US Airways Panel to Plan US2 Strategy
US Airways Group Inc. said Wednesday that it has formed an employee task force to plan its previously announced low-cost, low-fare “airline within an airline” to compete with discount carriers starting early next year.
US Airways was able to move ahead on the proposed discount service, currently called US2, after its pilots on Friday approved a new labor agreement that allows the airline to reduce its high costs.
Chairman and Chief Executive Stephen Wolf has said that developing a low-cost airline was a key part of his plan to transform US Airways into a major carrier. It faces stiff competition from discount airlines Southwest Airlines Co. and Delta Air Lines Inc.’s Delta Express.
“One of the key problem areas US Airways faced was the onslaught of low-fare carriers like Southwest, so it was critical for them to develop the lower-cost U2 unit,” said Richard Henderson, an analyst at Pershing, a division of Donaldson Lufkin & Jenrette.
Without it, US Airways, which has one of the highest cost structures in the industry, would have had to match its competitors’ lower fares and profit would have suffered, Henderson said.
The task force will plan everything about the new discount service, from its name and routes to marketing and maintenance.
The Arlington, Va.-based company’s shares rose 31 cents to close at $48.38 on the New York Stock Exchange.
The task force will be led by Michael Scheeringa, director of international service. US Airways President Rakesh Gangwal and Bruce Ashby, vice president of financial planning and analysis, are likely to play major roles as well.
Gangwal developed a similar low-cost airline service when he and Wolf were at top executives at UAL Corp.’s United Airlines.
Likewise, Ashby was involved in creating Delta’s low-cost service while an executive with that airline.
Separately Wednesday, British Airways, the world’s biggest carrier, said it’s considering its own no-frills, low-cost airline--a move that provoked anger among small rivals, who responded by threatening legal action.
BA Chief Executive Bob Ayling ended weeks of speculation by acknowledging that the giant was considering launching a low-fare airline in Europe.
“It is true we are looking at this,” Ayling told Reuters. “If we proceed, it would have to be done on an independent business [basis], run separately.”
A senior BA source told Reuters that a decision could come within the next month, with BA considering whether to buy a rival or establish a service from scratch.
The news overshadowed BA’s half-year results, in which pretax profit fell to $721.8 million from $789.9 million after taking hits from the strong pound and last summer’s strike action.
American depositary receipts of BA rose $1.50 to close at $100.38 on the New York Stock Exchange.
