Merger has smooth takeoff

By Richard N. Velotta

Thursday, Oct. 6, 2005 | 8:01 a.m.

Ten months ago US Airways' customers were outraged when service declined and baggage disappeared during the height of the Christmas holiday.

Workers were disciplined for abusing sick-leave policies, and the airline took a public relations beating as employees expressed their displeasure with the sad state of affairs that had befallen the seventh largest U.S. air carrier, which was mired in bankruptcy.

What a difference time and a few million dollars make.

Today, the new US Airways is off and flying with a new optimism. Bolstered by $1.5 billion in new capital, arranged primarily by Tempe, Ariz.-based America West Airlines -- the No. 2 passenger carrier at McCarran International Airport -- US Airways has new life.

In the first week of operations, the merged airline has had few glitches. Passengers at McCarran said they had no problems booking flights, finding their planes and making their journeys.

"I had no problems at all," said Jerre Mosely, a Las Vegas resident who booked a US Airways flight to Minneapolis hours earlier because of a death in her family.

"It was the first time I had flown them with that name," Phoenix resident Eric Geiger said. "I've flown America West for years, and when I booked my flight, I didn't even think about it. When I got to the airport in Phoenix, I saw a sign and remembered, 'Oh yeah, that's coming up.' "

Jonathan Edwards of Honolulu said he didn't even think about the transition until he heard an in-flight announcement about it on his flight to Las Vegas from San Diego.

"No trouble at all," he said. "It's all good."

From the airline's perspective, Week 1 also was all good.

"There weren't any major glitches," US Airways spokesman Carlo Bertolini said. "I think the biggest trouble we had was that we would forget and answer the phone 'America West.' "

Bertolini said Sept. 28, the first day after the merger took effect, the US Airways system had its first day since Dec. 30 with no flight cancellations.

He added that on the America West side, the airline shoots for a performance level of 65 percent of its planes leaving on time. On the first day after the merger, the America West on-time performance came in at 64.7 percent.

Bertolini explained that those on-time marks are different than the ones measured by the U.S. Transportation Department, which considers a flight on time if it departs within 15 minutes of the scheduled departure.

In the past year, America West has been a key growth generator at McCarran.

Recent statistics show the airline was responsible for the highest percentage of growth among the airport's major players.

Between January and August, America West carried 5.2 million of McCarran's 29.7 million passengers -- a 14 percent increase over the previous year.

In the last year, America West and its America West Express affiliate added 35 flights and picked up 17 new nonstop markets. The airline links Las Vegas nonstop with 73 cities, the most of any carrier at McCarran.

Executives of the new US Airways -- now the nation's fifth-largest commercial passenger carrier -- hope to continue the momentum and promise to keep Las Vegas a priority for the company.

"Las Vegas will continue to be important to us," Chief Executive Doug Parker said in a recent interview.

While Parker hasn't made any promises about new routes in Las Vegas' future, the blending of the fleets of America West and US Airways gives the airline jumbo jets capable of overseas travel, including 10 Boeing 767-200 and nine Airbus A330 twin-engine jets.

The airline plans to work with Airbus, a European consortium, to transition to an all-Airbus fleet comprised of A330s and, beginning in 2011, A350 jets.

US Airways' European destinations include Paris, Rome and Amsterdam, none of which is currently linked to Las Vegas with nonstop flights.

Later this year the airline plans to introduce service to Hawaii, a destination once served by America West.

Parker has said that one of the biggest challenges of the merger would be to blend the cultures of the workforces, which include 1,300 America West employees at McCarran.

It's a process that is expected to take two to three years and will involve integrating seniority lists developed by unions that represent both airlines. The rub with some employee groups is that America West workers, who may have been around since the airline's inception in 1983, would lose their status after the company merged with an airline that has flown in some form since 1939.

Another challenge for the newly blended airline has vexed airlines for months: high fuel costs.

When Parker and US Airways counterpart Bruce Lakefield began putting the deal together earlier this year, they came up with a plan filled with synergies that positioned the airline for profitability with oil costing $50 a barrel.

Since that time, the price of oil has continued to climb, thanks in part to the two refinery-pummeling hurricanes in the Gulf of Mexico, and oil has hovered around the $70-a-barrel level.

A recent Securities and Exchange Commission filing illustrates the challenge: In US Airways' second-to-last U.S. Bankruptcy Court financial status report, it reported a net loss of $14.1 million after paying $158.3 million for fuel, the single largest expense, in August.

While operating under bankruptcy protection, the airline was not allowed to implement a hedging strategy, an advantage America West has had that enabled the company to report a profitable second quarter.

Richard N. Velotta is a business writer for the Sun and its sister newspaper, In Business Las Vegas. He can be reached at (702) 259-4061 or by e-mail at [email protected].