Air Transport World

Unfinished business.(US Airways emerges from bankruptcy but faces challenges)(Brief Article)

While US Airways has made big strides away from the brink of bankruptcy, its leaders agree there is still a long way to go

No doubt about it, US Airways no longer is the basket case of five years ago. By the same token, rebuilding it from near-bankruptcy after years of poor management is not yet complete. Stephen Wolf and Rakesh Gangwal joined US Airways in early 1996 as chairman/CEO and president respectively. Gangwal became CEO last year and is poised to succeed Wolf, whose longest stint in the last 18 years was seven years--1987-1994--at United Airlines. Gangwal was Wolf's head of planning at United.

The two arrived fresh from their participation in an overhaul of Air France, Wolf as a consultant, Gangwal as a top-level official. Their presence there upset employees not ready to accept business reality but contributed greatly to Air France's restructuring.

Prior to that, Wolf had presided over three airline sales. The biggest was at United, in 1994, to employees, including pilots and mechanics who had clashed for years with management. Before the buyout, a British Airways-led LBO of United failed during the 1989 stock market crash.

The new team had a good idea of what faced them when they landed on their new employer's doorstep next to Reagan Washington National Airport. The company had accumulated a net loss of $2.845 billion in the previous eight years. Numerous respected managers had left. Nonunion workers were demoralized after hefty pay cuts. Some pilots were on furlough. Remaining union personnel were unhappy too, but they had their industry-leading high pay for comfort. Productivity set a standard at the bottom end. Bankruptcy had been discussed.

However, Wolf and Gangwal inherited one huge asset, one that had protected the airline throughout its history, including during the botched 1987 takeovers of PSA and Piedmont: The near-monopoly grip on short-haul, high-yield traffic in the northeastern US. More broadly, 84% of US Airways' departures and 56% of its capacity originate east of the Mississippi River.

Notwithstanding the extensive due diligence that is part of business deals, Wolf explains that no one really knows the whole story until he is on the inside. Meaning, "USAir was in far more difficult shape than expected"--for example, selling new airplanes to raise cash. The jet fleet, totaling 454 aircraft in 1990, was down to 367 last year. Still, Wolf felt the company was 'fixable".

Three and three-quarters years later he finds, "We still have a long way to go. Gangwal amplifies, "This is a grass-roots change going on. We intend to build a profitable, robust, long-term entity."

The two have made big strides. In trademark fashion Wolf rapidly changed the airline's paint scheme, logo, and while he was at it, its name--just slightly--in a rapid-fire attempt to revitalize the company's image. Cosmetics, though, are no replacement for service. US Airways' historically small-minded approach had earned it near-contempt for years. Wolf and Gangwal went to work on making it the "carrier of choice," particularly of high-yield fliers who could help pay the cost of battling low-fare carriers.

But changing an airline's attitude about what the paying public deserves takes time. A frustrated passenger wrote ATW for help with an unacknowledged complaint about exceptionally poor servicing of first-class facilities on a particular flight. …

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