Air Transport World

In pursuit of a profile: USAir grew in order to remain independent. Now, ridden by losses and more growth, it appears to have no direction. (Company Profile)

Like individuals, companies rarely perform well when forced to do something. So it is with USAir. In 1987-88, the airline spent $460 million buying PSA and $1.6 billion on Piedmont. It did so not because of a grand strategy but because other airlines were getting bigger and it wanted to remain independent.

As a result and despite a deliberately cautious merger plan, the twin factors of recession and competition found USAir financially vulnerable. The PSA purchase became a miniversion of Pan Am's takeover and subsequent destruction of National Airlines. Highcost, ponderous, business-oriented USAir could not compete in the fare-competitive, flaky West Coast market. The most visible remnant of the PSA deal is 18 grounded BAe 146s.

Whether due to arrogance or diversion because of PSA, the first year of the Piedmont merger was spent dissipating the enthusiasm and expertise of Piedmont's employees and the loyalty of its customers. Important factors such as integrating the pilot seniority lists and more symbolic ones such as solving the ftill-can-of-Coke problem intervened. The second year was spent trying to recoup from the first. And USAir is still trying to maximize the two systems. The way things are going, the only operational remnant from Piedmont may be the Charlotte hub.

So by 1991, with the recession in full swing, the equation read: One unhealthy airline, PSA, plus two healthy ones, USAir and Piedmont, equaled one sick company. USAir had fallen from the No. 1 spot in Salomon Brothers' financial ratings to No. 7. Once, it carried the most U.S. passengers but had fallen to No. 4 by third-quarter 1991. After 13 consecutive years of profit, USAir piled up an estimated $800 minion in net losses in 1989-91. Actually, 1988, while profitable, was weak, too. Sam Buttrick, airline analyst at Kidder, Peabody, says: "The notion that bigger is better does not get unqualified endorsement" where USAir is concerned.

Last spring, Edwin I. Colodny, who remains chairman of USAir Group and the airline, handed the CEO reins to 34-year veteran Seth E. Schofield, who began airline life as a baggage handler. Despite expectations, Colodny also lowered his participation in the company's affairs considerably. Some analysts are very optimistic about USAir's future. They see it as a strong No.4 carrier-with some help from a more concentrated U.S. industry. Edmund Greenslet, head of ESG Aviation Services, declares: "USAir came awful close to not making it... [Now] The probability is, we'll see

A dramatic improvement" in profits this year. Others are more measured. They think Schofield is taking actions that Colodny should have, such as obtaining Boeing 757s. Still, one analyst decries a disturbing "lack of a crisis mentality" in reducing costs. officers, for example, announced pay cuts in October but did not make them effective until january. In September, County NatWest said: "The airline requires continuing route restructurings and labor-cost reductions to survive. …

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