US Airways Continues Restructuring Efforts

US Airways President and CEO David Siegel today announced that US Airways has reached an agreement on a marketing alliance with United Airlines. Since receiving conditional approval for a federal loan guarantee and reaching tentative agreements with several employee groups, the code sharing agreement is the latest of several steps the airline has taken to implement a financial restructuring and new business plan.
“A marketing agreement has always been a vital piece of our plan, and it was a key component of the loan guarantee application conditionally approved by the Air Transportation Stabilization Board,” said Siegel. “Finalizing labor agreements and negotiating with lenders and lessors remain the critical elements of our restructuring, while this alliance will provide our airline with the revenue and marketing enhancements that are already enjoyed by our competitors.”
Siegel said that he could not predict when US Airways` restructuring efforts would be concluded, but that the agreement takes into account either a negotiated restructuring of US Airways or one supervised under a Chapter 11 filing.
The agreement will be submitted to the U.S. Department of Transportation. Once implemented, US Airways and United passengers will be able to:
*Access US Airways` network in the Eastern U.S. and the Caribbean, but also now enjoy significantly easier access to cities in the West, Europe and Asia served by United

*Make connections between both airlines on a single reservation through new streamlined ticketing, baggage handling, and check-in procedures

*Earn and redeem frequent flyer miles on each other`s airline

*Use each airline`s airport lounges if they are already a member of either

“We have repeatedly said a marketing agreement should significantly boost our revenues by giving us reach to more markets and enabling us to offer our customers more choices and greater convenience,” said Siegel. “As demonstrated by similar agreements between other airlines, an expanded network and the traffic feed from United will provide us with more passengers, higher load factors and more revenue. Since our restructuring plan involves strategic steps to increase revenues to allow us to become profitable and to repay the federal loan guarantee, we believe it is critical that we implement proven business initiatives like this one in order to accomplish those objectives.”
Siegel noted that marketing alliances have been a proven means to boosting revenue in the industry. “The industry trend has been to broaden competition to include not just airline-versus-airline competition, but broader alliance-versus-alliance competition as well. In the past, US Airways lost business to competitors because we lacked domestic and international scope and marketing partners who can feed traffic onto our network.”
US Airways and United will remain separate competing companies with separate schedules, pricing, and sales functions. In addition, unlike some existing airline alliances, there is no equity ownership element between US Airways and United. The two airlines will independently set prices and establish schedules, and they will continue to compete on all routes served by one another.