• Overhead Bin Ads - Ah come on, they’ve already done tray table ads, so why not just go to the overhead bins as well? It’s worse, yes, because you can’t actually hide those from sight, but it wouldn’t surprise me if they could make some decent money off of it. And that means it could actually happen, even if it does somewhat degrade the “appearance.”




• Charge for Advanced Seat Assignments - I know, this is a little late to the game with Spirit already setting the bar, but why not jump on the bandwagon? If someone is really going to choose you because of price and schedule, then advanced seating assignment fees won’t really alter the decision, right?




• Remove Window Shades - This takes a page out of the Ryanair playbook. No window shades = less weight and fewer things that can break. Ryanair also doesn’t do seatback pockets, but there’s too much money in the magazine and Skymall to take that away. Would US Airways actually do this? I’m not sure what the savings would really be, but if they are real, then I don’t see why not.




• Sell Products Onboard - They already pimp their credit cards, so why not follow the Skybus model and start selling products, like duty free in the international world? True, that would technically add weight to the plane, so it would have to generate good revenue to make sense, but they might think it’s worth a shot.




• Charge for First Class Upgrades - I’ve saved the most controversial for last. If you think there have been objections to the latest round of changes, just wait until something like this happens. All hell will break loose. I’d argue that free First Class upgrades are by far the most important reason someone desires elite status with the airline. But, would people walk away if they had to pay $25 for the privilege on a domestic flight? It’s a risky move, and it would absolutely piss off the elites, but at some point they may consider it for the revenue it would raise.

Some of these are pretty risky moves, but with fuel where it is right now, I’m sure everything is in play. Would any of these moves stop me from flying the airline? Nah, not more than anything they’ve already done. (I haven’t flown them in almost 18 months, or at least that’s what my Dividend Miles expiration notice tells me.) The reality is that they’re right about a lot. Price and schedule do matter most in the domestic world, and they rarely if ever have a price or schedule advantage from my home in the LA area.

The airline has made it clear that it is racing to the bottom when it comes to amenities being included in the fare. At some point, passengers will revolt, that is, if they actually have a better option to choose. With all the legacy airlines following similar paths, there aren’t many options left for someone who wants to protest. But one of these moves will cross the line, and passengers will start to defect. Until that happens, you can expect to see airlines continuing to push the envelope on what they’re willing to try to reach profitability.

• As of a couple of weeks ago, fuel was expected to cost $800m more this year. Fuel has now gone much higher, so that number will be worse if it holds.
• They’re going to test a new in-seat inflight entertainment system on one domestic plane this year. That may or may involve internet access, but they aren’t sure.

Schedule Planning/Fleet with Andrew Nocella

• The domestic network will either be flat or shrink a little. All the growth will be internationally.
• This year, there will be 10 767s and 9 A330-300s in the fleet, no change from last year. Next year, they’ll add the first 6 of the smaller and longer range A330-200s followed by 6 in 2010 and 5 in 2011.
• If demand starts going down or fuel gets to be too pricey, they have the flexibility to dump the 767s if they want.
• Between now and 2011, they expect to add 14 new flights to 9 new European cities.
• New destinations will be served from Philly, and they make a note to include the Middle East as being a possibility.
• Phoenix may get flights to Europe and/or Asia, but it probably won’t be until 2010 at the earliest.
• Charlotte flights to London and Frankfurt do well, and they will likely add flights from Charlotte to destinations already served from Philly. They are also looking at South America from Charlotte and have already applied for Bogotá. (my note: They just lost out yesterday and didn’t get awarded Bogotá.)
• They’re still trying to figure out how to serve Beijing. The plan was to use A340s, but they have yet to find any that they can get their hands on (cheaply, I would assume). They can serve the route with A330-200s, but they’d rather not.
• Vegas may get some international flights, but it’s not a focus.
• 737s will be gone by 2011. Only 18 757s will be kept, all for Transatlantic flying. So, you’ll see Airbus narrowbodies and Embraer 190s on domestic flights (plus Express carriers).
• They’d like to get rid of as many 50 seaters as they can

Envoy Enhancements with Kevin Jackson and Sherri Shamblin

• US Airways surveyed 636 Envoy customers who traveled in Feb 2007. 60% of them paid, so these were people they wanted feedback from.
• US Airways ranked slightly above American, Delta, and Northwest and slightly below United. Air France, Continental, Lufthansa, British Airways, and Virgin Atlantic finished higher (unsurprisingly, I’d say).
• The number one most important factor was that “Flight attendants treat you like a valued customer.” Second was “Meal Quality.” That’s where the airline has been focusing.

Philly Hub with Suzanne Boda

• This year, they’ll be working to improve checkpoint staffing and improve international re-check of bags
• By next summer, they’ll have 3 to 6 new intl gates, bigger checkpoints at B and C, and improved airport signage
• By 2010, the F (Express) terminal will be redesigned and they will have inline baggage screening.
• In the long term they want 16 new gates (inclusive of the previous 3 to 6)
• They’d had 56 straight days without a transatlantic cancellation in Philly - over 1100 flights.

