Faced with increasing competition from low-cost carriers and a high cost structure of its own, the “status quo is not an option” for US Airways, the airline’s Chairman, Stephen M. Wolf, told the Senate Judiciary Committee today.
“Senators, there are two certainties,” Wolf told the panel. “One, US Airways does not have the financial wherewithal to become a large network carrier. Two, you cannot shrink an airline into profitability.”
By merging with United Airlines, Wolf said US Airways’ 45,000 jobs and service to scores of communities will be preserved and competition in the industry will be enhanced.
“In today’s competitive marketplace, there are only two platforms on which to operate an airline successfully,” Wolf told the Senate panel. “There is the low-cost, low-fare business model, represented by carriers such as AirTran, America West, JetBlue and Southwest, and the fully mature, full-service, network carriers, such as American, Continental, Delta, Northwest and United. US Airways is neither and there is no place for a ‘neither.’ This is simply an economic reality.”
Despite significant gains in operational performance, fleet modernization and labor accord, Wolf said US Airways’ “fundamental problem” - its limited size - “has magnified itself as a result of a significant increase in intra-East competition” in recent years.
He noted, for example, that Southwest Airlines’ East Coast system had expanded to cover 22 cities with 531 departures since 1996, much of it overlapping US Airways’ route structure. Further, he said, Southwest has signaled a clear intent to continue its
East Coast expansion. At the same time, Delta Airlines, the primary major-carrier competitor on the East Coast, has added 365 new departures and 61 aircraft in the region.
“We know all too well what happened to other similarly situated carriers, such as Braniff, Eastern, PanAm - and now TWA,” Wolf said.
“Therefore my strongly held view is that the merger with United Airlines - with a job guarantee for all employees and a commitment to preserve and enhance service - is in the best interest not only of our employees, shareholders and the communities we serve, but of the traveling public as well. In the end, with a substantially larger American and United, competition in the East will be dramatically enhanced.”
Reporters needing additional information should contact US Airways Corporate Communications at (703) 872-5100.