profits.
High-fare airlines have gotten away from providing low-fares to stand-by passengers. I remember years ago if the plane was an hour away from taking off and there were empty seats, you could save a lot of money.
Sometimes, you could even barter with the agent about the fare.
NOW, it doesn't matter if the plane is half-full at the last minute. You'll still be charged the high fare, which can be ridiculous, at times; sometimes over $1000. Is it any wonder that the high fare airlines are going bankrupt?
It's no wonder people are migrating to the low fare airlines.
I'm sorry but I don't think the government should bail airlines out because of poor business practices.
They need to do what they did years ago.
Just my opinion. Thank you.
N
Ben Baldanza: Great question! Low fare airlines make money because they have a cost structure that supports low fares. The "traditional" airlines in the US, like us, have higher costs due to a number of factors: more complicated operations (small cities, International flights, worldwide frequent flier benefits), and higher labor costs that come with being a mature carrier.
There is no "right answer" other than that revenues must be higher than costs! Low fare airlines have balanced this, while higher cost carriers are now dealing with it.
We agree that high fares need to come down, but there is a reality we all face: lower fares, especially lower last-minute fares, reduce overall revenue. Today, for every dollar we collect, Southwest collects about 70 cents. They have a cost structure that makes this work.
We're rebuilding our airline to both offer lower fares AND be profitable.
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Harrisburg, Pa.:
I never fully understood E upgrades. Do this build up along with frequent flyer miles? When I use an E upgrade to go from coach to first class, do I lose frequent flyer miles in doing so? How long do they last before they expire? If I wish to use an E upgrade, must I inquire of the person at the ticket counter if there is a first class spot available and then I go on a waiting list, or how do I use an E upgrade?
Ben Baldanza: Preferred Dividend Miles members are rewarded with unlimited upgrades in North America. All other Dividend Miles members can purchase e-upgrades or redeem miles for upgrades.
You always earn Dividend Miles, even when you use an upgrade. They last for one year, and you can redeem them at usairways.com, any of our hundreds of airport kiosks, or at the ticket counter.
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Washington, D.C.:
Since it seems like people are eager to burn DM miles so they don't lose them, and are already concerned about putting miles on DM (and are considering placing them on Mileage Plus, for example), does US Airways plan to do anything to keep its frequent flyers in the fold, to make sure that the customers who are most loyal keep their business, or their company's business, with US? There are a lot of us who fly US regularly for work or play, who haven't always felt like our patronage was seen as important. Keith Alexander: Ben, this seems like a fair question. Will your frequent fliers who have chairman's preffered or other elite status receive any type of priority in obtaining upgrades or free trips while the airline is in bankruptcy?
Ben Baldanza: We have built the Dividend Miles Preferred programs to reward customers with the perks they asked for. One of the benefits of our Transformation Plan is that our customers don't have to sacrifice these benefits to get lower fares! So, if you like us today, root us on by staying with us as we rebuild ourselves to be more of the carrier you want.
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Harrisburg, Pa.:
Alot of us in this office have found US Airways the hardest airlines on which to book flights. Do you know the answer to these questions: what percent of people who attempt to book a flight online can successfully book on their first attempts without having the system shut down on them? What is the average time it takes to telephone for a reservation before a person answers? If you don't know the answers to these, you should find out. The answers will probably explain why US Airways has declined from handling two thirds of flights out of Harrisburg to about one thirds.
Ben Baldanza: Sorry that you've had problems. We look at the operating stats of usairways.com daily, and we're proud to say that the investments we've made in the site have improved reliability and both the stats and the customer feedback reflects this. And, we're continuing to improve all of our self-service tools as a key piece of the Transformation Plan.
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Bethesda, MD:
Dear Mr. Alexander,
Thanks for having this discussion. I guess my questions is: what is to prevent other major carriers from the same fate (i.e., Delta, American, Continental and United)? It seems to me that these older business models of running an airline are dinosaurs and certainly face extinction. Smart "low cost" airlines have a different model. One type of aircraft for example ( a la Soutwest) so there is no need to train personnel on many different models. That United created "TED" and still clings to the old business model worries me. In my opinion, unless the business culture of the airline industry chnages drastically, none of the traditional carriers mentioned above will survive.
