“A lot of ‘experts’ are counting us out – but like all of you, I can’t wait to prove them wrong again”
Here’s an interesting postscript to US Airways’ “me-too” move this afternoon, which adopted American Airlines’ controversial $15 fee for the first checked bag. Just hours before, United Airlines had done the same.
In many respects, US Airways goes further than the other carriers — here’s the full announcement — because it’s also charging for beverages that were once free, including water. But more on that and other customer-hostile changes in a future blog post.
Here, in Chief Executive Doug Parker’s own words, is what employees are being told:
Dear Fellow Employees:
Last Friday, the price of oil surged nine dollars in one day to nearly $140 a barrel, setting a new historic high. As has been reported for months, sustained oil prices have created a financial crisis for our industry. For US Airways, the average fuel cost to carry one passenger on a round-trip in 2008 is $299 versus $151 in 2007. In 2000, that same cost was $70!
The economic rules of our industry have changed substantially and we simply can’t keep running the same plays. We have too many seats (supply) in the marketplace and not enough demand for those seats to raise fares. That leaves us with two options: reduce seats and find new revenue streams.
Today we announced plans to do both with the goal of returning US Airways to sustained profitability in this challenging environment. Similar actions have already been announced by other airlines.
Effective with our fall schedule, we’ll reduce flying across our system by returning some aircraft later this year and in 2009. We’re also planning to reduce additional aircraft in 2009 and 2010. In Las Vegas, we’re pulling most of our night operation primarily because as the price of fuel has gone up, incremental flying (used by airplanes sitting overnight) is now unprofitable.
In addition, we are introducing a $15 first checked bag service fee and a fee for the sale of inflight beverages, which will start later this summer. We’re making some changes to our Dividend Miles program and will increase other administrative fees to offset costs associated with those services. As is often the case, we’ve chosen to be more aggressive than our competitors with some of these programs, but these are changes that are wholly appropriate in this new world. To offset the soaring fuel-related cost of transporting passengers that I mentioned above, we are also increasing the employee guest and parent pass fees.
Unfortunately, employees will be impacted by today’s announcement. One of the results of today’s actions is that we’ll need approximately 1,700 fewer employees once all of the capacity reductions are made. For front line employees, the staffing reduction is expected to be handled through attrition throughout the summer. Any necessary furloughs following the summer travel season will be mitigated by voluntary leaves of absence as permitted by our respective labor contracts. In workgroups with lower attrition, such as pilots, or where we don’t receive sufficient leave requests, the result will be to furlough where necessary.
For some workgroups, the way you do your job will change. We’re working hard to ensure our customer service, airport and in-flight teams have all of the support and tools they’ll need to manage these new programs, and there will be more specific information for each workgroup over the next weeks.
All of the actions we’re announcing today, when combined with the capacity other airlines have already announced, will have a materially positive effect on the financial performance of US Airways going forward. Our team has been here before and we won’t sit by and wait for external circumstances to dictate our future. A lot of “experts” are counting us out – but like all of you, I can’t wait to prove them wrong again. As part of my commitment to achieve this goal, as well as reaffirming my belief in our company, I’ve made the decision to invest an amount equal to my 2008 salary into US Airways by buying stock in the open market at the next trading opportunity for insiders.
We’re communicating a lot of information today through a special issue of AboutUS, video interviews with company leaders, Frequently Asked Questions/Answers, and other information on Wings and theHub (wings.usairways.com or theHub.usairways.com). If you have a question, we’ll do our best to try to get an answer for you quickly. Just send a note to corporate.communications@usairways.com.
Thanks for all you do each and every day. You are doing a great job of taking care of our customers. Please keep it up.
That’s some pep talk. Anyone buying it?
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Comments
22 Responses to ““A lot of ‘experts’ are counting us out – but like all of you, I can’t wait to prove them wrong again””
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Talk about a race to the freaking bottom… Do the airlines have ANY clue how much chaos charging for the first checked bag is going to cause at the gate? ANY clue? Please tell me that SOMEBODY there realizes that there is going to be a huge scrimmage for the overhead bins, and then laborious gate-checking for the poor schmucks that boarded last.
And charging for the inflight beverage? Remind me again why I would want to fly USAir instead of Southwest… I seem to have forgotten… I remember something about USAir being a “full service” airline, but I must be confused.
I have a feeling that the airlines are going to find out the hard way that providing a product that makes Greyhound look like the lap of luxury will turn customers away from flying just as much as higher fares.
