USAir cuts 170 flights in bid to trim costs Only 15 of those are out of carrier's hub at BWI airport

March 09, 1995|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

USAir Group Inc. said yesterday that it will eliminate more than 170 daily flights from its schedule, including about 15 daily flights from Baltimore-Washington International Airport, as part of the troubled airline's effort to cut $1 billion from its annual costs and survive the airline industry's staggering early-1990s losses.

The Arlington, Va.-based airline, by far the leading provider of BWI service, insisted that the cutbacks were not timed to gain advantage in talks with its pilots' union, which is leading the labor side in negotiations with USAir.

"The two are not related," said USAir spokeswoman Andrea Butler, who added that the pilots and their business advisers were not asked to help plan the route cuts. "This is not a tactical move. This is a business decision about what is right for USAir."

Aides at the Air Line Pilots Association said the group's leaders were not available yesterday, referring reporters to a taped message in which the union said it opposed the cuts and reserved the right to alter its bargaining proposals in response.

USAir hopes to cut an average of $500 million annually from labor costs over the next five years, for a total of $2.5 billion, and the pilots are negotiating to get a major USAir ownership stake for their members in return.

USAir said the schedule cuts will save another $100 million a year, including $50 million on fuel. The impact of the cuts on jobs was not immediately clear, but is expected to be small. The company has no-layoff agreements with the pilots, flight attendants and its machinists, Ms. Butler said, though only more senior machinists are protected by their union's contract.

The company wants to save another $400 million annually through a combination of purchasing reforms, lower maintenance costs resulting from longer average flights, delegating more functions to outside contractors and other management changes.

Response from Wall Street, which has pushed the company's stock down to $6 a share from $9.50 a year ago, was positive but reserved.

"They made virtually nothing public," said Jamie Baker, an associate airline analyst for PaineWebber Inc. in New York. "Until they make public, market by market, what they are doing, we won't know the competitive impact."

But Ferris, Baker Watts Inc. airline analyst Alex C. Hart said cutting service is the right direction for USAir to take.

"There has demonstrably been overcapacity in the airline industry in this country for years," he said, pointing to the failures of old staples such as Eastern Airlines Inc. and the fiscal problems at carriers such as Continental Airlines Inc. and TWA Inc. "The question is, is this enough? The answer is, we'll see."

Richard A. Henderson, an analyst with Pershing Inc. in Jersey City, N.J., said the airline must move swiftly to reduce its costs. The company has said it had $450 million in liquid assets at the end of 1994, but made $170 million in payments on debt and leases in January.

Mr. Henderson said the basic approach of swapping wage concessions for a piece of the company has been used widely in the airline industry. While United Airlines parent UAL Corp. and Northwest Airlines Inc. have returned to profitability since making wage-for-stock deals, the history of such deals isn't perfect. Eastern tried the same idea before it went out of business.

The cuts will eliminate only 15 of the 240 daily USAir flights from BWI, and some of the losses will be offset by a small increase in commuter service and the planned introduction of flights. Most flights cut will be from routes the airline serves heavily, meaning there will still be USAir service to virtually every city now reachable from BWI.

"We will . . . recapture those passengers on other flights," Ms. Butler said.

Maryland officials don't expect more cuts at BWI.

"They [USAir] believe it will stabilize their schedule throughout 1995 and into 1996," said Ted Mathison, executive director of the Maryland Aviation Administration, who met with USAir Chairman Seth E. Schofield Tuesday. "They are not looking at further cuts as far as BWI."

Mr. Mathison said BWI passenger traffic grew 36.8 percent last year, and he said it was clear that some markets would be saturated as USAir conducted fare wars with BWI newcomers Southwest Airlines Co. and Continental's low-fare Continental Lite unit.

Overall, the airline expects passenger traffic to rise 4 percent to 5 percent this year.

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