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US Airways looks ahead
July 31, 2001: 2:01 p.m. ET

Carrier asks pilot support to add regional jets in wake of dead UAL deal
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NEW YORK (CNNfn) - US Airways is asking its pilots and employees for support in expanding its regional jet fleet now that its proposed $4.3 billion takeover by United Airlines has been terminated, the company said.

In a pre-recorded announcement on its hotline, Arlington, Va.-based US Airways (U: unchanged at $16.91, Research, Estimates) said expanding the regional jet fleet is critical to the troubled air carrier's efforts to restore profitability, and that it had requested approval by the Airline Pilots Association, the union representing its pilots. The union has until Aug. 13 to reply.

US Airways needs the pilots' approval, since their contract restricts the number of regional jets the carrier can use to 70. Other carriers currently fly more than double that figure, according to analysts.

"With the merger with UAL now behind us, we must now focus as a company on our future as we attempt to return to profitability," the announcement said. "We face a number of challenges to reach this goal. One of the most critical is the lack of an adequate number of regional jets in our network."

A US Airways spokeswoman said the company had met with its unions Monday. A spokeswoman at the Airline Pilots Association was not immediately available for comment.

In the letter to employees, US Airways said the company is being squeezed by competitors in the regional jet market and that it needs to reverse that course as quickly as possible.

"Looking at the basic economics, we have crippled our airline by failing to achieve an early resolution to this issue," the letter said. "We are all aware of the continuing incursions into our East Coast markets such as Southwest, AirTran, Spirit and JetBlue. In addition to this competitive threat, we have hobbled ourselves in our ability to compete with mainline carriers as well because we cannot deploy an appropriate number of regional jets to keep pace with competitors."

On Friday, US Airways and United Airlines (UAL: up $0.47 to $34.68, Research, Estimates) called off their proposed merger after the U.S. Justice Department said it would move to block the deal.

With that deal terminated, US Airways now is left scrambling for a way to restore profitability. The carrier views adding regional jets to its fleet as its best option since its main competitors have far more of the planes. Also, the company serves numerous smaller airports to which flying a mainline jet makes little sense, since it is difficult to fill all the seats, analysts said.

Additionally, consumers are demanding them.

"If you're flying a propeller when the other guys have regional jets, you will lose market share, especially in a weaker economy," Goldman Sachs analyst Glenn Engel said.

But pilots object to adding regional jets since carriers typically hire small airlines to fly and maintain them, raising job security fears among the pilots.

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Nevertheless, outsourcing to regional carriers helps airlines to manage costs better since they can fill most of the seats on the smaller planes and someone else is responsible for the maintenance.

In three comparable markets -- Cleveland, Cincinnati and Pittsburgh -- US Airways is far outmatched in terms of regional jets. In Cleveland, Continental Airlines operates about 120 regional jets; in Cincinnati, Delta operates about 280 jets. But in Pittsburgh, US Airways operates just 6 regional jets, Engel said. graphic


UAL, US Air nix deal - July 27, 2001

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US Airways execs deny breakup - July 10, 2001


US Airways

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