Strategic Management Group Assignment

7/31/2019 Strategic Management Group Assignment

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BUILD BRIGHT UNIVERSITYSiem Reap, Cambodia

MBA PROGRAM

Strategic Management

U.S Airway Group, INC

Group Exercise

Lecturer by:

Mr. Rom Ra

BBA, MBA,

Group member:Mr. Phich Sokda 092 991 005Ms. Pen Kesornicole 012 595 921

Ms. Ny Sandayvy 012 800 311Mr. Lim Seanghout 012 505 853

Mr. Koet Vitiea 097 9557 357

Mr. Khoun Sokhemra 016 633 999

Mr. Heang Mengho 077 652 111


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TABLE OF CONTENTS

Page

I . I ntroduction

1.1 Firm Background ....................................................................................................... 1

1.2 Vision/Mission/Goal/Objective 12

1.3 Headquarter Office/Geographical Operation .. 13

1.4 Firm Structure . 15

I I Ext ernal environment ( Opportunit ies & Threats )

(Socio-culture, economics, political, legal, and technological) . 16

I I I I nternal environment (Str engths &Weakness)

4.1 Management (BOD and top management) . 23

4.2 Marketing . 28

4.3 Operation/Production .. 28

4.4 Finance . 29

I V Crit ical success Factors/ Firm st rat egies

V Conclusion & Recomm endation


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I . I ntroduct ion

US Airways, along with US Airways Shuttle and US Airways Express, operates morethan 3,000 flights per day and serves more than 200 communities in the U.S., Canada,Mexico, Europe, the Middle East, the Caribbean, Central and South America. The airline

employs more than 32,000 aviation professionals worldwide and is a member of the StarAlliance network, which offers its customers more than 21,000 daily flights to 1,290airports in 189 countries. Together with its US Airways Express partners, the airlineserves approximately 80 million passengers each year and operates hubs in Charlotte,N.C., Philadelphia and Phoenix, and a focus city in Washington, D.C. at Ronald ReaganWashington National Airport. US Airways was the only airline included as one of the 50best companies to work for in the U.S. by LATINA Style magazines 50 Report for 2010and 2011. For six years in a row, the airline also earned a 100 percent rating on theHuman Rights Campaign Corporate Equality index. The Corporate Equality index is aleading indicator of companies attitudes and policies toward lesbian, gay, bisexual andtransgender employees and customers. US Airways also ranked #1 among its competing

hub-and-spoke network carriers for 2010 performance as rated by the Wichita StateUniversity/Purdue University Airline Quality Rating (AQR). For more companyinformation follow US on Twitter @USAirways or at Facebook.com/USAirways.

1.1 Firm Background

1939

All American Aviation brings the first airmail service to many small westernPennsylvania and Ohio Valley communities with introduction of a unique 'flying postoffice service.

1948Piedmont Airlines begins operations.

1949

All American Aviation becomes All American Airways and makes the transition fromairmail to passenger service with introduction of the DC-3 and an expansion of itsservice. Pacific Southwest Airlines begins operations with service in California.

1953

All American's route system grows and the name is changed to Allegheny Airlines,recognizing the mountains and river of the same name that lie in the heart of the airline's

network.

1965

Allegheny Airlines begins the transition to turbine-powered aircraft with introduction ofthe first Convair 580, its workhorse for the next several years.


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1966

The first jet, a DC9-10, makes its debut in Allegheny colors. It is replaced the followingyear by the first of what would eventually become a fleet of 62 larger DC9-30 jets.

1967

The first Allegheny Commuter service begins, between Hagerstown, MD andBaltimore/Washington International Airport by Henson Aviation, forerunner of today'sPiedmont Airlines. It was the beginning of today's network of 10 regional airlines thatprovide US Airways Express service to 172 cities throughout the nation.

1968

Allegheny merges with Indianapolis-based Lake Central Airlines, expanding the growingroute network beyond Pittsburgh to the Midwest including Dayton, Columbus and

Cincinnati, OH; Indianapolis, IN; and St. Louis, MO.

1972

Allegheny acquires Mohawk Airlines, a Utica, NY airline with service to most citiesthroughout New York and New England. With the merger, Allegheny acquiredMohawk's BAC-1-11 jets to complement its DC9s and becomes the sixth largest airlinein the world as measured by passenger boardings.1978

Deregulation comes to the U.S. airline industry. Airlines have new freedom to expandtheir route systems and more flexibility to develop new and innovative pricing structures,but lose the protection of the fare- and route-setting authorities exercised by the CivilAeronautics Board, which closes down by 1984.

1979

Allegheny changes its name to USAir to reflect its expanding network, including post-deregulation entry into Arizona, Texas, Colorado, Florida and later, California.

1983

America West Airlines begins operations in Phoenix on August 1 with 230 employeesand three 737s, serving Colorado Springs, CO; Kansas City, KS; Los Angeles, CA; andWichita, KS. The airlines schedule calls for 20 daily departures.

1984

USAir introduces its Frequent Traveler program, which provides travel benefits toUSAir's most loyal customers.

1986

Piedmont acquires Empire Airlines and its Syracuse, NY hub.


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1987

Large-scale airline consolidation, a partial product of deregulation, continues. Piedmontintroduces European routes in its system. Competition for the lucrative California marketintensifies as local carriers are bought and merged into larger partners. Pacific SouthwestAirlines of San Diego becomes a wholly-owned subsidiary of USAir Group in May.

Piedmont Airlines, the dominant carrier throughout the mid-Atlantic region of the UnitedStates, also becomes a subsidiary of USAir Group in November 1987.

1988PSA is merged into USAir.

1989

Piedmont is integrated into USAir, the largest merger in airline history. The mergerbrings with it Piedmont's international routes as well as its Charlotte, Baltimore, Daytonand Syracuse hubs. Baltimore and Charlotte remain hubs. The merger also brings USAir'sfirst wide body jets, the Boeing 767-200ERs now used on its transatlantic and some

transcontinental routes.

1990

USAir expands its international flying with service between Pittsburgh and Frankfurt,Germany, complementing existing Charlotte-London service begun in 1987 by Piedmont;and in 1991, international expansion continues with the introduction of new nonstopsbetween Charlotte and Frankfurt.

1992

Philadelphia-Paris is added to USAir's transatlantic schedules in January. Daily nonstopsbetween both Philadelphia and Baltimore/Washington International Airport and LondonGatwick Airport are introduced in May. USAir and Trump Shuttle begin a marketingaffiliation under which the service becomes the USAir Shuttle. The Shuttle provideshourly service between New York and Boston and between New York and Washington,DC. USAir's new terminal at New York LaGuardia opens, as does the new MidfieldTerminal at Pittsburgh International Airport.

1993USAir and British Airways announce an investment/alliance plan, under which USAirgives up its London route authority.

1994

USAir makes its largest expansion ever of its 10-year-old Frequent Traveler Program bybecoming the exclusive U.S. domestic airline partner of LatinPass, which has 14 LatinAmerican airlines sharing program benefits.

1995

USAir posts its first profitable year since 1988, with earnings of $119.3 million on salesof $7.474 billion. USAir introduces Priority TravelWorksSM, allowing bookings frompersonal computers.


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1996

Stephen M. Wolf is elected chairman effective January 22. Seth E. Schofield retires aschairman after 38 years' service to the company and three and a half years and chiefexecutive. USAir continues its transatlantic expansion, winning the right to serve

Munich, Rome and Madrid from Philadelphia beginning in 1996. USAir introducesticketless travel. USAir, in a dramatic two-week period, announces what might in time bethe largest single order for airliners; then announces a new name, image, identitydesigned to carry the airline aggressively into the next century. The airline ordered up to400 new Airbus A319, A320 and A321 narrowbody twin jets for delivery starting in 1998and continuing through 2009; then within days announced its new identity as USAirways. The airline challenged its relationship with British Airways in court, seekingrights to London Heathrow from four U.S. gateways and to require British Airways todispose of its USAir stock. USAir notifies BA the codeshare between the two will end inMarch, 1997, and in December, British Airways announces it will sell its shares in USAirand that its three directors will resign.

