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US Airways CEO Letter to Secretary of Transportation Applauds Dialogue on the Competitive Future of U.S. Airline Industry

Dépèche transmise le 12 novembre 2009 par Business Wire

US Airways CEO Letter to Secretary of Transportation Applauds Dialogue on the Competitive Future of U.S. Airline Industry

US Airways CEO Letter to Secretary of Transportation Applauds Dialogue on the Competitive Future of U.S. Airline Industry

TEMPE, Ariz.--(BUSINESS WIRE)--In a letter to U.S. Secretary of Transportation Ray LaHood, US Airways’ (NYSE: LCC) Chairman and CEO Doug Parker responded to Secretary LaHood’s invitation to attend the Future of U.S. Aviation Forum being hosted today by the Department of Transportation. In the letter, Parker shares the airline and industry’s views about the future competitiveness of the U.S. aviation industry. The letter in its entirety follows:

                November 11, 2009
 
 
The Honorable Ray LaHood
Secretary of Transportation
U.S. Department of Transportation
1200 New Jersey Ave., SE
Washington, DC 20590
 
 
Dear Secretary LaHood:
 
Thank you for the invitation to the Future of U.S. Aviation Forum hosted by the U.S. Department of Transportation (DOT) on November 12, 2009. Unfortunately, US Airways has a regularly scheduled Board of Directors meeting on that date so I will not be able to attend.
 
Although I cannot be in Washington tomorrow, Tom Chapman, our Vice President, Congressional and Federal Affairs will represent US Airways. All of us at US Airways applaud your effort to “begin a dialogue about the health and future competitiveness of U.S. Aviation.” Like the DOT, we are concerned about the future competitiveness of the U.S. aviation industry and I wanted to share some of our views. While I believe the positions stated here are shared by most airlines, I obviously can only speak for US Airways.
 
First and foremost, any discussion about the future of U.S. aviation must begin with an assessment of the current financial state of our Nation’s airlines. The fact is our industry is severely financially challenged because of massive losses over an extended period. The U.S. airline industry has lost nearly $60 billion since 2001, with $27 billion of those losses coming during the oil price spike and the global recession suffered in 2008 and 2009. As a result, most of the major airlines have borrowed heavily against their assets and business relationships and have little or no ability to raise additional capital. If we want a healthy and competitive airline business, we simply must figure out a way to make our industry profitable over the long term so we can attract new capital over time. This, of course, is what every unregulated industry in the U.S. must do to ensure it remains healthy and competitive, but for some reason this concept often gets dismissed when well-meaning, thoughtful people get together to discuss aviation policy.
 
We can not dismiss it any longer, Mr. Secretary. The reality is that every important issue you will discuss and look to resolve at this week’s forum will not just be influenced by the industry’s financial condition, but severely, if not completely, constrained by it. Take, for example, NextGen. It will yield enormous benefits to consumers through reduced congestion. It will also reduce carbon emissions significantly by shortening flight times. Our industry has worked well with the Federal Aviation Administration to shape NextGen, and we are extremely supportive of its implementation. However, if the cost of deploying NextGen has to be covered by even higher taxes or fees imposed on the airlines, we prefer to live without it at the current time. This is not just because we believe the public benefits of NextGen justify funding it with general tax revenues (although they do). It is more because our industry currently lacks the financial wherewithal to finance costly projects like this.
 
This inability to produce long-term profits affects all of our constituents. Our employees rightfully worry about financial and job security. Our customers grow frustrated with ever-changing policies and concern about service quality. Those customers and the communities we serve worry about the viability of their air service. This is of particular concern to the smaller communities of the United States, most of which are only served by the larger and more vulnerable hub-and-spoke airlines.
 
The good news is I believe we are making important progress toward this objective of sustainability and have taken important steps toward long term industry profitability. The industry has taken aggressive and swift measures to improve performance and create stability. We have reduced U.S. capacity in the last two years to better meet demand. The mergers of US Airways-America West and Delta-Northwest have helped to modestly consolidate an overly fragmented industry. We have instituted a la carte revenue programs that better match the cost to consumers with the services they use. We have reduced our expenses through aggressive cost management. We are improving operations as evidenced by the September Air Travel Consumer Report issued by DOT earlier the week. Industry on-time performance was 86.2%, the highest since 2003; cancellations declined by 70% versus September 2008; mishandled baggage declined by 22% and consumer complaints to the DOT declined 12%. And, of course, we accomplished all of this while maintaining an uncompromising commitment to safety and operating the safest aviation system in the world under the oversight of the FAA.
 
