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

The complaint alleges that the Atlantic Coast board's inequitable manipulation of the rules by which the consent solicitation shall be considered

PHOENIX (Business Wire) - Mesa Air Group, Inc. announced today that it has filed a complaint in the Court of Chancery of the State of Delaware alleging that Atlantic Coast Airlines Holdings, Inc. ("Atlantic Coast") and its board of directors has prematurely fixed a record date of October 23, 2003 as the record date in connection with Mesa Air's consent solicitation and that their unilateral declaration that Mesa Air's consent solicitation has commenced violates Atlantic Coast's by-laws, and constitutes a clear breach of the Atlantic Coast board of directors' fiduciary duties owed to its stockholders under Delaware law.

Northwest Airlines to sell $225 mln convertibles

No plan yet to restore Asia-Pacific capacity

Bangkok (Bangkok Post) - The devastating effect on air travel business of the Sars outbreak, coupled with continuing weak global economy and the consequences of the Iraq war, is not over yet though the intensity of the problems have become less than it was earlier this year.

Southwest reportedly will begin service with about 40 daily flights, although destinations are to be announced later. Philadelphia is US Airways' third largest hub with 384 daily departures, accounting for nearly 60 percent of the airport's passenger traffic.

City Aviation Director Charles J. Isdell said the addition of Southwest likely would lead to vastly more people in the region flying due to its low fares. When Southwest started service from Baltimore a decade ago, passenger traffic went up by 300 percent to 800 percent on routes that had only non-discount service before.

City officials plan to hold a news conference today at the airport, where Southwest Chairman Herb Kelleher is scheduled to announce Southwest's plans. According to Isdell's comments to the Inquirer, Southwest initially will use four gates at the end of Terminal E that had formerly been used by TWA. Using Terminal E will enable Southwest to turn around one of its jets in about 30 minutes because Terminal E is near the east end of the airport, where jets usually start their takeoff roll, the newspaper said.

ARLINGTON (theHub.com) - US Airways Express carrier PSA Airlines Inc. today took delivery of its first new 50-seat Bombardier CRJ-200 regional jet.

The aircraft is scheduled to enter service on PSA’s route network on Dec. 14. Senior US Airways officials attended a special hand-over ceremony today at Bombardier Aerospace.

"This truly is an historic milestone for US Airways Group as we take delivery of PSA’s first regional jet, implementing another key element of the company’s restructuring plan," said US Airways Express President Bruce Ashby.

PSA’s President and Chief Executive Officer Dick Pfennig said: "PSA today begins its transition to an all-regional jet airline. I am delighted for our company, our employees and our customers, and we are especially grateful for the commitment and support we have received from the City of Dayton."

PSA, based at Dayton, Ohio, will take delivery of 60 Bombardier CRJ-200s as part of US Airways regional jet order announced in May 2003. The first two will arrive this week and will perform proving flights and undergo training requirements before entering service in December.

ARLINGTON (theHub.com) - US Airways will further enhance its In-flight Cafe product with the introduction of a $5 meal option on all In-flight Cafe flight segments starting Nov. 5.

The $5 meal will be offered in addition to the breakfast or lunch/dinner meal selections that are currently featured.

The decision follows testing in the Orlando and Tampa markets, which revealed positive customer feedback.

"Customers have told us that flexibility and choice are important to them. The enhancement of the In-flight Cafe product answers their desire to have a variety of choices," said Al Capps, Regional Catering Manager and project manager for the US Airways In-flight Cafe project.

ARLINGTON (theHub.com) - As employees have probably seen by now, Southwest Airlines yesterday made it official. The low-fare carrier will begin service at Philadelphia -- US Airways' key Northeast hub -- in May. Southwest said it will begin with up to 14 daily flights, but that fares and destinations will be announced later. Dave Siegel called Southwest’s decision a "direct assault on our principal hub," adding that the company faces two choices -- to either stand and fight or cut and run. "I prefer to stand and fight," he said responding to reporters following an address to the Aero Club in Washington yesterday. Siegel said that to defend its position, US Airways needs a more competitive cost structure. "We have the same challenges as every other major network carrier. We have to protect our markets and compete for business. Ultimately, the marketplace will tell us who the winner is."

