Published: Wednesday, Aug. 17, 2011 / Updated: Wednesday, Aug. 17, 2011 10:05 AM
US Airways CEO says fees are here to stay, so is hub in Charlotte
Airline committed to Charlotte, but labor issues may last for years
CHARLOTTE --
Baggage fees and other charges introduced since 2008 are here for the long haul, but they leave airlines poised to weather economic storms without another wave of bankruptcies, US Airways CEO Doug Parker told the Observer on Tuesday.
Parker was in Charlotte visiting the airline's busiest hub for his monthly employee meetings. On other subjects, he said the airline is still open to the possibility of a merger, that it remains committed to Charlotte as a hub, and that labor problems with US Airways' 4,200 pilots could continue for years.
After landing the top job at America West on Sept. 1, 2001, Parker steered the airline through its 2005 merger with bankrupt US Airways. He has since tried unsuccessfully to take the new US Airways into three other mergers, and seen the company's labor relations with its pilots devolve into a series of running court battles and public spats.
But US Airways has returned to profitability, buoyed by a raft of new fees such as $25 to check a bag and a wave of industry consolidation that has cut down on fare competition. The airline also has closed what it says were underperforming hubs in Pittsburgh and Las Vegas.
US Airways is based in Tempe, Ariz., but has its busiest hub in Charlotte, where the airline flies some 630 daily flights - about 90 percent of the airport's daily total.
Parker said Tuesday that US Airways, the country's fifth-biggest airline by market share, is committed to keeping its Charlotte base, and he believes that Charlotte would remain a hub city even if the airline were to merge. He said he expects the hub's traffic to grow as business picks up.
Fees, security, crowded planes
Over the last decade, planes have become more crowded. The average domestic flight has gone from flying with 71 percent of seats filled a decade ago to 81 percent so far this year, according to government statistics. Passengers must take off their shoes, and there are full-body scanners and restrictions on liquids. And new fees, on everything from checked bags to in-flight food, have become commonplace throughout the industry.
Parker said he understands that fliers hate the new fees, but with fuel prices rising and the economy tottering, they are necessary for airlines to survive.
An especially odious one to fliers is the now-common strategy of charging for all checked bags. "Our customers have let us know they prefer not to have those, but the reality is it allows us to charge the customers that are using that service what we think is a very fair fee," said Parker.
He said consumers have access to technologies such as online check-in and boarding pass printing that make flying easier.
US Airways posted nearly $450 million in profit last year. Company officials have said all of that can be attributed to fees.
Analysts said the new fees aren't likely to go anywhere.
"It's here to stay," said Bob Harrell, a consultant who tracks airfare. "They're a big part of the bottom line. Some might call them the bottom line."
Bob Mann, an independent airline analyst, said while consumers don't like the fees, they'll remain part of the new pricing model. "The first bag (fee) is probably objectionable, but as part of a system which charges for every bit of effort a carrier takes, it's a little more understandable," he said.
Labor problems
Parker's tenure has been marred by a labor dispute with the pilots stemming from the 2005 merger between America West and US Airways. The combined pilot group couldn't agree on a combined seniority list, and the conflict ended up in court.
The pilots have sued US Airways, claiming the company is pressuring them into flying unsafe planes, disciplining pilots for raising safety concerns and dragging out bargaining. US Airways has sued the pilots union, alleging an illegal work slowdown that's disproportionately affecting flights from Charlotte.
Six years after the merger, US Airways and America West flight attendants and pilots still fly separate flights under separate contracts.
Parker said he's optimistic that the airline can get a combined agreement with flight attendants soon, but he's less hopeful that the dispute with the pilots will be resolved in the near future.
"The flight attendant issue will get resolved," he said. The pilot seniority dispute, which Parker said must be resolved before a new agreement with the pilots, is tied up in court and "it's not months, it's years," before that plays out, he said.
Hub Charlotte
As US Airways has closed hubs in Pittsburgh and Las Vegas, Charlotte has assumed a greater role in the airline's operations. About 6,900 US Airways employees are based in the area.
"I think it will grow kind of as the economy grows," he said. "We have the right amount of supply for the existing demand. As demand grows, as the economy in Charlotte gets stronger...I think you'd expect to see our seats out of here grow accordingly."
He said the hub is "clearly one we're going to have forever," and said there are no plans to reduce the workforce in Charlotte.
More consolidation?
Parker isn't shy about discussing consolidating his airline with a competitor, talking about the possibility several times in public forums already this year. He's attempted consolidation three times since 2005, once with Delta and twice with United, but to no avail.
"We have a stand-alone airline that works," he said Tuesday. "The industry's also shown that consolidation can, in the right situation, make airlines even stronger. We're prepared for either...If it happens one day, it happens."
The labor strife could prove an obstacle to any possible merger. Parker said it was a difficult point in failed merger talks last year with United, which ended up combining with Continental instead of US Airways.
"We got very far along in those talks," he said. "Yes, it was a cause for concern. Once they understood the issue, we were ready to close with United...absolutely not a deal breaker."
The pilot dispute could simmer for years, and Mann, the independent analyst, said labor unrest could deter future mergers: "I think that's the one red flag in an otherwise attractive opportunity."
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