1997

The name US Airways is put into use officially on February 27. Signs, stationery, ticketstock, business cards, advertisements, marketing materials, ticket folders and counters allstart to sport the new US Airways blue, red, gray and white identity, and the first aircraftare painted in the new scheme as the changeover approaches. The US-BA codeshareexpires in March.

1998

US Airways Inc., purchased Shuttle Inc., from a consortium of banks. The Shuttle hasflown under the US Airways name since 1992, when US Airways became an investor inthe Shuttle with a minority ownership stake. US Airways Shuttle flies 17 daily roundtripsbetween Boston and New York LaGuardia, and 16 daily roundtrips between New YorkLaGuardia and Washington Reagan. US Airways introduces Personal TravelWorks, anonline travel reservation system. MetroJet by US Airways starts service, providing theairline with a low-fare unit to compete in the eastern United States. MetroJet's single-class, using Boeing 737-200 aircraft, proves highly popular. US Airways Expressintroduces regional jets to its system. US Airways fleet transformation begins with theintroduction of the first of as many as 400 Airbus A320-family aircraft.

1999

US Airways first Airbus A320 aircraft enters service with scheduled daily flights betweenPhiladelphia and Los Angeles. The new 142-seat A320 is part of the US Airways plan tosimplify and modernize the fleet by adding Airbus A319, A320 and A330-300 aircraft.US Airways expands its international route network by adding nonstop service betweenits Charlotte, NC hub and London Gatwick. Charlotte becomes the third US Airwaystransatlantic gateway. Colgan Air, Inc. joins the US Airways Express nine-carriernetwork, expanding service to destinations across the East Coast from Bar Harbor, ME toAtlanta, GA. The Sabre system becomes the platform for the majority of US Airways'computer operations, giving the airline the most modern computer technologies available


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2003

US Airways begins implementation of a codeshare agreement with United Airlines,introducing customers of both airlines to more than 3,000 codeshare flight segments inthe first half of the year, reciprocal airport club use and simplified ticketing and baggageprocedures. Midway Airlines joins the US Airways Express ten-carrier network, bringing

expanded regional jet service to destinations such as Jacksonville, FL and Myrtle Beach,SC. US Airways launches service in May between Philadelphia and both Dublin andShannon, Ireland, the airline's ninth and tenth European destinations.

2004

US Airways joins the Star Alliance network, an alliance of member airlines that sharenetworks, lounge access, check-in services, ticketing and other services.

US Airways Group, Inc. files again for reorganization under Chapter 11 of the UnitedStates Bankruptcy code on September 14, seeking to restructure operating costs in lightof ever-increasing fuel prices and cutthroat industry competition.

2005

America West Holdings and US Airways Group, Inc. announce plans to merge on May19. Former America West Airlines Chairman and Chief Executive Officer Doug Parker ischosen to run the combined airline.

In August, America West and US Airways unveil the livery that will appear on theaircraft of the new US Airways. Employees of both airlines, some sporting 'retro'uniforms heralding back to various periods in the airlines' pasts, celebrate the new paintscheme as a freshly painted Airbus A320 makes its way across the country, stopping forspecial events with union leaders of both airlines.

The merger transaction is officially complete on September 27, and US Airways Group,Inc. is no longer in bankruptcy. Stock of the merged airline begins trading on the NewYork Stock Exchange under the LCC ticker symbol.

2006

US Airways adds Lisbon, Stockholm and Milan to its expanding international route mapwith several domestic routes including Portland, OR to/from Philadelphia; Orlandoto/from Key West, FL; and Sarasota, FL to/from Washington, DC. Throwback liveriesare dedicated mirroring the schemes of PSA, Piedmont, Allegheny and America West.Events are held in the progenitor airlines hub cities. The airline posts profits for both thefirst and second quarters of the year, surpassing analyst expectations and contributingtens of millions of dollars to employee profit sharing programs. The airline employs morethan 35,000 aviation professionals and its route map encompasses 3,800+ daily flightsserving 239 destinations and 28 countries/territories.

2007

US Airways inaugurated new service from Philadelphia to Athens, Brussels and Zurichand announced the airline's first-ever service to London Heathrow from Philadelphia to


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2009

On January 15, the crew of flight 1549, bound from New York LaGuardia to Charlottesuccessfully ditched their crippled aircraft in the Hudson River. All 155 passengers andcrew survived.

US Airways was awarded and began year-round service from its Charlotte hub to Rio deJaneiro, resumed its Charlotte to Paris service and began service from Charlotte to Rome.Also in 2009, the airline began nonstop flights from Philadelphia to Tel Aviv and fromPhoenix to Montego Bay. During the year, the airline entered into codeshare agreementswith Qatar Airways, ANA and TACA.The airline introduced its Power-Nap Sack pillow and blanket kits and reinstatedcomplimentary nonalcoholic beverages in flight. US Airways also reintroducedcomplimentary house wine and beer in the US Airways Clubs and announced free Wi-Fi.The airline also announced the ability to prepay for checked bags online. During the thirdquarter US Airways unveiled its newest transatlantic, lie-flat business class cabin, theEnvoy Suite.

In the third quarter US Airways announced an airport slot transaction with Delta Airlines.Upon regulatory approval, US Airways will obtain 42 pairs of slots (roundtrip flights) atWashington Reagan and will acquire the rights to expand to Sao Paulo and Tokyo. USAirways will transfer to Delta 125 pairs of slots used to provide US Airways Expressservice at New York LaGuardia. US Airways also announced that, once the transaction iscomplete, the airline would provide service to 15 new destinations from WashingtonReagan. The airline announced that the transaction is expected to improve profitability bymore than $75 million annually.In October, US Airways announced a strategic plan to strengthen its core network byrealigning its operational focus on its hubs in Charlotte, Philadelphia and Phoenix and itsfocus city Washington, DC. These four cities, as well as the airlines hourly Shuttleservice between New York LaGuardia, Boston and Washington Reagan will serve as thecornerstone of the airlines network and will present 99 percent of the airlines availableseat miles, compared to the 93 percent in 2009, by the end of 2010.The airline completed a major liquidity improvement plan in November, reducing capitalspending and deferring certain debt repayments, which improved the projected year-end2009 liquidity by approximately $150 million and would generate, in aggregate,approximately $450 million of projected liquidity improvements by the end of 2010.

2010

In the first quarter of 2010, US Airways began a new bilateral codeshare agreement withEl Salvador-based TACA Airlines, opening up new Central American offerings for USAirways customers at Managua, Nicaragua; San Salvador, El Salvador and GuatemalaCity, Guatemala. The airline also announced a new codeshare agreement with BrusselsAirlines. The new codeshare, which began April 3, provides single-source booking,ticketing and baggage connections for more than 20 new destinations in Europe andAfrica, including points in Gambia, Senegal, Cameroon and Kenya.In March, the airline launched wireless internet through Gogo Inflight Internet on fiveof its Airbus A321 aircraft, with the remaining fleet of A321 aircraft outfitted by June.Gogo allows passengers to use their laptops or Wi-Fi enabled mobile devices to access


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the web, email, log in to corporate Virtual Private Networks (VPN) and access onlineentertainment options.In April, the airline moved to a cashless cabin on mainline domestic flights, acceptingonly credit and debit cards in flight to expedite cabin service and reduce back-endprocessing time and costs.