Southwest said delivery of five new aircraft from Boeing will allow it to expand to Philadelphia, a destination that surprised some observers. The Wall Street Journal called it a "bold and unusual move for an airline that tends to avoid busy airports dominated by another major carrier." Analysts said US Airways' cost structure, which even after emerging from bankruptcy remains significantly higher than low-cost carriers like Southwest, created an opening. "That gives an excellent opportunity for a carrier like Southwest to move in there and get some market share," said Jim Corridore of Standard and Poor's.

ARLINGTON (theHub.com) - The proposed unsolicited takeover of Atlantic Coast by Mesa Air Group turned more aggressive this week as Atlantic Coast Airlines alleged in a federal court filing that Mesa broke a federal securities law by failing to disclose that United Airlines is a backer of the Mesa bid, according to the Washington Post. United in a statement yesterday denied any involvement, saying the allegation "has no merit and is not relevant" and that it expressly declined Mesa's invitation to participate in its offer. Atlantic Coast is suing to stop Mesa from taking the unwanted takeover bid directly to shareholders, saying that Mesa’s proposal jeopardizes Atlantic Coast's intention to transform itself into a low-fare airline.

This is Jack Stephan with a US Airways MEC update for Tuesday, October 28^th, with three new items.

Item 1. The PBGC and US Airways presented their cases in bankruptcy court on Monday, October 27, concerning their bankruptcy claim disagreement and the possible effects that this disagreement could have on the pension benefits PC-3 eligible pilots would receive from the PBGC. (PC-3 benefits are those benefits that would be paid to any vested pilot who was age 53 or older as of March 31, 2003, the date of plan termination.) The dispute centers around the interest rate used to value the unfunded liability the PBGC can use to increase its claim as an unsecured creditor. The PBGC has stated that approximately 73 percent of any additional funds they can acquire from US Airways will go toward increasing PC-3 funding levels. That means that the PBGC would keep the additional 27 percent of the recovered amounts. It should also be noted that any monies the PBGC has earned or will earn from investing the funds from our terminated defined benefit plan since the date of plan termination will not increase your PBGC guarantee. PC-4 eligible pilots, defined as those pilots who were under the age of 53 at the time of plan termination, will not be affected by the outcome of this decision.

While ALPA bankruptcy counsel is attending this hearing, and certainly would support any measure that would produce increased returns to our pilots, it remains ALPA’s contention that only pension reform legislation with the requirement to restore our Defined Benefit Plan will significantly address the harm done to our vested retirement benefits and that continued disputes arising from the vagaries of assumptions used to calculate plan assets and liabilities only highlight the need for common sense solutions to the pension crisis in the airline industry. The PBGC has been aggressively lobbying against HR 2719, the pension relief bill that would restore the US Airways pilots’ defined benefit plan.

Additionally, the PBGC has indicated that PC-3 funding is now estimated to be at the 98 percent funding level, compared to the 85 percent funding level that the company’s actuarial firm, Towers Perrin, estimated earlier this year. This change is mainly due to more actuate prior earning information and does not reflect any increase in the total PC-3 funding.

Item 2. During the last two weeks, Congress has been addressing a full legislative agenda including Iraq funding, the energy bill, and Medicare. Both the House and the Senate are trying to complete their work and adjourn for the year before Thanksgiving. The House has addressed pension legislation with the passage of H.R. 3108, which only provides for a two-year adjustment of the interest rate used in calculating pension liabilities. No amendments were permitted on this legislation. In the Senate, work continues on a pension bill. On Wednesday, October 29, the Senate Health, Education, Labor and Pension Committee is scheduled to hold a mark up session at 10 a.m. Pension legislation will be on the agenda, as well as a number of other topics and legislation under its jurisdiction. Those wishing to attend should contact the MEC office in Pittsburgh for the latest location information. ALPA and our allies on Capitol Hill will continue working to add H.R. 2719 to this bill or any other appropriate legislation from either the Senate or the House.

