Air Transport World

America West Airlines: making reorganization work. (Company Profile)


WITH A SECOND YEAR OF RECORD EARNINGS IN THE BOOKS, some of the lowest costs and one of the strongest balance sheets in the industry, and a new management team that is focused on "cash flow and profits," America West is dem- onstrating that bankruptcy rorganization really can work.

"I'm not an airline guy but I believe that this is a commodity product and that cash flow is what counts," says Chairman and CEO William Franke, who engineered the complex deal that allowed a pared-down America West to emerge from three years of bankruptcy last Aug. 25. "I'm not convinced that bigger is better [or] that you grow the revenue line just to grow it.

Franke agrees that this represents a basic change in the philosophy that led America West to explode in seven years from three Boeing 737s serving five cities to a 123-aircraft fleet and a route system stretching from the U.S. East Coast to Nagoya. What has not changed is founder Edward Beauvais's concept of a huband-spoke airline combining low fares with amenities such as meals, assigned seating, interlining and by the end of 1995, IFPC FlightLink interactive entertainment systems at every seat.

"We've tried hard to differentiate ourselves from the other lowcost carriers--whether it's Southwest or the United Shuttle or Continental Lite, to name a few--by providing an increment of service you don't find on many shorthaul carriers and by pricing ourselves competitively," he says. One shift in strategy has been "to try to attract the passenger who's looking at the medium to longer haul. We have not placed as much emphasis as in the past on the short-haul market," i.e., competing head-to-head with Southwest.

Franke also acknowledges that America West still must resolve "two major issues" in the months ahead: A disgruntled work force and a toothin management. "Employees had to bear a significant portion of the recent bankruptcy and we need and intend to develop a compensation plan that is fair, competitive, yet doesn't saddle the airline with the very high costs our competitors have inherited over the years," he said. "And we need to develop the management team necessary to carry the airline over the next 10 years. We've gone through a lot of change as a result of the bankruptcy and we're in the process of attempting to develop not only the strategy but the leadership qualities necessary to implement the strategy."

The only remaining carrier of some 150 founded in the first flush of deregulation, it was launched on Aug. 1, 1983 by Beauvais, who today is putting together a new airline based in Colorado Springs. He and President Michael Conway were advocates of "critical mass" and by 1990, their by-thenmajor airline had 14,000 employees and was serving 60 destinations from a "superhub" of Phoenix and Las Vegas. …

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