Your thoughts?
Thanks, Joe
Keith Alexander: Joe, you pretty much summed up what the executives from the legacy airlines have been saying for months now. The costs of doing business for the legacy carriers has changed forever, thanks in large part to the ability for travelers to get cheap fares via the Internet and low cost, low-fare airlines. That means the legacy carriers have to review their pension plans, salaries, amenities, work rules, destinations and various aircraft types as part of their effort to continue operating in this new operating environment.
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Rockville, Md.:
Ben: I recently used miles to fly to Asia on your Star Alliance partner Lufthansa, it was a wonderful trip. Does your bankrupcy filing affect this partnership in any way? Are you still going to be part of the Star Alliance?
Ben Baldanza: Yes, we remain a full member of the Star Alliance and I'm happy that you had a great trip.
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Easton, Md.:
When will US Airways offer online award redemption, like some other airlines?
Ben Baldanza: We already do!! In fact, over 50% of all rewards redeemed are now done online. We also offer uo to a 20% discount on certain awards when booked online.
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Silver Spring, MD:
My husband and I have tickets with USAir to fly to Italy in December. All reports are saying that flights and service should not be iterruped. How seriously should we take this? Do you think flights are going to be cut, and if so, how can we plan for this? If we do end up with tickets for a non-existant flight, what happens to the money we already spent?
Ben Baldanza: We're flying our full schedule and expect to continue business "as usual" throughout our reorganization. So, enjoy your trip with us!
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Washington, D.C.:
What changed between the time US Airways emerged from Ch. 11 and its return to Ch. 11 last weekend? Did the company emerge too quickly or did external events change in unexpected ways?
Ben Baldanza: Another great question. We met all of the cost goals from our first restructuring, but underestimated the pace of pricing changes in the industry. So, now we need to again cut costs further so that we can offer low fares on all routes in our system.
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Arlington, Va:
I appreciate everything you do to keep us updated but I don't understand the suicidal behavior of the airlines. For instance, when you purchase a ticket, particularly online, at a price, and that price falls, as it invariably does, there is almost no way to recoup the difference in fares so why would you buy a fare in advance you don't have to? It is maddening why they wouldn't want to find a way, even a voucher, to pay off good customers.
Ben Baldanza: I understand your frustration, and that's why we're introducing "GoFares" as our new, simplified, low-fare structure. We currently have GoFares on many flights from Philadelphia, Washington, and Fort Lauderdale, and over 20% of our domestic customers now enjoy these lower fares. Our Transformation Plan, as it evolves, will bring GoFares everywhere!
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Arlington, VA:
Ben,
Would US management entertain a possible merger with UAL once again if the situation arose?
Ben Baldanza: Consolidation in the industry probably makes sense, but not until everyone gets their own houses in order. That's our priority at this time.
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Keith Alexander: Ben,
I'll throw out the last question, do you think your filing will cause other airlines to file for bankruptcy in an effort to quickly reduce their costs to remain competitive with you and United?
Ben Baldanza: Can't say for sure, but I do know that all airlines with high costs will have to face the reality that customers want low fares and will get them from someone. For us, that has meant another reorganization to rebuild our company to meet our customers needs. For everyone else, it's their choice of how to do this.
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Ben Baldanza: Keith, thanks for setting this up and thanks to everyone who asked questions. Sorry that we couldn't get to all of them.
I'd like to say one thing in closing. We're making the tough choices to really fix our company -- to create an airline that offers low fares everywhere with the conveniences of a full-service, world-wide airline. As we do this, there will be a lot of public discussion about our actions, but I ask everyone to keep in mind our goal. "Pardon our Dust" while we build the airline you've asked for!
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Keith Alexander: Ben, Thank you again for your time. As you can imagine, there are millions of people out there who are closely following what happens to US Airways. We look forward to possibly doing this again soon.
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