There are currently 86 co-sponsors of the Air Line Pension Act of 2003. Your participation in our grassroots communication efforts has played a vital role in gaining the support represented by this impressive list of sponsors. Additional co-sponsors will help demonstrate the broad bi-partisan support necessary for the bill’s passage and for the restoration of our plan. Members of Congress should continue to hear how important restoration of our defined benefit plan will be to our pilot group and our families. A letter to your Senators, and to your congressperson, if he or she is not already a sponsor of H.R. 2719, will help convey that message. Even if you have already written your representatives, follow-up letters will serve to remind the legislators and their staff that we need their support and involvement to regain our defined benefit plan. Ask your legislators to contact their colleagues in leadership positions, including Senate Majority Leader Bill Frist, and Speaker of the House Dennis Hastert, on our behalf. Template letters for both members of the Senate and House are available for downloading from the Legislative Affairs Committee website on the pilots only home page.

If your representative is already a co-sponsor, please write to thank him or her for their support, and ask them to contact the congressional leadership. There is also a template letter available for this purpose on the Legislative Affairs website. Additionally, if you haven’t already written a letter conveying your personal circumstances, please reconsider, as this can be a very effective way to deliver our message concerning this legislation.

Item 3. As a reminder, the 2004 benefits open enrollment period for all US Airways employees ends on October 31. Please be aware that this year’s enrollment is available only through the internet and will not include telephone call center support.

If you choose to keep your current benefits, no action is required on your part for most of the available programs. However, if you choose to participate in, or to continue to participate in, the health and dependent care flexible spending account programs, you must indicate this change through the internet enrollment. These two choices do not roll over automatically. A re-verification of your beneficiary for life insurance programs is also suggested on an annual basis.

Good afternoon, and thanks for the kind introduction.

The last time I spoke to a major aviation group here in our home town, I raised a few eyebrows when I poked fun at another airline CEO, comparing him to Dr. Evil. But what the heck – I was due a little levity. We had just filed for bankruptcy protection a month before. I had been out on two rounds of grueling, emotional employee road shows. We had just completed labor negotiations and had those deals ratified by nine different work groups. The summer of 2002 was long and hot in more ways than one.

But today, I promise to strike a more sober, statesmanlike tone -- to be more "visionary," as it were. As most of you here today know, it’s not all that hard to be a "visionary" in the aviation business -- since there’s pretty much a 50-50 chance that almost any prediction will prove true. The real challenge is to be a profit-making visionary.

Five years ago, there were some basic assumptions about the U.S. airline industry. Southwest had carved out its niche, and then these assumptions – I will call them "Unassailable Truths" – applied to the rest of us. Things like:

A true national airline needs to be ubiquitous, flying to nearly all 50 states; or You can't run a profitable airline without a hub-and-spoke system, or; Business travelers will never fly in the cheap seats.

Sometimes it seems that Unassailable Truth in the airline business means practically any notion that:

1. can't be readily proven false in the short run,
2. is simple enough to be widely understood, even by consultants,
3. is repeated often and authoritatively in snappy sound bites, and
4. serves the proponent's self-interest. (This is Washington, after all...)

Today's Unassailable Truth is that the network airlines are dead. Kaput. Walking corpses. Jamie Baker at JPMorgan goes so far as to say that the low-cost carriers will "inherit the earth." At least one aviation leader in Congress has called us "dinosaurs" facing extinction. (Frankly, calling me a dinosaur is one of the nicer references that have been made about me recently…)

The cause of the major carrier demise? Take your pick: new consumer access to competitive fare information via the internet, business traveler refusal or inability to pay business fares, overall economic downturn, lingering fear of terrorism, so-called "commoditization" of air travel, stubborn fixed costs and uncontrollable cost increases and – my personal favorite, "myopic airline management." Most of the cause, however, is the evolution of the low-cost airlines – from pesky upstarts a decade ago to worldbeating dragon-slayers that some say are destined to relegate the nation's airline networks to the dustbin of aviation history.