From the airlines largest hub, Charlotte, NC, US Airways launched year-round service toMelbourne, FL in February, began begin daily, year-round service to Ottawa on May 31and on June 5, the airline began year-round service to Puerto Vallarta and Los Cabos,Mexico. The airline also initiated new transatlantic service from Charlotte to RomeFiumicino Airport, inaugurated new nonstop, year-round service to Ottawa, Ontario inMay and resumed service to Baton Rouge, LA in June. Nonstop seasonal summer servicebetween Charlotte and Madrid, Spain and Dublin, Ireland was also announced, whichwill begin in May 2011. The new flights complement US Airways daily, nonstop year-round service to both destinations from Philadelphia, the airline's international gateway.In Philadelphia, the airline began operating both international and domestic flights atPhiladelphia International Airport's Terminal A-East upon the relocation of Delta to

Terminal D in April, giving the airline full or shared access to all international gates inPhiladelphia, reducing operational challenges and providing a better airport experiencefor customers. The airline also launched its first-ever service to Halifax, Nova Scotia onJune 1.In the summer of 2010, the airline announced a major expansion of its bilateral codeshareagreement with Star Alliance partner Spanair, giving US Airways customers seamlessaccess to destinations within Spain, the Canary Islands, continental Europe and Africa.Also announced was a new bilateral codeshare agreement with Star Alliance partner,Turkish Airlines, giving customers access to Istanbul via Turkish Airlines service fromFrankfurt, Munich and Zurich access to four new destinations including Adana, Izmir,Antalya and Ankara via Istanbul. In addition, US Airways customers may now opt fornonstop travel to Istanbul via Turkish Airlines service at New York John F. KennedyInternational Airport and Chicago O'Hare International Airport.The company reported a net profit of $279 million for its second quarter 2010, or $1.41per diluted share the companys second highest quarterly profit since its 2005 merger.In June, the airline paid out $150 to each employee for delivering top DOT rankings forthe month of May in on-time performance, baggage handling and customer satisfactionamong the five largest network carriers. US Airways also ranked #1 in on-time arrivalsand customer satisfaction among major network carriers for Q2 2010 and has ranked #1among its peers in baggage handling in May, July and August.US Airways launched FastPathSM an expedited airport experience for customerstraveling between Boston and Philadelphia. FastPath features dedicated facilities forcurbside check-in and bag drop, ticket counter check-in, security checkpoint lanes,departure gates and baggage claim carousels.The airline received distinction as one of the 50 best companies for Latinas by LATINAStyle magazine for 2010. US Airways was the only airline included among the top 50companies. Also during the quarter, the Company received distinction as one of 'BestPlaces to Work' and earned a 100 percent rating on the Human Rights Campaign'sCorporate Equality Index, which is a leading indicator of companies' attitudes andpolicies toward lesbian, gay, bisexual and transgender (LGBT) employees and customers.


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This is the sixth year in a row the airline has achieved a perfect score.In October, Mesa and US Airways signed a term sheet that outlines the terms andconditions beyond the current codeshare term, which ends June 2012. The term sheetreflects a 39-month extension, through September 2015, for Mesa to operate the 38CRJ900 aircraft they fly for US Airways.

In October, US Airways reported a net profit of $240 million for its third quarter 2010 the highest third quarter profit in the companys history.In November, US Airways announced the need to recall and hire an additional 500 crewmembers, 420 flight attendants and 80 pilots, for 2011 to cover retirements, attrition andinternational growth. The airline also announced record load factors for the month ofOctober at 83.6 percent for mainline operated flights.The airline launched Star Alliance Upgrade Awards, an innovative and unique programthat allows US Airways Dividend Miles members to use their miles to upgrade to thenext class of service on Star Alliance partner operated flights. The program also allowsfrequent flyers with other Star Alliance carriers to use miles towards an upgrade whentraveling on US Airways.

The airline, in the fourth quarter, introduced electronic boarding passes in Las Vegas andCharlotte with plans to expand the program to the entire US Airways system in the firstquarter, 2011. The new technology allows customers to receive their boarding passelectronically via their smart phone and to seamlessly pass through security and board theplane.For the fourth quarter, US Airways paid employees $50 three times for ranking #1 inbaggage performance among the Big Five hub-and-spoke network airlines for themonths of July, Aug. and Sept. as ranked by the DOT. Employees also received another$50 for surpassing the airlines internal goals for on-time arrivals for the month of Oct,another $100 for top ranking in baggage handling and customer complaints for Nov., andan additional $50 for the airlines #1 spot in baggage handling for the month of Dec.,bringing the airlines year-to-date companywide employee payouts to approximately $24million, or $650 per employee.US Airways recorded a fourth quarter profit excluding special items of $28 million, thecompanies first profitable fourth quarter since 2006. It also recorded a full year 2010 netprofit excluding special items of $447 million, the second highest profit in the companyshistory, and an accrual of $47 million in the airlines employee profit sharing program.

2011

US Airways, in January, announced the signing of a new multi-year partnershipagreement with Expedia to continue offering its full range of products and services,including all fares and inventory, through Expedia, Hotwire and Egencia sitesaround the world.In February, the Federal Aviation Administration (FAA) validated the airlines fullyfunctioning Safety Management System (SMS), making US Airways one of the first U.S.airlines to receive the FAA's validation of its company-wide implementation of thisvoluntary safety enhancement program.Also in February, the U.S. Department of Transportion (DOT) ranked US Airways #1 inbaggage handling for 2010 among the major network carriers according to the DOTDecember 2010 Air Travel Consumer Report.


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US Airways announced that it will begin three daily flights from its hub in Philadelphiato Quebec City on June 2.For the first time since 2007, in March US Airways employees received profit sharingchecks totaling $72 million for 2010 performance.US Airways achieved a number one ranking among the big five hub-and-spoke carriers

in the annual Airline Quality Ranking (AQR) report, an industry benchmark thatmeasures airline reliability and service.In April, US Airways announced the addition of First Class service to 110 US AirwaysExpress regional jets - expanding the number of domestic flights with First Class and theavailability of upgrades for the airline's Dividend Miles Preferred frequent flyermembers. The Company also announced several enhancements to its domestic First Classand Envoy international business class experience.In May, US Airways begins seasonal service to Madrid and Dublin from its Charlotte,N.C. hub. The new flights brought the number of international destinations US Airwaysserves from Charlotte, its largest hub, to 31 - six cities in Europe and 25 in Latin Americaand the Caribbean.

In May, Delta and US Airways announced a new agreement to transfer takeoff andlanding rights at New York's LaGuardia and Washington D.C.'s Reagan Nationalairports, which will enable Delta and US Airways to expand service and increasecompetition at two of the nation's key cities, and provide the opportunity for additionalaccess to LaGuardia and Reagan National for new entrants and airlines with a limitedpresence at the airports.Under the agreement, Delta would acquire 132 slot pairs at LaGuardia from US Airwaysand US Airways would acquire from Delta 42 slot pairs at Reagan National and the rightsto operate additional daily service to Sao Paulo, Brazil in 2015, and Delta would pay USAirways $66.5 million in cash. In addition, the airlines will divest 16 slot pairs atLaGuardia and eight slot pairs at Reagan National to airlines with limited or no service atthose airports. The completion of the transaction is subject to certain closing conditions,including government and regulatory approvals. A slot pair is the authority to operate onetakeoff and one landing.In June US Airways begins three daily flights from its hub in Philadelphia to QuebecCity, Canada. The new flights brought the number of international destinations USAirways serves from its Philadelphia hub to 36 - 17 cities in Europe/Middle East, 14 inLatin America/the Caribbean and 5 destinations in Canada.Also in June, US Airways announced that it reached a tentative agreement, subject toratification, on a new, four-year collective bargaining agreement with the TransportWorkers Union (TWU) that represents the airline's 164 flight dispatchers.In July, US Airways announced a second quarter, 2011 net profit excluding special itemsof $106 million, or $0.56 per diluted share.Also in July, the Department of Transportation (DOT) tentatively approved the proposedslot transaction, announced in May, at New York-LaGuardia and Washington-ReaganNational airports.

For the second year in a row, US Airways was named one of LATINA Style Magazines50 best U.S. companies for Hispanic women to work for.In August, the American Red Cross named US Airways as a 2011 Disaster Responder


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and recognized the airline for its support in disaster response.In September, US Airways operated its 200th Honor Flight, transporting veterans to visitthe World War II memorial and other sites in Washington, D.C. The flight took 101veterans from Raleigh-Durham International Airport in North Carolina to WashingtonNational Airport.

In October, Delta Air Lines and US Airways welcomed the decision by the Departmentof Transportation to approve the proposed slot transaction at New York-LaGuardia andWashington-Reagan National airports, subject to certain conditions. The DOTs finalorder represents a clear recognition by the Obama Administration that the slot transactionis in the public interest because of the service benefits and efficiencies that would resultin both New York and Washington, D.C.In November, US Airways announced it has returned work previously handled outside ofthe United States to its call centers in Winston-Salem, N.C., Phoenix, and Reno, Nev.The new positions meet a contractual requirement to handle all general reservations salescalls originating in the United States in U.S. call centers by Nov. 1, 2011.Also in November, US Airways announced two new routes from New York City and

North Carolina. Beginning March 10, 2012, customers on the East Coast can takeadvantage of US Airways' first-ever flight beyond the 1,500 mile limit set by theperimeter rule at New York's LaGuardia Airport with Saturday service to the airline'sPhoenix hub. Additionally, starting March 4, 2012 customers in Salt Lake City will haveaccess to daily year-round service to Charlotte, N.C.