If people are going to fly less, why not do so with a product the airlines can be proud of? I can’t imagine this race to the bottom will make anybody happy. Not travelers, not crew, not even the airlines…
SirWired
I am not buying any of this “business transformation.” I am confused who their target market is. They are alienating frequent and leisure travelers with this onslaught of fees for leisure travelers and removal of bonus miles for frequent flyers! I am going to finish flying this airline by August, when my last voucher is redeemed and my last booked flights are flown. And I will be burning my miles for award tickets while the fee is still $10!
I will make sure to plan ahead for all my holiday travel in order to secure seats on Southwest. Has anyone noticed the Southwest Web site boasts today of “No Surprise Fees!”?
So now that US is charging for drinks, what stops them from closing the doors of airplanes nice and early and then letting customers sit forever on the tarmac? “Oh you are thirsty? No problem, that’s $2.” They can pretty much change into tarmac bars.
Who is the one that will tell them that when your basic xcost go up, you need to simply increase the price of your product!
I agree Jasper. Fuel prices go up, JUST RAISE YOUR FARES TO COVER IT! Quit tacking on ‘fees’ and alienating customers in the process.
[...] Airways — despite the rantings of its chief executive — is headed down the same flight path. It’s taken customer service to a new low by [...]
BTW: The advantage of tarmac bars? Nobody can get out!
I see a new business model coming up! Must be way better than just charging a reasonable price for flying.
US Airways just made my future flight decisions at lot easier. They have just joined the ranks of United and American on my personal “no fly” list. When are air lines going to learn that if they want to mirror RyanAir’s service levels they need to mirror their prices as well?
I’m getting tired of the airlines blaming everything on fuel prices. If fuel prices are higher, then the cost of your flights should be higher. They claim that they are trying to keep the cost of the fares down, but by adding all these “hidden” fees the cost of the flight still goes up.
Obviously they think that people will only look at the initial price without looking at the overall cost of travel. How sad that we, the traveling public, have taught them that this is true. I wonder how long it will take for us to teach them that we do care.
EVERYONE,
Check the FFOCUS Website for our statement on the changes at US Airways.
http://www.ffocus.org
Anyone notice that the only thing not cut is Doug parker’s Salary and Bonus?
NateB is correct. Have rational fares that match current economic conditions, don’t fee all of your customers away!
Jasper, thanks to our stupid liquid rules, you are right. We can buy overpriced soda and water at the airport or from the airline. Some hardy travelers bring their own bottles to fill from a water fountain, but I find those drinking fountains to be a little gross for my taste. I’m waiting for the revolt when people get stuck on the tarmac at O’Hare in the summer waiting for takeoff clearance.
I just realized a way that the check bag fee will hurt me. I belong to two airline clubs so that I can get work done before or between flights. Now I feel I will be forced to get to the game before boarding begins so I don’t have to gate check my carry-on bag. This will reduce my time in the club by at least 10 minutes per flight segment. As one who flies at least 50 segments a year, that means 500 minutes (8 hours!) that I can no longer spend in the lounge. It’s like the membership fee has just been raised.
I am sitting at Sky Harbor Airport right now listening to the flight attendants camp out behind the gate podium for gate A1. The US Airways in-flight crew are not excited about receiving the brunt of the angry customers when the “no free drinks” starts to hit the skies on their airline.
My boyfriend and I had a discussion about this last night, and this is what we have come up with (and posted on CraigsList Rants and Raves before realizing it was on this site as well):
For those of you who fly a lot and even those who don’t, a crisis in the way you will fly is on the way. First off, we start with airlines downsizing and reducing everything from staff to where they fly and when. This happens to do 2 things. First- it reduces the number of available seats causing a spike in price per seat and secondly it puts many people out of work who got some of these airlines to where they are today.
Next we run into more price hikes all in the name of “fuel prices souring”. We have checked baggage at $15 per piece, charges for crackers and sodas that were once free, charges for weight of baggage, size etc. It’s been reported on several occasions that many of the airlines pay less for their jet fuel then we as Americans pay for a gallon of gasoline for our cars.
So my question is this, how can these airlines charge higher fares and charge for baggage and grossly overpricing and call it in the name of “fuel prices souring” when they pay less for their fuel then we do to gas up our cars?
The airlines are going to eventually price themselves out of the market shutting down more airlines and job losses to hard working Americans. This whole process will end up in the same situation of the pre-Amtrak days when passenger rail line priced themselves out and were eventually taken over by the US Government. Eventually, the Government will have no choice then to buy out airlines and consolidate. This will bring prices under control, since they will be a government subsidiary and will have to answer to Congress on price changes. Mark my word- this will happen unless the industry works together and fixes the issues without grossly over charging customers.
