USAir announces new look, name change to US Airways But agreements with workers to cut costs remain elusive

November 13, 1996|By Suzanne Wooton | Suzanne Wooton,SUN STAFF

NEW YORK -- In the process of reinventing itself, USAir announced here yesterday that it will change its name to US Airways.

But the message that Wall Street wanted to hear from Chairman and CEO Stephen M. Wolf in his first meeting with security industry analysts since taking over USAir last spring was missing.

After months and months of talks with its labor unions, USAir still hasn't reached an agreement to cut its costs, long the highest in the industry.

New image or not, that fact threatens the carrier's restructuring, especially its efforts to compete with the growing number of low-cost carriers on the East Coast.

Three of USAir's top labor leaders appeared with company officials yesterday, assuring analysts that the sides are working together. But no one was saying how much longer it could take.

"I would like to think it's four hours or four days away, but I have no idea whatsoever," Wolf said.

"We've been working through it, but we still have things to do," said Bob Gaudioso, chairman of the airline's pilots union.

After years of staggering losses, USAir -- which Wolf described as a one-time "timid nonachiever" -- is finally making some money.

Now, it's focusing on boosting trans-Atlantic service and restructuring its route system to take advantage of its strength on the East Coast.

Come January, USAir will leave behind regional carriers such as Air South and Reno Air that have only "air" in their name, and join the top-tier carriers named "airways" or "airlines."

With the new name will come a new look -- navy blue and gray aircraft with accent lines of red and white, plus a gray, stylized U.S. flag on the tail. In addition, the largest carrier at Baltimore-Washington International Airport will add more first-class seats, including a premier international business class, beef up its frequent flier program and revamp its in-flight magazine.

Company officials said the new name signals a new era for the company, which is an amalgam of six small airlines, including Piedmont and Allegany.

"We want to become not the carrier of convenience, but the carrier of choice," Wolf told the analysts.

Philip A. Baggaley, managing director of corporate ratings for Standard & Poor's, said the name change is "a very small part of the whole puzzle" in improving the airline but that "people will at least be taking a look."

USAir officials said that in the past year the carrier has corrected serious image problems. In 1995, for instance, USAir flights departed on time only one-third of time. This year, that has improved to more than two-thirds. Likewise, it has reduced its denied boarding statistics.

But USAir's cost issue remains.

The airline spends 40 percent of its operating costs on wages and benefits, compared with 37.9 percent for Delta, 33.4 percent for Southwest Airlines and 25.7 percent for Continental Airlines -- its chief competitors.

"But it's not just an issue of employee costs," Rakesh Gangwal, USAir's president and chief operating officer, said yesterday.

Critical to USAir's success, he said, is reducing the different types of aircraft it has and correcting poor business practices, even simple ones such as loading too many extra meals on flights and its redundant route structure.

Critics long have insisted that USAir operating too many expensive hubs, too close together. The airline has large operations at Philadelphia International, BWI and Washington National -- all within a 90-mile radius.

"We are our largest competitor," Gangwal said. "We're cannibalizing our own product."

By cutting back at BWI, the airline could reduce its costs and still maintain the revenue because National Airport is so close. Such cuts would give USAir the ability to redeploy aircraft elsewhere. But Gangwal said USAir has no plans to pull out of BWI.

Instead, plans are to beef up its discount flights there, taking on Southwest Airlines more aggressively. Contingent on reaching cost-cutting agreements with its employees, USAir hopes to launch a low-cost operation at BWI, he said.

Pub Date: 11/13/96

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