1.2. Vision/ Mission/ Goal/ Object ive

US Airways, Inc. is a major airline based in the U.S. city ofTempe, Arizona. The airline isan operating unit ofUS Airways Group and is the sixth largest airline by traffic and eighth

largest by market value in the country.US Airways operates major hubs in Charlotte, Philadelphia and Phoenix and maintains focuscity operations at Ronald Reagan Washington National Airport.A member of the Star Alliance, the airline has a fleet of 340 mainline jet aircraft and 300regional jet and turbo-prop aircraft connecting 200 destinations in North America, SouthAmerica, Europe and the Middle East.In 2003 US Airways began exploring the availability of financing and merger partners,and after no financing was available US Airways filed for Chapter 11 bankruptcy again in2004 for the second time in two years. The airline merged in 2005 with America WestAirlines; The merger was treated as a reverse takeover of US Airways by America WestAirlines under FASB rules and regulations. Under harsh financial conditions, America

West initiated a merger with the larger carrier that took them out of bankruptcy andcreated what is today the 5th largest US based airline in terms of revenue. After themerger, the new airline retained the US Airways name. The name choice was based onstudies indicating that the US Airways name had better brand recognition worldwide thanthe America West name.The carrier operates the US Airways Shuttle, a US Airways brand which provides hourlyservice between Boston, New York and Washington, D.C. Regional airline service isbranded as US Airways Express, operated by contract and subsidiary airline companies.


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As of April 2012, US Airways employed 32,241 people worldwide and operated 3,208daily flights (1,271 US Airways Mainline, 1,937 US Airways Express).Research completed through the case and the Internet has revealed that US Airways hasno formal mission statement available to the public. Without a mission statement, USAirways will find it hard to form objectives and to answer the question What is our

business?. An effective mission statement can lead a company, encourage investors, andmotivate employees (Mission Statements, BUS 130, 230). To design a mission statementthat will be effective, the majority of nine characteristics must be included. Customers,products, markets, technology, profitability, philosophy, self, public image, andemployees are all components that should be incorporated into a mission statement(Vision and Mission Statements, BUS 485).An effective mission statement that US Airways could use follows:Our mission is to offer competitive prices to our customers, while using the latestadvances in technology to create a quality air travel experience. We strive to be the bestin our workplace, our industry, and our community.The above statement contains elements, which will help establish future objectives and

offer focus to US Airways stakeholders.

1.3 Headquarter Off ice/ Geographical Operat ion

US Airways has its headquarters in Tempe, Arizona. The 225,000 square feet (20,900m2) building was originally occupied by America West Airlines. Jahna Berry ofthe Arizona Business Gazette said in 2005 that the building "is one of the dominantbuildings in downtown Tempe." The City of Tempe gave America West $11 million inincentives and tax breaks so it would occupy what is now the US Airways headquarters,which cost $37 million to construct. Construction of the building began in January 1998,

although the official groundbreaking ceremony was held on February 19 of that year. Asof 2006, over 700 employees work at the nine story building.Previously US Airways had its headquarters in Crystal Park Four, a Class A. mixed-usedevelopment in Crystal City, Virginia. Park Four is between Reagan NationalAirport, The Pentagon, and Washington, D.C. After the merger with America WestAirlines, the company decided to close its Virginia headquarters and moved theemployees into the former America West building in three to six months after the mergerclosed. Russell Grantham at the Atlanta Journal-Constitution said that the decision tomove the headquarters to Tempe was not that difficult because the Crystal City facility"consisted of like two or three floors of people." US Airways operate 3,130 flights a dayto 132 destinations in 31 countries from its hubs in Phoenix, Charlotte and Philadelphia.

US Airways' routes are concentrated along the East Coast of the UnitedStates, Southwestern United States and the Caribbean, with a number of routes servingEurope and primary destinations along the U.S. West Coast. The airline's western U.S.presence has increased following the merger with America West. Code sharingwith United Airlines has helped US Airways by enabling the airline to offer its customersservice throughout the Midwest, Great Plains and Rocky Mountains states. Services toSouth America, Asia and Australia also are offered via the United Airlines codes share.Likewise, united passengers benefit from increased access via US Airways to the U.S.


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East Coast, Europe and the Caribbean. US Airways Express carriers operate a largenumber of domestic routes, primarily into US Airways' hubs and focus cities, but withsome exceptions, particularly small markets where the regional express carriers operateservice under the EAS program, as well as some point-to-point commuter routes in thenortheast and mid-Atlantic regions and south through the Carolinas. In February 2007,

the airline announced that its official operations center would be located in Pittsburgh,Pennsylvania.On November 11, 2007, US Airways announced nonstop service between Philadelphiaand London Heathrow Airport, its first service to the airport. The airline will retain itsexisting nonstop service between Charlotte and Gatwick Airport.Also in 2007, the airline applied for flights to Bogot, Colombia, however its applicationwas denied by the U.S. Department of Transportation after the agency awarded Delta AirLines, JetBlue Airways, and Spirit Airlines the routes from Delta's New York-JFK hub,JetBlue from Orlando, and Spirit from Fort Lauderdale.As of 2008, US Airways and other airlines have struggled with the price of fuel. Despitethat, US Airways CEO Doug Parker said "It is our international gateway. We'd like to

expand that". The airline has added three international flights during the summer of 2009,including to Tel Aviv from Philadelphia. US Airways has also started year-round servicebetween Charlotte and Rio de Janeiro. On June 1, 2010, US Airways inaugurated its newservice to Anchorage, AK from Philadelphia.In 2009, US Airways and Delta have reached an agreement to exchange landing/takeoffslots at both LaGuardia Airport and Ronald Reagan Washington National Airport. Also,US Airways plans to purchase flying rights to Tokyo and So Paulo from Delta. Theairline plans to begin service to Tokyo from its Phoenix hub with Airbus A330 aircraft;however it plans not to begin service until 2012 or later.US Airways has announced they will use United Airlines dormant Brazil slots to beginnonstop service to So Paulo from Charlotte. The route has been approved by the UnitedStates government and US Airways is waiting for approval from the Braziliangovernment to begin the route. Service is expected to start December 2012.


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1.4 Firm Str ucture


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I I . Ext ernal environment (Opportunit ies & Threat s)

OpportunitiesThe airline industry is one that is affected by many external factors. A change in fuelprices, by mere pennies, can force companies into bankruptcy. Even with the amount of

debt that US Airways has acquired, it has many opportunities available. With strategicplanning, help from the government, and a little luck, US Airwayscould once again seeprofits, market dominance, and growth internationally.

Point-to-Point

One opportunity that is available to US Airways is the use of point-to-point flying insteadof their already established hub-and-spoke flight patterns. There are many positiveoutcomes from this change. Customers prefer to get on one plane and arrive at theirdestination, rather than have a layover. There would be more profit from this type ofsystem because less fuel would be needed, fewer employees, and fewer airplanes. Costswould be lowered, therefore; ticket prices could be lowered. Fewer layovers and the

lowered ticket prices could increase the number of customers flying with US Airways.The hub-and-spoke system worked for US Airways when it was seeing profits and therewas more people flying. Today, it is costly, inefficient, and more of a burden on time-conscious travelers. This change will not happen overnight. It will take up to a year tochange the type of system used. Changing one flight at a time can do this.Changing from a hub-and-spoke system to a point-to-point system is an internalopportunity. However, its highly dependant on many external factors. Some of thesefactors include money from the government and investors, the views and attitudes of thecustomers, the cost of fuel, and the economy. One downside to this change is thetransition of the employees. Many employees are trained and prefer the alreadyestablished system. Resistance to change can be considered the single greatest threat to

successful strategic implementation (D 254).

Partnerships

Another opportunity that would improve US Airways current condition is a partnershipwith a financially stable company (Partnerships, BUS 130). There are many companiesthat could become a partner with US Airways, one such company is FedEx. There aremany obvious benefits from this action. The greatest advantage would be financially.With some solid financial backing, US Airways will be able to get back on its feetquicker. The idea of a partnership would prove beneficial for US Airways. If thegovernment wants to keep perfect competition and avoid monopolies, then they wouldgrant more funding and loans to US Airways.