Finance with Derek Kerr

• $300m being spent this year on improving the airline.
• 30% of costs are fuel, 26% labor, and 13% aircraft/airport rents
• Every $1 increase in the price of a barrel of oil, annual costs go up $37m for the airline.
• It costs $31m per day to run the airline (at previously lower fuel levels, I assume).
• Combine $3b in cash with no major debt payments until 2014, and they’re ready to weather a poor economy if need be.

Government Relations with C.A. Howlett (Yes, he’s still there)

• Trying to get government to allow airlines to convert Washington/National flights from inside the 1,250 mile perimeter to outside
• Also trying to convince the government to let them trade 2 slots from inside the perimeter for one outside (as long as the new flight is on an aircraft smaller than a 757). This will help increase the size of aircraft and reduce the number of flights at LaGuardia. To use a 757, they’d need to trade another slot. If that happens, look for long haul flying out of LGA very quickly.
• Very concerned about all the states trying to enact different passenger rights legislations. It will be really hard to comply without a common standard.

Research has consistently shown over the past few years that people choose their airline based on price and schedule far and above everything else. That’s why I also tell you all to act with your wallet if you want to see things change in the industry today. Historically, people just don’t do that unless an airline has a catastrophic meltdown like United and America West in the summer of 2000. And that’s exactly what this slide recognizes.

This probably won’t float well with the FlyerTalk crowd. You know, those are the guys who want the old level of US Airways service, and they’ve watched that slowly disappear as the airline has become more like America West. I think that it’s pretty clear from the message at Media Day that the FlyerTalkers are going to have to live with the new US Airways plan or find someone else to fly.

For me, the plan makes a lot of sense. It’s nice to see an airline that isn’t Southwest actually laying something out there that’s achievable. I think where airlines get in trouble is when they start promising the moon. United’s idealistic cartoons are a good example. They overpromise this uber-experience and then when you end up in a middle seat in Economy Minus paying for food, you’re just pissed off. So what US Airways is saying now is that the airline understands how it works and they’re only going to promise the basics. They will work on reliability, convenience, and appearance so that they remain in the consideration set. Then, if price and schedule are right, they will become . . .

Oh yeah, the airline of choice. Gee, so original. Doug even made a point saying that he was told Stephen Wolf used something like this back in the day (but it was the GLOBAL airline of choice), and United has said similar things recently. Of course, management has meant something very different in each instance. For US Airways, becoming the airline of choice is going to involve much lower goals than United, which probably thinks they need a “definitive experience” or something like that. So for US Airways, as long as the price and schedule are right and the airline has high reliability, convenience, and a good appearance, the management team thinks they can become the airline of choice. That’s it. So what are their plans for those three areas of improvement?

Reliability

Run a poor operation and it doesn’t matter how cheap you are. Nobody will fly you. Well, ok, the really, really cheap people will do it, but that’s hardly a winning business plan. We all know what a crappy operation US Airways ran last year, and the presentations had plenty of data to back that up (as if we needed it). Most of it, they blamed on the botched reservation system migration that happened just about a year ago. There was some speculation in the media that it could have been labor unrest that caused the delays, but Doug Parker quickly killed that notion. He said there was no labor action at all. Apparently when they migrated to the new system, transactions that used to take 10 seconds in the system started to take 30 seconds. Uh oh. Multiply that by the sheer number of daily transactions and you’ve got disaster. So that’s now fixed, they say, and they’ve started to rebound in the numbers.

They seemed to be most worried about on-time performance, since that’s a big part of reliability. And yes, they’ve seen tangible improvement. I’m a little concerned, however, that they’re comparing their results to those of the industry and patting themselves on the back. Yes, December was a great month compared to the rest of the industry, but as we’ve discussed here before, the industry tanked that month. True, US Airways avoided free-falling but the airline doesn’t have much of a presence in Denver, Chicago, or the rest of the Midwest where the weather was worst. The airline says it expects to be at the top of the list in January and February as well, so then I’ll start thinking this is real achievement, if true.

While they’re working on the whole on-time thing, they’ll also be thinking about lost bags as well. Anyone who has flown through Philly knows this is still a big problem. US Airways is spending a good chunk of change of upgrading Philly once again. Actually, Suzanne Boda, the new head honcho of the East Coast, says she’ll spend $28m on getting the hub in better shape. Even simple things like the planned installation of a Ramp Information Display System (RIDS) at all the gates will go a long way toward helping the ramp workers get bags to the right place. For what it’s worth, I remember when America West installed the RIDS in Phoenix probably 7 or 8 years ago, so it’s amazing to me that Philly doesn’t have them yet. You’ll also (finally) see bag scanning at all points of bag handling. This will help them to actually be able to tell people where their bags are. How is this not already happening? Oh, whatever. At least, they’re going to be doing it now.