You have to look back historically. Before deregulation it was actually pretty pleasant to fly. There were 3 classes of service: First (F), Full fare coach (Y) and B class - provided you were staying over a Saturday night and purchased your ticket at least 7 days in advance. The airlines were profitable and the levels of service were pretty decent. Planes were serviced here in the US and the American mechanics were pretty good at their jobs. Travel agents were paid a flat 8% commission on everything and you could go to an agency and be treated like a valued customer. Deregulation - the need to be cheap and greedy all at once - ruined that for everyone. Now most of the air carriers are hanging on by a fingernail, the planes are serviced outside of the US, the flight attendants are surly, the planes are dirty and now everyone is in a state of shared misery when it comes to traveling. We were the architects of our own demise. Eventually the ‘add-ons’ will equal what you once would have paid in a regulated environment except that now you will be treated like cattle. BIg cars to guzzle gas, big houses to waste electricity, too much food, too much stuff. This is only the beginning of America’s chickens coming home to roost. Think about that the next time you decide to ’supersize’ - it’s all part of the same problem….
When I fly I always take an aisle seat. I’m going to start charging the inside passengers for access to the aisle. I figure I am basically leasing the space that includes my seat, therefore I should legally be allowed to charge for this access. Let’s see how the airlines and their employees handle this.
I disagree with Robert Johnson that we should register our complaints against US Airways to keep them at the bottom of the satisfaction list. This issue is much bigger than just one airline - it is about the entire airline industry. We need to complain about poor service on every airline so that all their ratings go down. We are somewhat of a captive audience and the airlines know it. Voting with our dollars is only possible to some degree since we all have to travel. The only remaining way seems to be to complain so much that the government has to step in and do something. Or maybe the shareholders will revolt. Or something… But to simply pick on one airline will do nothing to stop the overall problem and dearth of good management and common sense.
These things we all claim that used to be “free” during a flight, were never free in the first place. No business gives anything away for free. It was always included somewhere into the cost of the ticket.
Airlines were looking for a way to charge for these things and the low-cost, no frills airlines got the flying public more used to this tactic. What we got was the same service with more fees. Why?
More and more folks are doing their own searches online for flights. These flights can be searched in a few ways, but the most basic manner in which we all look for a flight is by the price. Yea, I am flexible, I can fly early, etc…but what catches the eye is the base price of the flight. Many search engines won’t even provide the final price until you buy it and that is where the fine print is found.
Airlines have employees that work the fare structures all day long. They also have people working to see the consumer buying habits and why he buy what we buy. The common guy doesn’t have the time or give enough effort to really look for the best deals and considering how airlines come up with these fares. Heck, if you really look, you can find a first class ticket that is cheaper than a coach class ticket. Go figure.
I’d only hope and really expect a standardization of fare structures. Let the public compare apples to apples and not this price system we all enjoy today. Buying an airline ticket is like buying a used car.
Some re-regulation may be needed, but since when do any of us believe the government to be more efficient that private industry. Deregulation provided one basic business idea, that a business, an airline, can fail. In this case, deregulation is working as planned. But before we can consider more regulation, maybe Congress would try to finally pass a national aviation plan. Funny how that never seems to get accomplished.
I’m wondering just how much it costs to provide free water on a flight? Seems penny-wise and pound foolish to create so much ill will. I suspect losing one customer out of every dozen flights is a much greater expense than the cost of the water…or is it?
Folks like Doug Parker only know one thing…”cut expenses at any cost”.
Anybody heard of an airline CEO doing things to INCREASE business? I guess the economy of scale simply doesn’t work when it is a foregone conclusion that every customer represents a loss. Parker’s cure is apparently to cut back the number of flights and alienate the customers until he has none. What is their plan for when they are shed of that nagging fuel cost problem because they have no more planes?
Something suggests to me that the ‘downward’ style of management has a lot more to do with the ailments of many large companies, not just airlines, than does the cost of fuel.
If it costs more to fly then raise the fares. Period. Mistreating customers for the sake of a few pennies of ‘water expense’ is a very poor business model and will hardly do anything perceptible at the bottom line.
[...] US Airways is now charging for soft drinks. That includes bottled water. Yes, bottled water. The airline is completely unapologetic about the new charge. “We’ve chosen to be more aggressive than our competitors,” Doug Parker, the airline’s chief executive, told his employees in an internal memo. [...]