There is no question that the low-cost carriers have arrived – in force – and that their remarkable success poses the toughest competitive challenge ever faced by the U.S. "major" airline industry. Today these airlines are much stronger than a decade ago, and they are getting bigger and stronger every day. Meanwhile, the market capitalization of relatively diminutive JetBlue (with some four dozen single-aisle airplanes and no international operations) is approximately double the equity market value of the world's largest carrier, American Airlines. And these carriers are raising capital and attracting new investors.

LCC market share has grown with phenomenal speed, and today accounts for a third of all mainline departures. With more than 20% of domestic revenues, these airlines are growing and buying new aircraft at an amazing rate. Within three years, they'll operate more than 1,000 aircraft -- nearly 40% of all mainline U.S. commercial flights. This means that just the LCC aircraft additions in the next three years will rival all of US Airways' current fleet. And, as everyone knows, Southwest Airlines is already the nation's biggest airline in terms of passengers flown. These carriers are clearly doing something right, as they continue to draw traffic and revenues away from the traditional hub-and-spoke airlines.

On the other hand, not everyone agrees with the Unassailable Truth as to the imminent demise of the network carriers. That includes Wall Street, where the Amex Airline index has nearly doubled since the major fighting in Iraq has ended. Some major airline officials – said to be pitifully "in denial" – argue essentially that what the network airlines really need to do is simply wait for the overall U.S. economy to improve, cut their workforces, pare aircraft capacity, and just "hold the line" until things "turn up" in an inevitable cyclical industry recovery.

Before we dismiss this notion as hare-brained optimism worthy of Dickens' Mr. Micawber (and remember, he too ended up in bankruptcy), let's recall that only five years ago, the Unassailable Truth of the day was that the low-cost "new entrant" carriers (except Southwest) had been driven from the marketplace, never again to emerge as even a modest competitive force. Remember the hand-wringing at DOT and the Justice Department at the time, which led to the unsuccessful predatory pricing case against American Airlines? The way things are going, the predators in this industry are the lowcost carriers who are eating the carcasses that the rest of us are leaving behind.

Then there is of course a third view. This is the "coexistence" or "can't we all just get along" theory of predicted airline industry structure. The idea here is that there is room in today's aviation marketplace for both network airlines and the new breed of
aggressive low-cost carriers. On this theory, the legacy carriers offer business travelers the lounges, upgrades, higher frequencies, and international services they want, while the low-cost carriers come to dominate most shorter-haul services and high density point-to-point markets, and capture the bulk of leisure traffic.

You've got to appreciate those who are trying to find some 0verarching meaning in – or just make some sense of – today's aviation industry. But I'm frankly just not sure we can do so quite yet. This industry has been buffeted by so many cross-winds and
downdrafts over just the last few years that it is nowhere near an equilibrium state that will permit a meaningful set of predictions and prescriptions for the future. So I'll happily leave it to the pundits and other "visionaries" to decide who will ultimately win the industry business model championship.

To my mind, there are more important questions for the U.S. network airline industry today: How do we adapt to the new realities of the marketplace and can we frankly recognize and effectively respond to the changed expectations and needs of our customers? How do we learn and borrow from the strengths of the low-cost carrier business model? At the same time, how can we better focus on what we do best, and build on our own strengths and the value we provide to the nation's travelers and the global transportation system?

We need to start by looking squarely, not defensively, at these new and changing marketplace realities. And we need to try to understand them from the standpoint not only of our own airline businesses, but from the perspective of our customers and the nation's travelers. They're not really very difficult to discern.