The result of all of this progress is that some analysts are actually projecting the U.S. airline business will be breakeven to slightly profitable in 2010. This alone won’t be enough to ensure the viability of the industry over the longer term, but it certainly would be a first step in the right direction. But the challenge will remain -- how does our industry achieve the level of sustainable profitability necessary to achieve our objectives and those of our constituents? Historically, at the first sign of airline profitability, changes have been made to make it harder for us to succeed. Many of these changes have been made by airline management (adding new airplanes, signing labor contracts that can’t be met, etc.) but many others have been imposed on us by our government in the form of new taxes, fees, unfunded mandates or increased regulation.
 
We are hopeful that the current airline management teams have learned from the mistakes of the past. But we would also ask this Administration to be careful not to repeat the mistakes of your predecessors. It is important to note that, despite our challenges, no one in the airline industry is looking for a government bailout or the kind of assistance that was provided the banking, insurance and automobile industries. To the contrary, our request is to simply let us run our businesses, continuing on the path of progress we have already successfully begun.
 
In short, our request of the Administration as it relates to U.S. aviation is “Do No Harm.” The “Do No Harm” prescription means two things as it relates to aviation policy. First, please do not impose any additional taxes, fees or unfunded mandates on this already over-taxed industry. Second, please allow us the ability to fix our industry through rational business decisions and actions and self-help mechanisms.
 
As it relates to taxes and fees, please note that in 2008, U.S. airlines paid nearly $18 billion in federally levied or approved special aviation taxes/fees. That’s up from $12 billion in 2000. Today, on a $300 roundtrip ticket with a stop in each direction, $60 or 20% constitutes government imposed taxes/fees. That’s up from 13% in 1992 and is now higher than the rates charged by the government on tobacco or liquor. While we’d like to argue for a reduction in this tax and fee burden, we recognize that is unlikely in this economy and simply ask that it not be made worse.
 
As an aside on this taxes and fees point, you are likely to hear some arguments to impose fees that are “paid for by the consumer” in the form of a user fee. Please know that if the American consumer were willing to accept higher cost air travel, our industry would not have lost $60 billion since 2001. The fact is any taxes or fees that increase the cost of air travel -- irrespective of how they are collected -- directly and negatively impact the U.S. airlines’ ability to generate adequate returns.
 
As it relates to allowing us to fix ourselves through sound business decisions and self-help, we would simply ask the Administration support efforts designed to improve the industry’s long-term viability. This could involve a broad spectrum of initiatives but, most visibly, is likely to include initiatives that are standard ways of addressing change and creating stability in other industries such as trading or selling assets to allow more productive use, the formation of alliances or joint ventures and mergers. Given the importance of our shared objective to make the industry sustainably profitable over the long term, we hope that DOT would encourage airlines to engage in such self-help measures, so long as they were compliant with the applicable antitrust laws.
 
Finally, while not completely consistent with “Do No Harm,” if the Administration were inclined to take an initiative to help the airline industry, there is nothing that would be more helpful than imposing restrictions on speculation in the oil commodities markets. Current prices for oil can not be justified by global supply and demand but are being held up by continued, unchecked speculation. We know the Administration is working to impose position limits and other restrictions on this activity and we reiterate our support for that work and our desire to see it addressed quickly.
 
Thank you again, Secretary LaHood, for convening the Future of U.S. Aviation Forum and for inviting me to attend. In summary, we believe that if we are to have a viable, competitive U.S. aviation industry then we must work together to enable the industry to become sustainable and profitable over the long-term. This is not just one objective in a plan for success, but an imperative that must be met if we are to be successful on other objectives that are shared by DOT, the airline industry, our employees, customers and investors. To do this, we simply ask the Administration to allow us to compete, not impose any new taxes, fees, or costly mandates and support our efforts to make and execute rational business decisions.
 
Please let me know if you have any questions or would like to discuss this in more detail.
 
Sincerely,
 
Doug Parker
US Airways Chairman and CEO

About US Airways

US Airways, along with US Airways Shuttle and US Airways Express, operates more than 3,000 flights per day and serves more than 190 communities in the U.S., Canada, Europe, the Middle East, the Caribbean and Latin America. The airline employs more than 32,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers its customers more than 19,000 daily flights to 1,071 airports in 171 countries. Together with its US Airways Express partners, the airline serves approximately 80 million passengers each year and operates hubs in Charlotte, N.C., Philadelphia and Phoenix, and a focus city at Ronald Reagan Washington National Airport. And for the eleventh consecutive year, the airline received a Diamond Award for maintenance training excellence from the Federal Aviation Administration for its Charlotte hub line maintenance facility. For more company information, visit usairways.com. (LCCG)

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