US Airways Ups Staffing as Skies Begin to Clear

By Jonathan Pont

Apr. 11, 2005

Running a bankrupt airline is difficult; running one poorly, more so. But management at US Airways, the Arlington, Virginia-based carrier with more than 25,000 employees, appears to have had a moment of clarity in its struggle to transform itself from a cash sieve to a viable competitor with the likes of Southwest Airlines.

    In part, management was chastened by what CEO Bruce Lakefield called an “operational meltdown” in Philadelphia over the course of several days in December. Normal operations ceased when the numbers of working baggage handlers and flight attendants dipped below what was necessary to keep the airline running. Among the results: 405 canceled flights, more than 560,000 passengers disrupted, 72,000 claims for lost bags, and an answer rate of less than 50 percent at its customer call centers.

    Although initial reports from the carrier hinted not so subtly at organized “sickouts” on the part of aggrieved employees, an inquiry by the Department of Transportation’s inspector general found that airline management hadn’t planned its holiday staffing schedule with enough care. The fact that the 2004 holiday travel period was the busiest in five years didn’t help. The airline itself increased its scheduled departures by 12 percent compared with 2003, but the number of flight attendants dipped by 5 percent over the same period. “We let our customers down,” airline spokes-man David Castelveter says.

    To avoid a recurrence, the airline is hiring new workers and regularly hosting job fairs in Philadelphia, Washington, D.C., and Charlotte, North Carolina, to attract baggage handlers and customer service agents. Thus far, the company has made offers for more than 1,000 positions, not only to replace positions left open by attrition but also to gear up for better times.

    “The threat of liquidation is gone,” Castelveter says. “Our employees feel like we’re on the comeback trail.”

    It may be that customers share that sentiment. Company figures indicate improved performance. For the first two months of the year, revenue passenger miles, a key industry measure of the number of miles traveled by a paying passenger, rose by 5 percent over the previous year. Investors stepped up in February as the company landed $125 million in funding, and in March the carrier reached a conditional deal for the same amount–notable because the financiers are other airlines. Other figures, though equally important to the airline’s destiny, tell a different story.

    Less than a month after the Philadelphia incident, management secured $353 million in concessions from its unionized workers, bringing the total value of those savings to just over $1 billion in the airline’s ongoing transformation plan. “I think it scared the hell out of their labor,” Aaron Gellman, professor of management and strategy at Northwestern University’s Kellogg School of Management, says of the possible outcome of the stoppage–namely liquidation. Mechanics and fleet service employees ratified the January round of cuts by margins of just over 60 percent.

    Flight attendants are not among new hires for the company. “All airlines downsized after 9/11,” says Mike Flores, local council president for US Airways flight attendants in Charlotte. “Now we take contractual concessions that allegedly make us more efficient: We have fewer heads and the number of flights is increasing.”

    Gellman says management would be wise to boost spending on things customers will notice. According to J.D. Power and Associates’ 2005 Airline Satisfaction Index, US Airways ranks eighth in a field of 11 carriers.

    If everything comes together, US Airways plans to emerge from bankruptcy this summer. One thing certain to be a drag on the carrier’s performance: rising fuel prices. In his weekly recorded message to the company March 11, Bruce Lakefield said that if oil prices remain around $54 per barrel, fuel will be the airline’s No. 1 cost in 2005, taking over the spot that labor holds.

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