First, business travel as we knew it in the go-go dot.com era is not coming back – not quickly, not ever. People just don't want to hop on the next flight as they did in the 1990s. We all know the reasons. The airport "hassle factor." Terrorism fears. The perceived degradation of the air travel experience with crowded planes, less food and longer check-in lines. The growing availability of telephonic or video "substitutes" for "being there." Whatever the reason, the FAA predicts that we won't return to pre-9/11 traffic levels until 2006, at the earliest.

Second, fares are not returning to the levels of three years ago. We're still in an economic downturn, and travelers, armed with instantaneous "perfect knowledge" of every competing price option via the Internet, continue to resist paying premium fares that are high multiples of economy class costs. And the fact is that average prices continue to drop -- up to 60-70% in numerous key markets -- in response to the proliferation of low-cost carrier fares.

Third, the price/value equation has been turned on its head for many travelers. In fact, the low-cost carriers are not always the low-fare carriers in the market. Book a seven day advance roundtrip from Washington to Fort Lauderdale, morning departure and morning return, and you will find that US Airways has lower fares available for flights to and from Reagan National than on some other low-cost operators out of Dulles or BWI. Checking last week for an October 31 outbound and a November 2 return, we had a roundtrip fare of $164. Compare that to $248 on JetBlue from Dulles, or $300 on Southwest out of BWI. Similarly, a recent DOT study found that people were at times even willing to pay a premium to fly on low-cost carriers. – more than 15% more to fly JetBlue from New York to Florida than to take "full-service" Delta, with all of its amenities, its frequent flier program, access to airport lounges, branded credit cards, international alliances, and meal service.

This suggests something pretty significant about the needs and desires of travelers, at least leisure travelers. It suggests that the problem for the legacy carriers is not so much that today's travelers increasingly see air travel as a commodity, where the choice of provider is dictated predominantly, if not exclusively, by price. Rather, those customers are getting more of what they want -- be it seatback TV's, simpler fares, new planes, overall a better travel experience – on the low-cost carrier. Again, business travelers may well have a different view, and there's little empirical evidence of customer attitudes. But the implications are unsettling for the network airlines.

Simply recognizing these realities hasn't been easy for a network airline industry simultaneously buffeted by 9/11, rising taxes and fees, economic doldrums, fuel spikes, and new regulatory requirements. Responding to them effectively will prove even tougher. But effective response starts with less focus on who's winning and who's losing, and more on some first-order issues: What do customers want, and how can we give it to them? What needs to change, and how do network carriers play to their strengths and minimize their weaknesses?

First, traditional airlines need to acknowledge the profound nature of the challenges they face in today's environment. This seems pretty obvious, but some are still looking for the "quick fix" – for example, the airline-within-an airline, or "less-room-incoach," or the new "elite-for-a-day" marketing. These just aren't panaceas. Not close.

Second, the network carriers need to learn from their LCC competitors, borrowing what they can. Perhaps most significantly, they have established a simple set of customer expectations – and then they meet them. The network carriers, in trying to be all things to all people, have done just the opposite. We are a full-service airline. We are a highfrequency airline. We are a no-frills airline. We are a business traveler airline. We are a cheap fares airline. No, we don’t have Sybil and her 15 sisters running our marketing departments – but in trying to attract every possible customer, we have developed a set of schizophrenic expectations, many in conflict with one another. And since we can’t tell which expectation you might have when you come to the airport tomorrow, we are setting ourselves up for customer frustration for not meeting expectations.

Most important, though, the U.S. network airlines need to find a way to better exploit the great strengths and structural advantages that made them the world's aviation leaders for more than a half century. Given their decided cost disadvantages, the major airlines really have no choice. As a group, the U.S. network carriers had operating costs some 60% higher than their low-cost competitors, according to DOT data for fourth quarter 2002.

