Travel :

To ﬁnd proﬁt, carrier plans to lose more Vegas flights

Steve Marcus

A US Airways jet takes off from McCarran International Airport.

Monday, April 6, 2009 | 2 a.m.

Monthly airport declines reach one-year mark (4-3-2009)
Las Vegas-based Allegiant takes flight formula to Los Angeles (3-20-2009)
Report: Las Vegas tourism tumbles 11.9 percent in January (3-10-2009)
Airport numbers down 11th straight month (3-6-2009)

Tempe, AZ — US Airways, the second-busiest airline at McCarran International Airport, has a game plan for profitability.

Unfortunately for Las Vegas, its plan includes contraction — not expansion — in Southern Nevada.

Reducing flights increases the value of available seats and enables airlines to charge more for tickets. In past recessions, low-cost carriers have taken advantage of this move by other carriers to steal market share and grow.

But in this recession, few carriers have the resources to grow. Even Southwest Airlines, McCarran’s busiest carrier and one of the few airlines that has consistently made money, is cutting capacity. That gives US Airways hope that capacity will continue to fall and enable it to make money this year.

High-profile airline mergers are one of the most aggressive ways to trim capacity, and US Airways’ management is among the most vocal advocates of mergers as a means to trim what it considers an oversupply of seats.

US Airways and America West Airlines merged in 2005. Before the ink had dried on that deal, the new US Airways was involved in a hostile takeover bid for Atlanta-based Delta Air Lines. Although the bid failed, US Airways leadership thinks its efforts drove the recently completed merger of Delta and Northwest Airlines.

Between those mergers and the discontinuation of operations by airlines such as Aloha, ATA and Skybus, capacity has dropped to a level that is making US Airways CEO Doug Parker optimistic about his company’s future, even though it lost $803 million in 2008. Parker says for the industry and his airline to make money, the business model has to change.

In addition to mergers and shutdowns, several airlines, including US Airways, have been aggressive in trimming schedules. US Airways capacity cuts have hit Las Vegas hard.

Before the merger, McCarran was one of two hub airports for America West. Almost every flight went through either Phoenix or Las Vegas.

The airline took advantage of Las Vegas’ 24-hour lifestyle and flew a majority of its operations to and from McCarran after 8 p.m. Passengers were offered lower fares if they traveled late, and the system resulted in the airline having more than 130 daily flights to more destinations than any other carrier serving Las Vegas.

When America West’s biggest rival, Southwest, expanded in Las Vegas as the community grew in the 1990s, the competition became even more intense. The two dominated the market, and the rivalry spurred fare wars that kept ticket prices low.

When the merger occurred, US Airways initially said it would continue to use Phoenix and Las Vegas as hubs, along with its established East Coast operations in Pittsburgh, Philadelphia and Charlotte, N.C.

But the airline dramatically reduced its presence in Pittsburgh, focusing on Charlotte and Philadelphia. When oil prices surged last summer, the airline reevaluated the Las Vegas night hub concept and determined it no longer made economic sense. Even with full aircraft, the airline wasn’t making enough money to justify the flights.

After the night hub was shut down, the airline intensified its bid to cut capacity as a way to make money. Las Vegas was an easy target because its leisure market position wasn’t as profitable as business travel markets such as Philadelphia.

Las Vegas’ primary business travel component — conventions — isn’t like traditional business travel because convention attendees, like leisure travelers, book flights in advance and are less likely to purchase tickets for higher-priced, spur-of-the-moment trips. Airlines generate most of their profits from business travelers who buy at the last minute.

Today US Airways has about half the flights it once had in Las Vegas — an average of 69 a day. In the past 12 months, the local operation has contracted by 34.8 percent. The airline no longer refers to Las Vegas as one of its primary destinations, and most US Airways flights are point to point, like those of rival Southwest.

“Vegas was one of the hardest hit (destinations) in the system,” said Robert Isom, executive vice president and chief operating officer. “But any flights that we pulled were money losers.”

Isom said even though fuel costs have come down, the airline is focused on becoming profitable and customers haven’t been rushing to book flights in the down economy. The lower demand resulted in decisions to cut capacity more in Las Vegas.

Fewer operations at McCarran translated into job cuts. The airline offered to transfer Las Vegas employees to other cities, but its local workforce was different from the workforces in traditional markets.