Government

Without governmental funding, US Airways would have been another business thatfailed. When US Airways was in the middle of hard times in July 2002, the governmentgranted them a federal loan of $900 million (See Appendix D, pp. 48-50). One downsideto governmental funding is company image (Consumer Perception, BUS 340). If theykeep receiving outrageous amounts of money, consumers will start to see US Airways asa money pit. After the September 11 tragedies, the government aided the airline industry


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monetarily. Following the aftermath of September 11, people were upset that their taxdollars went to independent companies. Without airline companies, our country wouldsimply shut down. Another governmental opportunity is the fact that John McCain isproposing a change to the Railway Labor Act. This new proposal would make it hard forunions to get wage increases (See Appendix E, p.51). The proposal would lock union

members in at a certain wage. The wage freeze would help to keep US Airways laborcosts down.

Consumer Confidence

An opportunity for every business today is the increase in consumer confidence(Consumer Confidence and Buying Power, BUS 341). Without consumers spendingmoney, no company would survive. With the poor economy and September 11 tragedies,consumers are watching where they spend their money. As we move further and furtheraway from September 11, people are starting to forget about terrorism and some risks thatare involved with flying.Another opportunity that US Airways can take advantage of is the fact that bond rates are

high and interest rates are low right now. This would allow US Airways to refinancesome of its debt to lock-in lower rates. US Airways could take advantage of high bondrates by selling bonds to investors. This would be a great opportunity because bonds aresafer than stocks; in that they are secured and have a maturity date some years down theroad (Corporate Bonds and Stocks, BUS 361).

Technology

Another industry wide opportunity is technology. US Airways can take advantage ofoutside technology. Simple advances, such as making reservations by the Internet, willhelp boost sales. New accessories are becoming available as well; these accessorieswould make flying more convenient. An example of a newly added accessory would be

the complete workstation. More personal televisions, along with satellite radio, would bea welcomed attraction for flyers. This is extremely important to US Airways right nowbecause with the addition of new accessories and technology, business travelers willinsist on traveling with US Airways.Not long ago, US Airways filed for Chapter 11 bankruptcy. To fulfill this, US Airwayshad to file a report on its debt and its expected courses of action. The continuation of thisfiling is a huge opportunity for US Airways to get its feet back on the ground. Whilefiling for bankruptcy, US Airways will be protected from creditors. Along with thecompletion of this filing, US Airways will have some of their debt forgiven (Chapter 11Bankruptcy, BUS 371 / ACT 162). This gives US Airways an upper hand whennegotiating with the union. US Airways employees are among the highest paid in theindustry (See Appendix D, pp. 48-50). With the approval of their Chapter 11 filing, thepilots union will be forced to work with lower salaries because of the condition that thecompany is in currently.A final opportunity for US Airways is the promise of money after bankruptcy. The TexasPacific Group has promised to provide US Airways with a $200 million investment in thenew equity of the airline on its emergence from bankruptcy (See Appendix C, pp.46-47).This is money that US Airways does not have right now. However, if everything goessmoothly, it will have this money to further its investing. This allows leverage when


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finalizing finances. US Airways can take money away from investing and use it to payoff some debt because that money will be replaced upon the end of its bankruptcy.A strategic plan is one thing that US Airways does not have, and because of that, USAirways is suffering. Opportunities in the airline industry are very uncertain. No onereally knows if gasoline prices or consumer confidence will increase. Looking at US

Airways past actions, it seems as if US Airways is going with a hit or miss theory. Thecompany cut benefits and laid people off, that did not free up enough funds. So, now, USAirways is starting to cut some unprofitable flights. With all of its opportunities, even if ittakes advantage of them, US Airways needs to be aggressive and regain market share.With spring and summer approaching, competition in the airline industry is only going toget tighter. The companies who take advantage of their opportunities and planstrategically will prove most profitable.

Threats

Economy

One of US Airways most important external threats is the current state of the worldeconomy. The U.S. economy, which is believed to be in a recession, is one of the primaryexternal forces that a company needs to focus on, especially if the business is one that hasdifficulty producing revenues in a downturn (External Forces, BUS 130, 230, 380).

Demand for Air Travel

As a subset of economy, the demand for air travel is a large threat currently facing USAirways. With the economy slowed, consumers with low disposable income or fixedincome are unable to afford ticket prices, which drives the number of people willing tofly (demand) down (Discretionary Income, ECN 101). Demand becomes a threat becausewhen demand is low US Airways will still incur high fixed costs with little revenue to

cover the cost.The demand for business related travel has also fallen as businesses try to save cashduring the downturn. Business traffic comprises 50 percent of airline traffic butgenerates 65 percent of ticket revenue. Employers are sending employees to fewerseminars, or sending one delegate to attend and teach the material upon returning insteadof sending multiple employees. An economy in recession requires less business travel,and businesses are using cheaper methods in response to cash crunches. Webconferencing allows businesses to conduct meetings across the nation without having tofly employees to the site.

Possible War with Iraq

War with Iraq is an important threat because customers will be less likely to travel tointernational destinations for fear of being civilian targets. War with Iraq, a member ofOPEC, will cause Iraqi oil exports to decline and supply to drop. In addition, the militarywill be using more oil to fight a war, affecting supply. The result of both a decline inexports and an increase in usage will be a rise in oil prices, and fuel expenses for USAirways (Supply and Demand, ECN 102).Any company that competes internationally must focus on the current political issuesabroad that may hinder business in the future. Businesses should develop contingency


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plans on how to operate internationally when political instability occurs in other areas ofthe world (Contingency Planning, BUS 230).

Oil and Oil Producing Exporting Countries

Oil and OPEC can be a threat to US Airways whether or not the United States goes to

war with Iraq. OPEC has the ability to control production of 13 oil-exporting countries.This allows OPEC to move oil and, subsequently, fuel prices as it chooses. As statedbefore, because OPEC can control supply, they can cause the price of fuel to increase,costing US Airways more in fuel expenses (Supply and Demand, ECN 102).

Possible Acts of Terrorism

Possible terrorist activity will greatly affect the number of people willing to traveldomestically and internationally. The airline industry is still being affected by theSeptember 11 terrorist attacks, which resulted in a large drop in air travel demand. Ifterrorist activity, across the globe, starts to become a problem again, US Airways willlikely see a drop in ticket sales, which will cause revenues to decline.

Union Strikes

US Airways most costly expense is the amount of money it pays for personnel. Unionshave strong negotiating positions inside companies because of their ability to stopproduction or services with walkouts and strikes (Organized Labors Rights, BUS 372,420, DSP 326). A potential strike by union workers at US Airways is a critical threat tothe companys success. Strikes by the pilots union, flight attendants union, andmechanics union can cause stoppages on many of US Airways flight routes. Theseunions will strike if they feel they are not receiving fair pay, benefits, safe workingconditions, and other possible rewards (Compensation Packages, Union Grievances, BUS420, DSP 326).

Air Line Pilots Association Region Flight Cap

The Air Line Pilots Association currently has a cap on the number of flights their pilotscan fly on long region routes. The ALPA has limited the flights to address the payequality of pilots who run these routes, which are on US Airways Express. The ALPAposes a threat if they continue to put pressure on US Airways Express, US Airways onlycurrent profitable division, because the higher labor costs will only add to US Airwayscash problems.

Government Assistance and Stoppage of Federal Aid

The United States government, if they choose not to assist the airline industry any further,may be a threat to US Airways ability to turn the company around. Federal aid has beengiven to the industry in relief from the outcome from the September 11 terrorist attacks,which grounded all aircraft for a number of days causing the industry to lose billions inrevenues. A stoppage in government aid may prevent US Airways from being able toemerge from Chapter 11 bankruptcy.


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Cut Throat Competition

The current state of the economy has had similar effects on all major United States air

carriers. All carriers have been using fare reduction pricing strategies to lure customers

from rival airlines. This poses a threat because some carriers may have lower breakeven

points allowing them to use a price leading strategy when pricing tickets (Price Leading

Strategy, Breakeven, BUS 340, ACT 161). US Airways may not be able to cut fares as

low as its competition because of its high breakeven point, caused by its large amount of

overhead. Therefore, competitive forces could force US Airways out of business.

