US Airways Tries Another Tactic

Just a few months ago, Chairman Stephen Wolf was telling everyone from Congress to government regulators to Wall Street analysts that if its merger with United Airlines did not go through, US Airways could not survive on its own and would eventually wither and die. The merger, of course, never even got out of the hangar, and so this week the top brains at US Airways have finally let the rest of the world in on their "Plan B" — by which US Airlines would not only survive on its own, but thrive.

But from the looks of it, Wolf has merely sped up his own death prediction by a few years: US Airways now wants to compete in the most viciously competitive part of the air travel market — the low-cost segment now patrolled by the likes of Southwest and JetBlue. US Airways has long carried the highest costs in the industry; Southwest and JetBlue are the lowest-cost, highest-efficiency sharks in the water.

Perhaps US Airways prospects wouldnt look quite so dire if the ailing airline hadnt tried this before. In fact, part of the new Plan B is cutting back on operations by Metrojet — the mini-airline it started a few years back as a copycat to Southwest. To save money, Metrojet flies only Boeing 737 planes just like Southwest, and often flies to secondary airports, just like Southwest. US Airways even made a smart leadership move — in a surprising break with tradition — and negotiated special arrangements with the unions in order to lower costs at Metrojet, so it could compete directly against... Southwest.

But now US Airways says Metrojet is doing so badly it might even kill the subsidiary as part of its new strategy. If they can't make money with an airline designed especially for the job, what do you think can be achieved with the parent carrier?

Some of what US Airways wants to do, like exchanging larger aircraft for smaller regional jets, makes sense — except that that move comes about a decade too late. While United and Delta were spending millions in the 90s on integrating regional jets into their operations, US Airways was twiddling its thumbs. Now, just after pilots' unions at those two master carriers have walked away with industry-leading contracts, US Airways is telling its pilots to hunch over and fly smaller planes at less pay. Hardly an enticing offer — for the pilots or their unions — and hardly a promising way to slim down an airline thats long been too bloated to keep its profits above sea level.

Then theres the plan to find, instead of the "marriage partner" that United was supposed to be, a good friend to set up an alliance with. This made some analysts laugh out loud — not because a partnership wouldnt help US Airways, but because the carrier is deemed to be rather less than the sum of its parts. According to analysts, airline CEOs might covet some of US Airways routes, as United did. But they don't have any interest in joining forces as independents and allowing the company's current leadership keep running things. In fact, some industry observers are surprised that Wolf, who heavily promoted the merger with United and has presided over a huge drop in the stock price over the last year, hasn't simply quit.

Maybe thats Plan C.