Donna Paladini, vice president for the airport customer service, said reducing the number of Las Vegas employees by about 60 in February has left a little more than 500 workers.

“The majority of the employees that left were part-time workers just because of the nature of our operation there,” Paladini said. “A lot of those folks were working full time at hotels and part time with us to get the flying benefits.”

Because many workers had other Las Vegas jobs, few accepted transfers.

US Airways hasn’t been alone in cutting capacity in Las Vegas. McCarran’s peak capacity occurred in October 2007, when there were 8,212 flights a week and 1,159,580 seats in and out of the market. March’s capacity was 7,024 weekly flights and 1,007,655 seats — a 14.5 percent flight and 13.1 percent seat decrease.

A version of this story appeared in this week’s In Business Las Vegas, a sister publication of the Las Vegas Sun.

Discussion: 10 comments so far…

By Harley

4/6/09 at 2:56 p.m.

Suggest removal

How symbolic of the times, a photo of an aircraft departing Las Vegas.
By rumrunner

4/7/09 at 2:34 p.m.

Suggest removal

Hell the rooms and food cost a fortune, why not charge even more to get here too! God help us all!!!
By smoke14

4/7/09 at 5:35 p.m.

Suggest removal

the days of a good deal in vegas are long gone......ruined by money hungry mega corporations eating up all the property
By jackj

4/7/09 at 7:03 p.m.

Suggest removal

you have to be kidding there are tons of great deals going on now because things are so slow, you guys must not live out here. someone should ask US Airways why they didn't go by seniority when they laid off all those people. the part timers got really screwed. a full time hired at the end of '08 kept their job while a PT with 4-5 years seniority lost theirs without the option to go full time. great union the Teamsters
By USA

4/7/09 at 8:31 p.m.

Suggest removal

Hey Mr. Editor why don't you ask Donna Paladini about the above and there are very few PT employees that work for casinos in comparison to how many there are. That could be a whole other story for you. America West made great profits with PT employees and treated their employees a lot better before the merger. one of the main reasons they went to Phoenix for the primary hub is because McCarren was out bid on pricing for gate space. now they have that nice new terminal and nobody to fill it because they got greedy.
By USA

4/7/09 at 8:35 p.m.

Suggest removal

BTW a lot of people lost their jobs at US Air and in the entire LV area as it filtered down and Las Vegas lost tons of revenue and could have been a larger hub because of that deal
By USA

4/8/09 at 3:06 p.m.

Suggest removal

BTW a person i spoke to knows one, yes that is 1, uno,eins person out of 100, yes one hundred part timers that works for a casino, sure sounds like all those laid off part timers really have their casino jobs to fall back on. maybe if Donna actually lived or worked in Vegas she would be able to answer intelligently.
By USA

4/8/09 at 4:14 p.m.

Suggest removal

maybe she should lay herself off just like all those FOLKS whose lives she affected, such cavalier statements. a lot of them would have gladly bumped full timers with YEARS LESS SENIORITY to keep their jobs and after all this time US Airways still hasn't made it right. if you don't know what your talking about, you should keep your mouth shut or all sorts of stupid remarks may pour out.
By flymetothemoon

4/10/09 at 6:08 p.m.

Suggest removal

Yes, these comments are accurate. America West acquired US Airways in 2005, but somehow, US has rolled right over the former America West folks. I asked Donna Paladini, point blank, how do you figure to furlough so many part time agents (in September there were 222 part time agents furloughed and NO...yes, I said NO full time agents). Her response was that mostly part time agents worked the night flights. Now, that was an intelligent response! NOT!! You mean to tell me with all those big wigs with years and years of airline experience, they couldn't come up with a new schedule to incorporate a fair number of full and part time agents? Doug Parker has said in the past that if America West hadn't merged with US, that they would probably have filed bankruptcy in six months to a year. I think that was a ploy to get us to play nice. But I have to say, the US East workers are a surly bunch. The America West people were great to work with, fun loving and they really cared about the passengers. Good luck to those who are left.
By awapat

4/11/09 at 2:29 p.m.

Suggest removal

I am not sure who has treated us worse... Doug & his gang, or IBT. America West was told we would be taken care of, and we have been nailed to the wall. maybe we should have asked for details. I, for one, do not have another job...and I cannot bump to full time, even though I have more seniority that all but about 20!! Palladini will be visiting us & we would like an apology, along with better treatment.

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