By leveraging our networks and participating in global alliances, the traditional carriers are uniquely positioned to offer high-frequency long-haul international service – from anywhere to literally anywhere on the globe. Over the long term, the forecasted demand for international service has been greater than predicted for domestic services.

New international market opportunities continue to present themselves, as a result of the ongoing process of liberalization of international traffic rights and the expansion and maturation of integrated international alliances. Most recently, we've seen stunning new technologies making possible longer and longer nonstop flights on "thinner" routes, including ultra long haul transpacific routes.

Counterbalancing these network airline advantages, of course, is the core issue of cost. Building and maintaining hubs is a massively costly endeavor. So is meeting a payroll of thousands of dedicated, long-time employees. Given their dramatic cost differential in relation to their LCC competitors, the network carriers will need to do more than exploit their existing strengths in high-frequency, network and international service. Network carriers will need to find a new cost paradigm, one based on competitive levels of productivity and smarter ways of managing across every element of our business.

Again, I don't have all the answers, but I do sense that increased cooperation, coordination, and potentially consolidation between and among network airlines must be another source of strength through enhanced efficiencies, in both marketing and operations. In the domestic sphere, there has already been significant code-sharing cooperation among combinations of nearly every major U.S. airline – a positive step from the standpoint of both marketing efficiency and customer convenience.

Internationally, each of the U.S. network airlines has begun to integrate more fully within the three primary global alliances, and we are likely to see further initiatives to coordinate within these worldwide structures, hopefully under the umbrella of U.S.
antitrust immunity. These alliances have proven to stimulate travel, reduce average fares and provide real convenience to international travelers demanding a more "seamless" travel experience. Hopefully, government competition regulators will recognize that the new competitive market realities, including the dramatic rise of the LCC sector, have dramatically changed the context for judging the benefits and risks of inter-carrier cooperation and coordination.

Other forms of inter-carrier cooperation – including partnering between LCC's and network carriers – may also be on the horizon. For example, why shouldn't the major U.S. international airlines cooperate with LCC's to feed their international – or even longhaul domestic – services? For that matter, why not bring LCC's into the major carrier frequent flier programs or other marketing efforts? Looking around this room, I'm sure there are some who can come up with even stranger ideas. You know who you are. See me at the door before you leave.

All of these changes are necessary for the survival of legacy carriers. Ultimately, we have to do more than survive. We have to succeed. And to that in this very challenging environment will require legacy airlines to think of themselves as entrepreneurial market stimulators and innovators, not just dinosaurs "on the defensive" seeking to "recapture" lost market share. We all have our respective sets of assets. But whether it be powerful hubs at Chicago and Atlanta, privileged positions at London Heathrow or Narita, slots and gates at Washington National or LaGuardia, or tens of millions of loyal frequent flyers – if we can’t make money with the assets, some other more efficient, creative airline will. That very same principle is why Wal-Mart has replaced Woolworth’s, and Canon has replaced Polaroid.

The current turmoil in aviation is likely to have some profound implications for the future shape of the airline industry here and around the world. For one thing, we're likely to see a convergence of the two predominant airline business models, rather than the "extinction" of any one business model. In some ways, the LCC's are starting to look like the majors. JetBlue, AirTran, and other LCC's are touting their "frills" such as TV and leather seats, and several LCC's are now flying long-haul transcontinental routes, with multiple daily frequencies.

Conversely, the major network airlines are dropping meal service on many routes, eliminating some first class cabins, and taking initial steps toward simplifying business pricing. Many are emphasizing Internet ticket distribution. Most obvious, some major carriers are directly emulating the LCC formula with their own LCC subsidiaries. Ultimately, however, the old guard airlines like US Airways are going to have to completely change the way we do business. Our Chapter 11 reorganization was designed to give our airline a second chance at life. We succeeded at one level, but we are certainly not done restructuring.

We have to deal with the new realities of the marketplace and the meet the demands and expectations of our customers. Which is why I will leave you with one prediction: sooner than we think, carriers with JetBlue’s cost structure will operate the principal aviation assets of this country. Whether it is with the employees of the incumbent legacy carriers or with JetBlue’s employees is the question.