US Airways can try to affect only a few of these external threats. Any action taken by the

company will not have any impact on the economy, but US Airways does have the ability

to affect demand for air travel in some instances through fare reduction activities. US

Airways also has the ability to negotiate with their unions, which they have minimal

control over. The only other threat that US Airways can have a chance at eliminating is

how the competition affects the company. The other threats are largely out of US

Airways control, but still need to be watched to help US Airways with contingencyplanning.

I I I . I nt ernal environment (St rengths &Weakness)

Strengths

US Airways owns a variety of planes: 767s, 737s, and 727s, A330s, and A320s. The

variety of aircrafts allow for more flexibility, versatility, mobility in passenger load

options, and operating costs. A wide variety of planes provide the flexibility of matchingthe load capacity with the area of demand. The company attempts to match the aircraft to

seat supply and route demand to increase the load factor. This type of aircraft offers

great flexibility since it has smaller capacity, is significantly more efficient to operate,

and has a shorter turnaround time than larger aircraft. If a route has less demand, a

smaller aircraft can be used to increase capacity in order to meet the breakeven point of

the aircraft. This helps US Airways reach their primary goal: to move load factor above

the breakeven point into the profit range. The wide variety also allows for expansion

and exploration into other routes because different size planes are readily available. The

agreement between US Airways and Airbus allows modernization of their old aircraft to

the new A320s. The new A320s are more fuel-efficient and replace the older aircraft with

younger assets. The average age of US Airways planes as of 2001 are 9.1 years to 9.6

years. The younger assets require less expenditure for repair and maintenance (Assets,

ACT 161). Another benefit of having a variety of planes and excessive assets is to use the

excess as leverage to free up money. The planes can be sold along with their lease in

order to free up cash to pay debts and relieve some of the current expenses and costs

(Leases, Debt, Expenses, ACT 161).


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WeaknessesUS Airways acquired approximately 400 Airbus planes since 1999. Some of these planeswere purchased and others leased. Although excessive assets can be considered a strengthfor most airlines, for US Airways, it is a weakness. US Airways is paying a large amountof money for its leased planes, most of which are not being used. This directly affects the

load factor, the percentage of filled seats on any given flight. However, US Airwaysmain goal is to move load factor above the breakeven point into profit range. USAirways inability to fill the seats is unprofitable for the company. The company isunable to produce at the breakeven point and, as a result, supply will not equal demandon the flights that they are trying to use (Supply and Demand, ECN 101). This causes thecompany to have a high overhead. The high overhead was a result of the growth of thecompany. The company grew too big in a short amount of time, which caused its supplyto exceed its demand. US Airways has an excessive number of planes to use for the fewpassengers that are boarding its planes. The load factor below breakeven causes most ofthe flights to be unprofitable. US Airways merged and acquired too muchproperty within a short amount of time. However, the cancelled merger with United

Airlines in 2000 caused the airline to put a stop to its growth. However this turned out tobe a good idea for the airline, which was already experiencing problems in the financialarea.

Most airline companies use a hub system that allows them to carry passengers around theglobe. However, the hub system has changed and now causes passengers to make stops atvarious hubs and board transfer flights. US Airways follows this type of system, but itshubs are smaller than other airline hubs. Not as many planes can fit into them, whichcreates a bottleneck for the transfer of passengers. Another weaknessof US Airways hub system, is its East Coast locations, some of these include: Baltimore,Washington, D.C., Philadelphia, and Pittsburgh. These hubs are located too

geographically close to one another on the East Coast. By using this type of hub system,US Airways cannot defend itself and its route system from competitors. If US Airwaysrelocated some or most of its hubs, it would be able to create a more efficient hub system.This allows the company to possibly move off the East Coast and expand into the West,which would allow US Airways to compete more efficiently with its major competitors.If they decided on this course of action, it would require the company to create a differentstrategy of both management and marketing.Rakesh Gangwals unexpected resignation in 2001 is a weakness of US Airways.Gangwals chief strengths under the current conditions were his attention to detail, airlineindustry, economics, and critical requirements. Stephen Wolf, a master dealmaker,replaced Gangwal. Gangwal was unable to make the company more successful andfinancially stable. Looking at the daily operations of the company was not one of Wolfsstrengths. This could be the main reason why US Airways does not have a contingency orvision plan. If the company is unable to look into the future or see the outlook of how itsdecisions will directly affect the company, it will be unable to choose any course ofaction that will create a stronger company. Not only did US Airways have to deal withthe unexpected resignation of CEO Gangwal, but with poor employee morale as well.After the September 11 incidents, and with business already declining, US Airways laidoff 25 percent (11,000) of its employees. After the layoff, most of the employees still


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working lost many of their benefits and other incentives for working hard. In the end, thiscreated a team of employees that had lost their desire to work hard for a company thatthey knew was having problems surviving.There are various reasons why US Airways has been losing customers for a couple years.One major reason is that, after September 11, it stopped flights to numerous locations.

Without a variety of locations that a customer can fly to and depart from, the customerbase began to decrease because other competitors had the locations and flights customerswanted. Also, without these locations, US Airways is unable to compete with the airlinesthat were flying to more locations. US Airways is failing to use an aggressive approach tocompete with other airlines. Without a stronger approach, many customers choose to takeother airlines because their names are more recognizable, and they have more locations towhich they can fly. An example of this is with Southwest Airlines, US Airways majorcompetitor. Since US Airways has locations only on the East Coast, Southwest took overmost of the West Coast. Southwest has non-stop flights, which most customers enjoymore. Southwest forced US Airways to essentially abandon its service to north-southCalifornia routes. They also entered the market in Baltimore, one of US Airways hubs.

This caused US Airways to eliminate 51 of its 75 mainland routes. If US Airways hadbeen more aggressive against its main competitor, these routes would never have beenabandoned.

Although plane crashes do not occur very often, there is still a chance one will happen.With all the problems that US Airways has been experiencing over the last few years, anunexpected plane crash of any sort would put the company out of business. While there isno way of ensuring that US Airways will never experience a plane crash, it is in its bestinterest that they should not. Not only would US Airways lose an asset, but they wouldalso lose many of their repeat customers and many new ones as well. Since September11, many people are still anxious about flying and watching another plane crash wouldpush most people over the edge. This would cause many people to drive to theirdestinations, or cause them to just stay at home. If this happened, it would cause USAirways to lose more money, pushing them further into bankruptcy or out of business alltogether.Each of the weaknesses explained above has been a direct influence on US Airwaysfiling for Chapter 11 bankruptcy (Bankruptcy, BUS 371). Since 2000, after the failedmerger with United Airlines, they have lost a total of $7.81 billion in assets and $7.83billion in liabilities, most of which occurred in 2001 after the September 11 incident; atotal of 2.11 billion in 2001(Appendix C, pp. 46-47).


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4.1 Management (BOD and top management)

BIOGRAPHIES

W. Douglas Parker

Mr. W. Douglas Parker is the Chairman of the Board, Chief Executive Officer of USAirways Group Inc. Mr. Parker has served as Chairman of the Board and Chief ExecutiveOfficer of US Airways Group and US Airways since 2005. Mr. Parker also served asPresident of US Airways Group and US Airways from 2005 to 2006. Mr. Parker servedas Chairman of the Board and Chief Executive Officer of America West HoldingsCorporation (America West) and America West Airlines, Inc. (AWA) from 2001 to

2007, and served as a director of America West and AWA from 1999 to 2007. Mr. Parkerjoined AWA as Senior Vice President and Chief Financial Officer in 1995. He waselected President of AWA in 2000 and Chief Operating Officer of AWA in 2000. Mr.Parker serves on the Board of Directors of Pinnacle West Capital Corporation, a publiclytraded company.


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Bruce Lakefield

Mr. Bruce R. Lakefield is the Vice Chairman of the Board, President, Chief ExecutiveOfficer of US Airways Group Inc. Mr. Lakefield served as President and Chief ExecutiveOfficer of US Airways Group and US Airways from 2004 to 2005. After this, Mr.Lakefield served as Vice Chairman of the Board of US Airways Group and US Airways.