Specifically to Philly, it looks like after a couple years of failed attempts at fixing it, they’re finally just going all out. They’ll be opening a satellite headquarters operation in Philly, and they’ll be hiring more than 200 more employees in the area. The satellite office will have Real Estate, Finance, Government Affairs, HR, Safety, Corporate Communications, and Information Technology groups. Not a bad plan of attack. Get people on the ground with decision-making abilities.

Convenience

This is a pretty broad category, of course. But it seems to me that most attempts at improving convenience center around increased automation. I know, that throws up red flags all over the place, but there are times where this is a good thing.

Some of the effort will be on increasing the number of things passengers can do at kiosks or online. If they can make it easy for people to change flights, etc., COO Robert Isom thinks this can “really distinguish an airline, especially when things don’t go right.” This also includes installing passport and credit card readers at all kiosks. The more places people have to get things fixed, the better. I always find that complicated transactions need the help of an agent though, so I’m highly skeptical of automated solutions until I see that they can actually get the job done. If they can, then I’m with Isom. This can differentiate an airline, but US Airways is already behind the rest of the crowd.

For some things, automation is great without question. And that’s why they’re planning to expand off-site check-in. If you’re at home and have a computer, you don’t need this. But if you’re on the road, it can be a big time-saver. I’m assuming this will see things like in-hotel check-in opportunities become more prevalent.

So, these aren’t bad ideas, but I still care most about having people around when I need them. If this automation can help reduce lines a the assistance counters for people who really need personal help, then this will be good. If it just makes it worse because people try and fail to fix their problems themselves, then it’s not good. Obviously the airline’s goal is the achieve the latter former.

Appearance

Anyone who has been on a 737 in the US Airways fleet, or even worse, one of the old America West 757s, probably knows why “appearance” has become such an issue for the airline. I would be kind to say that some of those planes look like they haven’t been refurbished since they were bought. So they’re now going to spend $50m this year refurbishing interiors. They’ll have a common, leather interior on the entire fleet; even on the 737s which will be disappearing by 2011. Employees will get new uniforms, and cleaning schedules will be stepped up. Overall, things should appear much more clean and new. That’s pretty important to me and to a lot of people. A plane could be maintained perfectly from a safety perspective, but if it’s dirty and nasty on the inside, people perceive it to be unsafe.

Isom noted that the key to this is actual compliance with the standards, so they’ll be stepping up their audit procedures to make sure things are getting done. While he did note that in tough times, this type of cleaning and upkeep can be considered more discretionary in order to cut costs, he believes that fixing them down the road just becomes more expensive so the airline won’t be using that strategy.

And that was the gist of the presentation. Not bad if you’re flying coach, huh? But what if you’re flying First Class? That’s not going to cut it. Are they just giving up?

Fortunately, no. Kirby said that the airline still sees domestic First Class as the number one most important benefit for elite members of Dividend Miles, so it’s not going anywhere. And international Envoy (business class)? That also has a different strategy.

According to Kirby, the number one important factor in someone choosing to fly an airline up front on long haul international flights is having a lie-flat bed. That’s why the airline will have angled lie-flat seats (bleh) on all the 767s by the summer. Of course, the much newer A330s will still have the cradle seat, so you’ll actually want to fly the older 767 if you’re riding up front. Strange since you’re much better off flying the A330 if you’re in coach. That creates a dilemma for the wishful-upgraders.

On the westbound transatlantic flights, the airline will start serving a brunch onboard. We had a chance to taste some of the appetizers to be served, and they were fine. I’m always hesitant to say anything about food on the ground, because it tastes a lot different when it’s prepared in the air anyway. But the idea isn’t a bad one. You get to choose from a variety of options that they’ll bring around during the flight. Take some, take all, whatever. I kind of like the idea.

Oh, and they’re now going to prepare a lot of the food on the cart in the aisle instead of in the galley. So, they’ll roll the salad out, for example, and make it to your order right by your seat. Nice changes to the product, and you can see that they’re taking a different view of international Envoy than they are everywhere else at the airline.

As far as I’m concerned, I like the messaging, but I won’t believe it until I see it. They say this isn’t a message that needs to be pushed out to customers. Customers will notice it when it happens. But it is something that they will be actively communicating to employees. The commitment of $300m for all these projects this year shows that they are really serious about doing something to improve the product, but that doesn’t mean the end result will be there. It’s always all about implementation.

Of course, for the airline to make this work, they need to get employees onboard. As we all know, they don’t have an agreement with four of their largest labor groups, and that’s a big problem for everyone. They didn’t touch on labor negotiations too much at Media Day. All they said was that pilot negotiations are stalled waiting for the two pilot groups to agree on how to merge seniority. Flight attendants are talking about detailed issues and the progress is slow. Fleet service and mechanics are once again back in negotiations, so they’re hopeful about that.

Many of these changes won’t work if the employees aren’t into it, and I think it’s going to be tough to motivate everyone while they’re preoccupied thinking about a new contract. I hope they can get that done soon, for everyone’s sake. But in the end, we’re looking at a basic, but very functional product at US Airways. It’s a nice, reasonable goal. Let’s just see if they can do it.

*Edited 3/3@ 830a to change “latter” to “former”