Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, March 22, 1990 TAG: 9003221953
SECTION: BUSINESS PAGE: B7 EDITION: METRO
SOURCE: The Baltimore Sun
DATELINE: NEW YORK LENGTH: Medium
During the past year, the airline's on-time performance crumbled, passenger complaints soared and profitability evaporated. Its stock has collapsed more than 40 percent from a takeover-rumor-inflated 54 3/4 peak of last fall, leaving some investors with tens of millions of dollars in losses.
Uncertainty about whether a rebound is feasible prompted some analysts to cut short vacations and business trips to hear Colodny's comments. By the end of the two-hour presentation, reservations were still evident.
The airline "has above-average costs and below-average quality of service," said Samuel Buttrick, an analyst with Kidder, Peabody & Co. "Re-establishing profitability is an uphill struggle."
"They have a lot of work to do refocusing and reapportioning their operating structure," added Remy Fisher, a portfolio manager at J.W. Seligman Inc.
Others were more caustic but declined to speak for attribution, faulting the airline's core route structure, its exposure to a brutally competitive California market, and a recent move to extend operations into Kansas City, where both Braniff and Eastern, both in bankruptcy proceedings, have withdrawn.
With almost 3,000 daily departures, USAir has by far the most flights of any domestic airline. But many of the trips are short hops into crowded airports, creating intricate logistical problems that the airline has been unable to solve.
Colodny said USAir's primary objective "is getting operations back to where our customers are pleased with us." After that, he said, "earnings will come."
At the core of USAir's troubles are two acquisitions, one encompassing Piedmont Aviation on the East Coast, and the other PSA on the West Coast. Despite an official target of last August for consolidating Piedmont, it was only in February that the two operations became one, Colodny said.
Meanwhile, West Coast operations, the source of 10 percent of USAir's traffic, had become embroiled in a brutal war among carriers for market share. "No one," an analyst said, "has the critical mass to succeed."
It's "a very bloody mess out there," Colodny said. "There are more flights than the market can support. . . . what happens to pricing, I can't tell you. We're not about to walk away."
Seeking to put USAir's prospects in a positive light, Colodny asserted that the recent conclusion of critical contract negotiations with pilots, the defeat of an organizing effort by the Teamsters, and the imposition of new operating procedures and scheduling bode well for the future.
On-time performance "somewhere near the middle of the pack" was a reasonable goal, given the carrier's service area encompasses many of the nation's most crowded airports, he added. Airplanes will be reallocated to the most promising routes and some markets will be eliminated that "look like permanent losers," he said. Operations will continue to expand because of new routes and the delivery of new planes, he said.
But doubt was expressed about whether the carrier would show progress soon.
USAir Group's shares ended the day at 30 3/4 a share, unchanged from the day before. B9 B7 USAir USAir
by CNB