Positive Spin on US Airways Las Vegas Route Cuts

US Airways is doing some major retrenchment, and is canceling a lot of Las Vegas flights. While most of this is due to costlier oil making marginally profitable flights unprofitable, you can bet that doom and gloomsters will be arguing that Las Vegas is to blame.

Now, there’s no question that the tourism business in Vegas is in recession.

But keep these salient points in mind when US Airways comes up in conversation:

In 2003, when Frothing Developer began traveling between Las Vegas and San Francisco, the only competition to US Airways, (which was then called America West) was United Airlines. You could fly on Southwest at a lower price, but you’d have to go out of your way through Oakland (which is much farther from San Francisco, and is something of a dunghill of an airport).

So I frequently flew America West. It was not a fabulous experience. I don’t think the flight staff was any better or worse than the United flight staff. But the planes were tired and lacked amenities, and America West had, until recently, an infuriating policy of charging $100 to make any ticket change, even on their most expensive first class tickets.

In 2005 I started flying from Vegas to New York quite frequently. Once again, it was mostly US Airways. The only real nonstop competition on that run was Continental. Continental had slightly better service and policies, but it also had tired old planes.

Around that time, AmericaWest decided to expand by merging with the old US Airways. Now, AmericaWest was full of beans at this point. It was running efficiently, growing in a strong southwest economy, and confident in its ability to assimilate a merged rival. But the old US Airways was a basket case. In fact, it was bankrupt, and had been operating in bankruptcy for a year. It had the gnarliest unions, the most expensive costs per passenger mile, and as Wikipedia writes:

Fuel costs and deadlocked negotiations with organized labor (chiefly the Air Line Pilots Association, who were traditionally the first group to come to a concessionary agreement) forced US Airways into a second round of Chapter 11 bankruptcy protection proceedings, on September 12, 2004. Widespread employee discontent and high sick calls were blamed by the airline for a staff shortage around the 2004 Christmas holiday, a public relations disaster which led to speculation that the airline could be liquidated; the USDOT, however, found that the problems were caused mainly due to poor planning by management.

AmericaWest was sufficiently confident of its managerial abilities, that it didn’t impose any constraints on the unions. What was the result?

A Consumer Reports survey of 23,000 readers released in June 2007 ranked US Airways as the worst airline for customer satisfaction. The survey was conducted before the airline’s March 2007 service disruptions. A follow up survey with a smaller sample size conducted in April 2007 found US Airways remained in last place, with its score dropping an additional 10 points.[16]

US Airways is the leader in service complaints with 4.4 complaints per 100,000 customers[20]. US Airways rate of customer complaints is 7.5-times the rate of JetBlue (0.59 complaints per 100,000 customers) and 11-times the rate of Southwest (0.4 complaints per 100,000 customers)[21]. US Airways has a very poor record of addressing those complaints only answering 50% of telephone calls to its customer service department[22].

And then there’s this beauty: In the last month, two competitors have announced they’re going to retire their most fuel-inefficient, oldest 737’s. Would US Airways consider copying this obvious efficiency? Businesswire:

US Airways Group Inc. (LCC) – the last holdout in the industry’s efforts to rid itself of one type of fuel-guzzling planes – said it has no immediate plans to cut more Boeing Co. (BA) 737 models from its fleet.

JPMorgan analyst Jamie Baker said US Airways’ pilots’ contract prevents it from shrinking its fleet as much as other airlines.

“US Airways is more dependent on 737 classics than either Continental or United are,” he added. “Also – on the subject of downsizing – there are comparatively few contractual impediments for United and Continental in reducing their fleet. However, in the case of US Air, their pilot contract does stipulate a minimum fleet size to which the company is already fairly close.”

So how about ol’ Frothing Developer’s trips to San Francisco and New York?

Turns out that Southwest start servicing the San Francisco – Las Vegas run. And then there’s another new guy in town. Virgin America.

Let’s go book a flight for a Monday afternoon business meeting:

Southwest has a $164 flight at 7 and another at 9am. For $15 more, I get to board first and score one of the exit row seats with all the legroom. I can cancel these flights for a full refund or change them at any time.

US Air has a $170 flight at 9:30.

Virgin America flies at 11:15am for $126, in a new plane, with a screen video system that includes movies, tv, and video games.

I have flown Virgin America and let me assure you, the experience is vastly superior to the old-line airlines.

And just a few days ago, Virgin America started selling a daily nonstop to New York at $159 (which is completely insane).

One more note: JetBlue just added nonstop service to Burbank. Another quiet expansion into Las Vegas.

What does this mean traffic wise? Here’s the Year To Date traffic at McCarran.



Notice that the Year To Date total traffic through Las Vegas is UNCHANGED. It’s off by POINT ONE PERCENT.

But now look at US Airways. It’s traffic through Las Vegas is DOWN 22.3%. That means passengers have been leaving US Airways and taking alternatives, such as Virgin America (up 71,290 passengers), Southwest, (up about 200,000 passengers)…in fact, only US Airways and United Airlines had any meaningful downturn in passenger count through Las Vegas. Everyone else went up year over year, or stayed flat. Some companies are killing it. AirTran is up 130% year over year. Alaska is up 25%. Allegiant is up 12%.

What’s the conclusion from all of this?

US Airways is pulling back not because Las Vegas is weak but because US Airways delivers the worst service in America, is beset by internal union rebellions, and is getting creamed by the competition.

This is healthy.


One Response to Positive Spin on US Airways Las Vegas Route Cuts

  1. […] For more on why US Air’s cutbacks are more about US Air than about Las Vegas, look here. […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s