A Daily Look at the Airline Industry and the Nation’s Top Seven U.S. Airlines

Analyst: "Nobody is looking to open a new hub"

ST. LOUIS (Post-Dispatch) - Some stark realities face St. Louis as it scrambles to replace the 210 flights that American Airlines plans to cut here Nov. 1.

Excluding one-time items, airline reported earnings of $12.9 million

PHOENIX (Business Journal) - Not since late 2000 has this happened, but officials of the Valley's hometown airline Tuesday reported a return to profitability.

Excluding government aid, net income during the quarter was $900,000

SEATTLE (AP) - Alaska Air Group Inc. reported a $45.2 million profit Tuesday for the second quarter, largely attributable to a cash infusion from the federal government, which temporarily has been reimbursing airlines for airport security fees.

US Airways to implement new Flight Attendant reserve system

AFA and the Company have been meeting for the last several months in an attempt to resolve differences regarding the new reserve system that was accepted as part of last December's restructuring agreement. AFA forwarded another proposal to the Company last week and today AFA was advised by the Company that the Company is no longer interested in continuing our discussions and that they will be implementing what they believe was negotiated, effective November 1, 2003.

At this time, the Company has not advised AFA of what they intend to implement. AFA is confident that whatever the Company implements, it will be a far cry from what we believe was negotiated last year. As soon as the Company issues their interpretation of the new reserve system, AFA will be filing yet another grievance. Again, as we advised you during the implementation of the Company's new sick policy, we will be asking you to contact your Inflight Supervisors for explanations/clarifications about the new reserve system.

AFA realizes the global bid for 2004 is currently open. Since we have not been advised of the details of the company's intrepretation of the new system we cannot offer any advise on how you may want to alter your bid for 2004.

Perry L. Hayes

US Airways MEC President

Date: Monday, 21 July 2003 17:41 ET

To: Emc2-News-c

From: GROFF.S

Subject: Reserve Time Balancing

Dear Flight Attendants,

We are jointly sending this letter to update you on the status of the implementation of the Reserve Time Balancing System agreed to with AFA in the January 2003 Restructuring Agreement.

After reaching the agreement last winter, it became clear to us that there were certain issues related to the modified reserve system which needed to be clarified with the AFA leadership team. As a result, the Company agreed to delay implementation of the Reserve Time Balancing System in an effort to work together with AFA to reach a joint understanding. The downside to this delay is that we have been unable to meet the projected savings requirement associated with the January agreement. However, we felt it was worth waiting to see if we could jointly resolve all of these issues.

The parties had numerous conversations and ultimately met face to face over a period of eight days, with both the Company and AFA working hard to clarify issues and concerns in an effort to come to an understanding on the final language. At the conclusion of these meetings, the Company believed that the creative process produced a Reserve Time Balancing System which included good solutions and compromises by both sides. For example, the Company's proposed time balancing system would provide for more equal distribution of time based on a flight attendant's option while honoring a reserve's seniority in several key areas. The AFA negotiating team was subsequently given additional time to conduct internal discussions and consult with members of the MEC.

Despite what we believed were productive meetings with the negotiating team, the resulting reserve structure was not acceptable to the AFA. The impact of this conclusion is that the Company can no longer afford to delay implementation and, effective November 2003, the Reserve Time Balancing System will be implemented with the provisions as outlined in the January agreement without the enhancements we had planned. We feel it bears repeating that the Company and AFA have worked very hard to reach an acceptable interpretation of the language and implement a procedure that is more flight attendant friendly. Both parties desire a fair time balanced system designed around the reserve rules and flying options that are unique to US Airways.

Failure to reach a mutual agreement is an unfortunate turn of events. Both sides have attempted to be responsive to the concerns of each other, as we spent significant time and resources focusing on these issues. Because of our inability to jointly reach an agreement, we must now focus on implementation in order to obtain the savings planned for in January 2003. This planned change is one of the many cost savings components assumed in our restructuring plan.

Sincerely,

Doug McKeen

Vice President- Labor Relations

Sherry Hendry Groff

Vice President-Inflight Services

ARLINGTON (theHub.com) - AMR Corp., parent of American Airlines, is transferring 33 Fokker 100 aircraft and giving company stock to an unidentified lender as part of an agreement to restructure about $130 million in debt.

The transfer of the Fokker 100 aircraft will occur during the current quarter, the company said in a filing to the Securities and Exchange Commission. The move may lead to a "significant" gain, most of it recognized in the third quarter, the filing said.

AMR, which lost $5.3 billion in the past two years, has negotiated job, wage and benefit cuts from employees to help reduce annual expenses by $4 billion.

Separately, American forgave a $26 million debt owed by its pilots union over a 1999 work stoppage as part of talks to secure $1.8 billion in annual labor savings from its employees.

The action was confirmed by the Allied Pilots Association, according to Bloomberg News. The $26 million was the unpaid portion of a $45.5 million fine imposed on the union by a federal judge who found it ignored his order to end an 11-day job action. The work stoppage forced American to cancel 6,600 flights in February 1999, costing the company $250 million.

