Air Transport World

They're back: written off for dead following 9/11, America West Airlines has found success by adopting a low-fare pricing model while continuing to offer a full-service product.(Profile)(statistical data included)

Few struggling companies can pinpoint a specific day or event that marked the beginning of their revival, but for Phoenix-based America West Airlines life began anew on March 25, 2002. That was the day it abandoned its legacy pricing model in favor of everyday low fares. Today, the carrier that has been left for dead more times than the Terminator is back again. It has posted four consecutive quarters of profitability in contrast to the hundreds of millions of dollars of red ink spilled by larger network rivals, and while most of them are struggling to return to their pre-9/11 size AWA has enjoyed record traffic for more than a year. The industry, in aggregate, may lose as much as $2 billion this year but AWA parent America West Holdings expects to be comfortably in the black.

It's not the outcome anyone would have predicted in late 2001 when the smart money had America West shutting down by year end, a victim of the post-9/11 collapse in air travel. But you don't spend nearly two decades banging heads with Southwest Airlines up and down the West Coast without developing a survival instinct, and the folks here had no interest in helping solve the industry's overcapacity problem by going gently into that good night. With money running out, they begged, badgered and cajoled their lenders into coming up with $600 million in concessions--including about $350 million in aircraft rent reductions--and persuaded a highly skeptical Air Transportation Stabilization Board to support a six-year, $429 million loan package.

Even after that, few figured the company had done anything more than delay a bankruptcy/liquidation scenario by a couple of months, with taxpayers left holding the bag on $380 million in federal guarantees. Most saw AWA as superfluous: The seventh-largest full-fare airline in an industry that probably only needed three or four.

Then a funny thing happened. Rather than waste precious time and capital pretending that everything soon would be back to normal, managers decided to take a hard look at the way they operated. "We'd gone through the ATSB process, a near-death experience. One of the things that does is to make you rethink your entire business model," Chairman, President and CEO Doug Parker recalls to ATW.

After what Executive VP-Sales and Marketing Scott Kirby describes as "probably the most heavily analyzed decision in this company's history," they came to a surprising conclusion: With its ultra-low cost structure--it has the lowest CASM of ally network Major, lower even than Alaska Airlines, AirTran and Frontier--AWA would be better off following the budget model despite being built along legacy lines with hubs in Phoenix and Las Vegas (a minihub in Columbus, Ohio, subsequently was closed in 2003). …

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