Mr. Lakefield served as Chairman and Chief Executive Officer of Lehman BrothersInternational from 1995 until 1999. He has served as a Senior Advisor to the InvestmentPolicy Committee of HGK Asset Management from 2000 to 2004. Mr. Lakefield servedas a member of the board of directors of Magic Media, Inc., a privately held company,until 2008 and currently serves as a member of the board of directors of NormanBroadbent PLC (previously Garner PLC), a publicly traded company on the AIM marketof the London Stock Exchange. Mr. Lakefield has served as a director of US AirwaysGroup and US Airways since 2003.

J. Scott Kirby

Mr. J. Scott Kirby is President of US Airways Group, Inc. He joined America West

Airlines, Inc. (AWA) as Senior Director - Schedules and Planning in October 1995. InOctober 1997, Mr. Kirby was elected to the position of Vice President - Planning and inMay 1998, he was elected to the position of Vice President- Revenue Management. In January 2000, he was elected to the position of Senior VicePresident- E-Business and Technology of AWA. He was elected as Executive Vice President -

Sales and Marketing of AWA in September 2001. Mr. Kirby served as Executive VicePresident - Sales and Marketing of US Airways Group and US Airways from theeffective date of the merger with America West Holdings on September 27, 2005 untilhis promotion to President of each entity on October 1, 2006.

Derek Kerr

Mr. Derek J. Kerr is Chief Financial Officer, Executive Vice President of US AirwaysGroup, Inc. Mr. Kerr joined AWA as Senior Director Financial Planning in 1996. Hewas elected to the position of Vice President Financial Planning and Analysis in 1998.In 2002, Mr. Kerr was elected Senior Vice President Financial Planning and Analysis. He was elected Senior Vice President and ChiefFinancial Officer of AWA and America West in 2002. Beginning in 2005, he served asSenior Vice President and Chief Financial Officer of the Company. In 2009, Mr. Kerrwas appointed as Executive Vice President and Chief Financial Officer. In 2010, Mr.Kerrs responsibilities were expanded to include Information Technology.

Robert Isom

Mr. Robert D. Isom, Jr. is Chief Operating Officer, Executive Vice President of USAirways Group, Inc. Mr. Isom joined AWA as Senior Director Financial Planning andAnalysis in 1995. He was elected to Vice President Operations Planning for AWA in1997. In 2000, Mr. Isom was elected to the position of Vice President RevenueManagement. Mr. Isom left AWA in 2000 to serve as Vice President Finance forNorthwest Airlines, Inc. In 2001, he was appointed Vice President International forNorthwest Airlines, and in 2003 he was appointed Senior Vice President Ground


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Operations and Customer Service. Mr. Isom left Northwest Airlines in 2005 to serve asChief Operating Officer for GMAC, Residential Finance Group, GMAC ResCap. He wasappointed Chief Restructuring Officer of GMAC in 2006. In 2007, Mr. Isom was electedExecutive Vice President and Chief Operating Officer of the Company.

Elise EberweinMs. Elise R. Eberwein is the Executive Vice President - People, Communications andPublic Affairs of US Airways Group Inc. Ms. Eberwein joined AWA in 2003 as VicePresident Corporate Communications.From September 2005 through October 2005, Ms. Eberwein served as Vice President Corporate Communications of the Company. She served as Senior Vice President Corporate Communications from 2005 to 2006, when she was appointed as Senior VicePresident People, Communication andCulture. In 2009, Ms. Eberwein was appointedas Executive Vice President People and Communications, and in 2010, Ms. Eberweinassumed the Public Affairs responsibilities. Prior to joining AWA, Ms. Eberwein heldvarious communications positions for three other airlines, including Frontier Airlines

where she served as Vice President, Communications from 2000 until she joined AWA.

Stephen Johnson

Mr. Stephen L. Johnson is the Executive Vice President - Corporate and GovernmentAffairs of US Airways Group Inc. Between 1995 and 2003, Mr. Johnson held a variety ofpositions with America West and AWA, including Senior Vice President CorporateAffairs and Executive Vice President Corporate. From 2003 to 2009, Mr. Johnson wasa partner at Indigo Partners LLC, a private equity firm, which specializes in acquisitionsand strategic investments in the airline, aircraft finance and aerospace industries. In 2009,Mr. Johnson was appointed Executive Vice President Corporate of the Company. In2010, Mr. Johnsons responsibilities were expanded to include Government Affairs.

Paul Galleberg

Mr. Paul Galleberg has served as Vice President - Legal Affairs of Us Airways Group Incsince July 8, 2011. He is responsible for overseeing the Companys corporate andbusiness legal work. Prior to his appointment, he was most recently General Counsel andChief Operating Officer and Principal at Berylian Capital.

John McDonald

Mr. John McDonald has served as Vice President - Corporate Communications of UsAirways Group Inc since July 8, 2011. He leads the Companys internal and externalcommunications and its social media initiatives. Prior to his appointment, he was aDirector of Operations and Hub Communications at United.

William Post

Mr. William J. Post has been appointed as Director of US Airways Group Inc., effectiveSeptember 06, 2011. He currently serves as Chairman of the Board of SwiftTransportation, and as a director of First Solar and Blue Cross Blue Shield of Arizona. Inaddition to serving as Chairman and CEO of Pinnacle West, Post also previously servedas Chairman of Suncor Development Company, Stagg Information Systems, Nuclear


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Assurance Corporation, Nuclear Electric Insurance Limited, the Institute of NuclearPower and El Dorado Investment Company. He also was a Director of Phelps DodgeCorporation (currently Freeport McMoRan). In addition to his corporate work, Post hasbeen a leader in the community, serving as Chairman of the Boards of the BusinessCoalition, Greater Phoenix Leadership, Greater Phoenix Economic Council, Greater

Phoenix Chamber of Commerce, and the United Way Campaign. He currently serves onthe Boards of Translational Genomics Research Institute and the Thunderbird School ofInternational Management. He is also Chairman of the Board of Trustees of Arizona StateUniversity, where he received a Bachelor of Science Degree in 1973.

Herbert Baum

Mr. Herbert M. Baum is an Independent Director of US Airways Group, Inc. Mr. Baumserved as Chairman of the Board, President and Chief Executive Officer of the DialCorporation, a manufacturer and marketer of consumer products, from 2000 until hisretirement in 2005. Mr. Baum served as President and Chief Operating Officer of Hasbro,Inc., a manufacturer and marketer of toys, from 1999 to 2000. Mr. Baum also served as

Chairman and Chief Executive Officer of Quaker State Corporation, a producer andmarketer of motor oils and lubricants, from 1993 to 1999. From 1978 to 1992, Mr. Baumwas employed by Campbell Soup Company, a manufacturer and marketer of foodproducts, and, in 1992, was named President of Campbell North and South America.Mr. Baum was a director of Meredith Corporation, a public company, from 1994 to 2009.Mr. Baum became a director of Whitman Corporation in 1995 which through a buyoutbecame PepsiAmericas, Inc. He continued to serve on the Board of the mergedcorporation until it was acquired by Pepsico in 2010. He also serves as Chairman of theBoard of Directors of the Safe Harbor Animal Sanctuary and Hospital and as a director ofPetsmart Charities, Inc. Mr. Baum served as a director of America West and AWA from2003 to 2007 and became a member of the Boards of US Airways Group and USAirways in 2005.

Matthew Hart

Mr. Matthew J. Hart is an Independent Director of US Airways Group, Inc. Mr. Hart wasPresident and Chief Operating Officer of Hilton Hotels Corporation from 2004 until theacquisition of Hilton by the Blackstone Group in 2007. He served as Executive VicePresident and Chief Financial Officer of Hilton from 1996 to 2004. Before joining Hiltonin 1996, Mr. Hart was Senior Vice President and Treasurer of The Walt Disney Companyfrom 1995 to 1996, and was Executive Vice President and Chief Financial Officer forHost Marriott Corp. from 1993 to 1995. He serves on the Boards of Directors of GreatAmerican Group, Inc. and Air Lease Corporation, each a publicly traded company, and isChairman of the Board of Directors of Heal the Bay, a non-profit organization. Mr. Hartpreviously served on the Board of Directors of Kilroy Realty Corporation, a publiclytraded company, from 1997 to 2008. Mr. Hart served on the Boards of Directors ofAmerica West and AWA from 2004 to 2005, and was elected to the Boards of USAirways Group and US Airways in 2006.