ARLINGTON (theHub.com) - The chief financial officer for low-cost, low-fare leader Southwest Airlines sees ample growth opportunity over the next few years, particularly with American Airlines' decision to cut capacity at its St. Louis hub.

Gary Kelly told Wall Street analysts on Monday, July, 21, that the airline might add a new city to its network in 2004. Southwest plans to add 92 jets to its fleet of Boeing 737s from 2004 through 2006, suggesting capacity growth of about 10 percent in both 2005 and 2006.

"We have lots of opportunities, as evidenced by AMR's announcement last week to dramatically reduce flights in St. Louis," Kelly said. "That may prove out to be a great opportunity for Southwest Airlines to rapidly add flights."

Earlier on Monday, Southwest reported that net profit more than doubled in the second quarter, including a reimbursement of security fees from the U.S. government, and said it expects a higher third quarter profit than a year ago.

Capacity growth is expected to be 6 percent to 7 percent in 2004. Even without the government's funds, the No. 6 U.S. airline said second-quarter profit increased 22.6 percent.

Southwest is the only major U.S. airline that has consistently posted a profit since the Sept. 11 attacks. Southwest's net income amounted to $246 million. A year earlier, it posted a profit of $102 million. Excluding $271 million from the government, Southwest's profit rose to $103 million, compared with $84 million, before items a year earlier.

ARLINGTON (theHub.com) - US Airways' senior officers will begin regularly visiting the seven largest employment centers on a rotating basis.

The new program, called "Senior Officer Outreach Days," is designed to improve internal communications and begins this week.

President and CEO Dave Siegel announced the program on his weekly phone message on 1-800-USDAILY. He said the goal is to "get senior managers out on the front line, where they will be able to see and hear your issues first hand and give you opportunities to ask questions on a regular basis."

The Senior Officer Outreach program is separate from the existing City Connections program, which Siegel instituted shortly after arriving at US Airways last year.

In City Connections, officers and directors "adopt" a specific city and make periodic visits to that city through the year. The Senior Officer Outreach Days involve the eight members of the senior management team, including Siegel, and several other who will visit a different city each quarter.

The locations are those places with the largest number of US Airways employees. They are: Boston, Charlotte, New York-LaGuardia, Philadelphia, Pittsburgh, Winston-Salem and Washington.

Along with Siegel, the senior officer team includes Executive Vice President of Finance and Chief Financial Officer Neal Cohen; EVP of Operations Al Crellin; EVP of Corporate Affairs and General Counsel Liz Lanier; Senior Vice President of Alliances and President of US Airways Express Bruce Ashby; SVP of Marketing and Planning Ben Baldanza; SVP of Corporate Affairs Chris Chiames; SVP of Employee Relations Jerry Glass; and SVP of Maintenance Operations John Prestifilippo. Dave Davis, vice president of financial planning and analysis, and Doug McKeen, vice president of labor relations and benefits will also be part of the Outreach group.

The events are informal and will not involve a prepared presentation. Each visit will consist of two drop – in sessions -- one in the morning and one in the afternoon. Employees will be invited to stop by on breaks, or, for pilots and flight attendants, while they are waiting for their flights. Employees who choose to do so can come in on their days off, but they will not be paid for their time.

Senior Officer Outreach Schedule

Date City Officer

Wed. July 23 BOS Doug McKeen

Wed. July 23 LGA John Prestifilippo

Wed. July 30 DCA Dave Davis

Wed. July 30 PIT Al Crellin

Thurs. July 31 PHL Liz Lanier

Thurs. July 31 INT Ben Baldanza

(A schedule for CLT will be announced soon.)

ARLINGTON (theHub.com) - US Airways on July 22 began offering customers interline electronic ticketing capabilities with Northwest Airlines, enabling travelers to use a single e-ticket for itineraries that include travel on both carriers.

US Airways already has interline e-ticketing agreements with United, Continental and American. "E-tickets are now used by 92 percent of our customers," said Kerry Carstairs, vice president of Direct Distribution. "By adding Northwest to our growing list of interline e-ticket-capable carriers, even more of our customers can enjoy the time-saving benefits of e-ticket travel."

Interline e-ticket technology allows customers to use a single e-ticket issued by US Airways for an itinerary that also includes travel on Northwest. It also enables US Airways to accommodate Northwest customers holding e-tickets on changed itineraries.

Previously, holders of Northwest tickets were required to acquire a paper ticket from US Airways or obtain a refund and purchase a new ticket on Northwest, if their flight reservations were changed from Northwest to US Airways, and vice versa.

US Airways customers will also have the flexibility of traveling on a Northwest flight during irregular operations without having to obtain a paper ticket.

Interline e-tickets for itineraries that include travel on both US Airways and Northwest can be issued immediately on Northwest’s Web site at nwa.com, through US Airways’ or Northwest’s reservations representatives, or at either carriers’ airport or city ticket offices. Northwest interline e-tickets are not available from usairways.com.