I took this job 18 months ago knowing it would be a challenge. It certainly has been so far, and it likely will be for some time to come. As we chart our plan moving forward, I am going to heed the wisdom of the 19th century naturalist, Charles Darwin, who wrote in The Origin of Species: "It is not the strongest of the species that survive, nor the most intelligent, but the ones who are most responsive to change."

Siegel told the Aero Club of Washington that in some ways, the LCCs are starting to look more like the big airlines. He noted that JetBlue, AirTran and other LCCs are touting frills such as live television and leather seats, and several LCCs are flying long-haul transcontinental routes. At the same time, legacy carriers are dropping meal service on many routes, eliminating first-class cabins and simplifying fares.

Siegel believes low-cost carriers and network carriers will likely form partnerships. For example, "why shouldn't the major U.S. international airlines cooperate with LCCs to feed their international services?" He also thought it would be a good idea to bring LCCs into the major carrier frequent-flyer programs.

One low-cost airline quickly ruled out that possibility yesterday. Southwest Chairman Herb Kelleher, in a conference call with reporters about his carrier's Philadelphia plans, said he has looked at linking with network carriers over the years but found it difficult as Southwest's operations are "completely different" from the other hub-and-spoke carriers "in every respect." In return for an alliance, Kelleher said the network carriers "wanted us to operate the way they do."

Ultimately, however, Siegel said, "Old guard airlines" like US Airways are going to "have to completely change the way we do business. While the carrier's Chapter 11 reorganization gave the airline a "second chance at life...we are certainly not done restructuring."

In response to a question, Siegel said the carrier "has no plans to file" for another round of Chapter 11 protection, but said more changes and cost cuts are needed before the carrier reaches "sustained profitability."

Siegel said the legacy carriers can learn a lot from the LCCs, including their "simple set of customer expectations." Network carriers, "in trying to be all things to all people, have done just the opposite." The airlines have created a "set of schizophrenic expectations, many in conflict with one other."

Siegel believes that some airlines are still looking for the "quick fix" to their problems, citing development of an airline-within-an airline or "less room-in-coach" or the new "elite-for-a-day" marketing program. "These just aren't panaceas," he said. "Not close."

He believes legacy carriers need to find a way to "better exploit the great strengths and structural advantages that made them the world's aviation leaders."

WASHINGTON (Aviation Daily) - The 60 Bombardier 50-seat CRJ200s entering service with US Airways' subsidiary PSA Airlines will replace not only the regional's Dornier 328 turboprops, but also mainline Airbus A319s and A320s.

At a CRJ200 delivery ceremony yesterday in Montreal, US Airways VP-Fleet Jeffery McDougle told The DAILY the airline would use some of PSA's CRJ200s to serve lower-traffic markets and move the Airbus planes back to its hubs. US Airways is increasing flights to the Caribbean, so some of the Airbus planes would be shifted to those routes, he added.

PSA, meanwhile, anticipates load factors for the CRJ200s in the upper 50% range, Airline President Dick Pfenning said. He doesn't anticipate cutting frequencies now that the airline is using the larger RJs, noting PSA has too little capacity in many of its 328 markets. "We definitely need the additional seats," he said.

The Dayton, Ohio-based regional initially plans to fly the -200s from Dayton to Washington National and New York LaGuardia, and from Dayton to US Airways' hubs in Philadelphia and Pittsburgh. The carrier will also offer connecting flights through Philadelphia to Ottawa, Richmond, Va., and Wilkes-Barre/Scranton, Pa. (DAILY, Oct. 8).

The CRJ200s will fly to about 48 cities by this time next year, PSA said. The airline has trained about 47% of its mechanics to service the -200s, and about 50 pilots have completed training. PSA VP-Operations Timothy Keuscher said about 109 pilots should finish training by the end of the year.