ARLINGTON (theHub.com) - Low-fare airlines are capturing a greater share of long-haul business traditionally held by full-price carriers, according to a report by the Transportation Department.

While mature, network carriers are in the midst of a financial slump, the low-cost discount airlines, such as Southwest, JetBlue, and AirTran have expanded their reach into transcontinental markets.

"Over the last few years, low-fare carriers have demonstrated an increasing tendency toward exploiting unmet demand for lower-priced service in long-haul markets," the department said.

Between 2000 and 2003, low-fare airlines gained a competitive market presence in an additional 32 of the top long-haul US markets, the report said. In those long-haul markets, average fares declined about 29 percent over the two years. Traffic among low-cost competitors in the markets nearly tripled, while the rest of the industry saw traffic decline by 15.5 percent. Overall, the low-fare carriers' share of the long-haul markets grew from 12.5 percent in 2000 to 17.3 percent in 2002, the report said.

Underscoring the DOT report on low-fare airline growth, Southwest said Monday that Baltimore-Washington International Airport could become its busiest after a new pier is completed there in 2005.

"It could very easily become the largest departure point," Southwest Chief Financial Officer Gary Kelly said yesterday in a conference call to report the carrier's earnings. Recent growth has made BWI the third busiest in Southwest's system with 156 daily nonstop flights to 35 destinations, according to the Baltimore Sun. The expansion project will provide Southwest with more than a dozen new gates at BWI.

While reporting a $246 million second quarter profit yesterday, Southwest also announced plans to add 92 aircraft over the next 30 months, which USA Today described as shifting its growth "back into hyperdrive."

Kelly said, "We feel like we're in a superb position. We're the low-cost producer in a low-fare world."

This is Roy Freundlich with a US Airways MEC update for Monday, July 21.

Pilots are reporting some confusion on the status of H.R. 2719, the Air Line Pension Act of 2003. Another unrelated bill named H.R. 1776, the Pension Preservation and Savings Expansion Act of 2003, generated publicity this weekend when a clash occurred between members of the House Ways and Means Committee over the legislation.

H.R. 2719, the Air Line Pension Act of 2003, is separate pension legislation. This is the legislation that is supported by ALPA, US Airways and other members of the airline industry. H.R. 2719 is the only legislation that would restore our defined benefit pension plan. As we reported last week, H.R. 2719 was introduced last Monday by Representative Dave Camp and a bi-partisan group of congressional leaders. This bill has not yet been scheduled for mark-up, which is when a subcommittee can make changes and amendments prior to recommending the bill to the full committee.

Please continue to participate in the MEC’s legislative communications campaign asking our elected congressional representatives to support H.R. 2719, the Air Line Pension Act of 2003.

Also, expanding grass roots active support for this legislation through members of your family, friends and neighbors would be very helpful. You may forward the information on the website to assist your family and friends in contacting their congressional representatives.

Residents in the congressional districts of the members of the House Ways and Means Committee are particularly crucial to this stage of the process. Information on contacting these representatives, if you reside in their districts, is highlighted in the information that MEC Chairman Bill Pollock sent to you, which you should be receiving by mail this week, and is also posted on the Legislative Affairs page of the MEC pilots only website at usairwayspilots.org.

Your MEC representatives thank you for your strong support of this initiative.

This is MEC Chairman Bill Pollock with a US Airways MEC update for Tuesday, July 22.

Management is distributing, in crew room mailboxes, form letters soliciting pilot responses to various scheduling or training events recorded in your line by crew schedulers. This form letter contains items for you to respond to that the Company is not contractually entitled to receive. It appears that management wants pilots to incriminate themselves for possible disciplinary action and to set up a process that would allow them to exceed the limitations placed on them by our Contract.

Your chief pilots have become accomplices to this activity by signing and distributing this form, knowing that the demanded information exceeds the Company’s contractual rights. We are advising all pilots to not complete and submit these forms to your chief pilots without first contacting the Contract Hotline or your local council representative for assistance.

To aggravate this situation, pilots have reported that LGA / BOS chief pilot, Captain Ed Schmidt, is in crew rooms putting out false information on your contractual responsibilities and requesting you to comply with additional "requirements" not contained in your working agreement.

For example, pilots have reported that Captain Schmidt is claiming that there is a requirement that you sign in for your trip. There is no such requirement in the pilots working agreement. You cannot be disciplined for failing to sign in for a trip. Pilots have also reported receiving misinformation regarding the requirements for producing a doctor’s note. A doctor’s note must be requested from you at the time you call in sick, not afterwards. Also there is no requirement that such a note be specific to anything regarding your illness.

This form letter from your chief pilots is attempting to achieve rights for the Company that management was unable to obtain at the bargaining table. Please do not fall into the trap of allowing the Company to use your responses to exceed its contractual limitations or expose you to arbitrary disciplinary action.

The form letter is an attempt to intimidate pilots and circumvent your contractual rights. The Association is vigorously challenging its use and content. We need your help by allowing us to centralize and coordinate the responses to protect and enforce your contractual rights.

The Contract Hotline can be reached through the MEC office at 800 USAIR MEC.