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Richard Kraemer

Mr. Richard C. Kraemer is an Independent Director of US Airways Group, Inc.Mr. Kraemer is President of Chartwell Capital, Inc., a private investment company.Mr. Kraemer served as a director of America West and AWA from 1992 to 2007. Hebecame a member of the Boards of US Airways Group and US Airways in 2005.

Cheryl Krongard

Ms. Cheryl Gordon Krongard is an Independent Director of US Airways Group, Inc.Ms. Krongard retired in 2004 as a Senior Partner of Apollo Management, L.P.Ms. Krongard was the Chief Executive Officer of Rothschild Asset Management from1994 to 2000. She served as Senior Managing Director for Rothschild North Americafrom 1994 to 2000. Additionally, she served as a director of Rothschild North America,Rothschild Asset Management, Rothschild Asset Management BV, and RothschildRealty Inc. and as Managing Member of Rothschild Recovery Fund. She was elected alifetime governor of the Iowa State University Foundation in 1997 and has served asChairperson of its Investment Committee. Ms. Krongard is also a member of the Deans

Advisory Council, Iowa State University College of Business. Ms. Krongard also servesas a director of Legg Mason, Inc., a publicly traded company. Ms. Krongard has servedas a director of US Airways Group and US Airways since 2003.

Denise O'Leary

Ms. Denise M. O'Leary is an Independent Director of US Airways Group, Inc.Ms. OLeary has been a private investor in early stage companies since 1996. From 1983until 1996, she was employed at Menlo Ventures, a venture capital firm, first as anAssociate and then as a General Partner. She serves as a director of Medtronic, Inc. andCalpine Corporation, each a publicly traded company. Additionally, she is a member ofthe Boards of Directors of Stanford Hospital and Clinics and the Lucile PackardChildrens Hospital and is the Chairwoman of the Board of Directors of the Corporationfor Supportive Housing. Ms. OLeary served as a director of America West and AWAfrom 1998 to 2007 and became a member of the Boards of US Airways Group and USAirways in 2005.

George Philip

Mr. George M. Philip is an Independent Director of US Airways Group, Inc. Mr. Philip isthe President of the University at Albany, State University of New York. From 1971 to2007 he served in various positions with the New York State Teachers RetirementSystem and retired after 13 years as Executive Director. He also serves as a member ofthe Board of Directors of First Niagara Financial Group, a publicly traded company; ViceChair of the St. Peters Hospital Board of Directors; and Chair of the Catholic HealthEast Investment Committee. Mr. Philip is a member of the Kentucky TeachersRetirement System investment advisory committee and a director of CommunityNewspaper Holdings, Inc., a privately held corporation. In past years, Mr. Philip wasPresident of the Executive Committee of the National Council on Teacher Retirement;Chair of the Council of Institutional Investors; Chair of the University at Albany Council,SUNY; a member of the Board of Saratoga Performing Arts Center; and a member of the


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NYSE Pension Managers Advisory Committee and the State Academy of PublicAdministration.

4.2 Market ing

US Airways uses the hub system which ideally allows any airline to fly passengers toany destination on the globe. The hub system also allows airlines to feed passengers fromsmall markets into the carriers transcontinental and international routes, thus allowingcompetition in these markets as well. The hubs are bunched together geographically onthe East Coast allowing for market domination. The close market can promote lowerexpenses because ticket sales can be lowered with less interference from outsidecompetition (Product Pricing, BUS 340). By offering the lowest priced fares to adestination, an airline hopes to lure customers from competitors and even increase theamount of overall passenger traffic by attracting passengers who would not haveconsidered air travel under a higher pricing structure. Once market domination of theEast Coast is prosperous, then the financial advantage can be used to integrate, expand

and dominate westward.

US Airways short international express flights are making the most profit for thecompany. The flights from Washington, D.C. to New York and Baltimore to Boston areconvenient routes for East Coast businesses. Revenue may be generatedby increasingprofitability on the core routes to cover underperformance on other routes.

4.3 Operation/ Production

US Airways Group, Inc. (US Airways Group) is a holding company whose primarybusiness activity is the operation of a network air carrier through its wholly owned

subsidiaries, US Airways, Piedmont Airlines, Inc. (Piedmont), PSA Airlines, Inc. (PSA),Material Services Company, Inc. (MSC) and Airways Assurance Limited (AAL). MSCand AAL operate in support of the Companys airline subsidiaries in areas, such as theprocurement of aviation fuel and insurance. It has hubs in Charlotte, Philadelphia andPhoenix and a focus city in Washington, D.C. at Ronald Reagan Washington NationalAirport (Washington National). During the year ended December 31, 2011, it offeredscheduled passenger service on more than 3,100 flights daily to more than 200communities in the United States, Canada, Mexico, Europe, the Middle East, theCaribbean, and Central and South America. It also has an East Coast route network,including the US Airways Shuttle service.The Company had approximately 53 million passengers boarding its mainline flights in

2011. During 2011, the Companys mainline operation provided scheduled service orseasonal service at 133 airports, while the US Airways Express network served 156airports in the United States, Canada and Mexico, including 78 airports also served by itsmainline operation. US Airways Express air carriers had approximately 28 millionpassengers boarding their planes in 2011. As of December 31, 2011, the Companyoperated 340 mainline jets and was supported by its regional airline subsidiaries andaffiliates operating as US Airways Express under capacity purchase agreements, whichoperated 233 regional jets and 50 turboprops. The Companys prorate carriers operated


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seven turboprops and seven regional jets at December 31, 2011.In May 2011, US Airways Group and US Airways entered into an Amended and RestatedMutual Asset Purchase and Sale Agreement (the Mutual APA) with Delta Air Lines, Inc.(Delta). Pursuant to the Mutual APA, Delta agreed to acquire 132 slot pairs at LaGuardiafrom US Airways and US Airways agreed to acquire from Delta 42 slot pairs at

Washington National and the rights to operate additional daily service to Sao Paulo,Brazil. On December 13, 2011, the transaction contemplated by the Mutual APA closedand ownership of the respective slots was transferred between the airlines. During 2011,the US Airways Express network served 156 airports in the continental United States,Canada and Mexico, including 78 airports also served by its mainline operation. During2011, approximately 28 million passengers boarded US Airways Express air carriersplanes, approximately 44% of whom connected to or from its mainline flights. TheCompany competes with Southwest, JetBlue, Allegiant, Frontier, Virgin America andSpirit.

4.4 Finance

US Airways is aware of their current market decline and financial instability. This isdeemed a strength because the company is using their position to implement changes andnew organizational plans to correct the situation. The government passed legislation thatfreed US Airways of some of its expenses by federalizing security. The September 11terrorist attacks pushed Congress to pass legislation and provide $14 billion to the airlineindustry. Other actions that freed up cash are: consolidation of flights, a 23% cut inservice, and decrease in routes. The postponement of shipping, and deferment of newA320s and A330s freed up cash. Also, the failed merger between United and US Airwaysprovided $50 million to US Airways.

I V. Cri t ical success Factors/ Firm str ategies

Despite hiring advisors to explore a potential merger with bankrupt American Airlines,executives at US Airways believe they have built a carrier to return consistent profits on astand-alone basis, and remain steadfast in their belief that consolidation in the US airlineindustry is no longer imperative for the business to generate regular returns, even withfuel prices steadily climbing. After the official close of the US Airways-America Westmerger in 2005, the new US Airways enjoyed two years of profitability before bleedingmore than USD800 million during the fuel price crisis of 2008. The global recession thatensued the following year triggered the worst downturn in the history of the aviation

business, forcing US Airways and the industry at large to make structural changes toavoid a total collapse.

For US Airways that meant joining the industry in new-found capacity discipline,creating new sources of revenue through ancillary products and an unflinching focus oncost containment and reduction. Specifically US Airways instituted a USD70 million costcutting scheme and tapped the capital markets for USD1.2 billion in 2008 and anadditional USD536 million in 2009 to stay afloat. Roughly USD800 million of that debt


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has to be repaid. US Airways president Scott Kirby concludes the Great Recession costthe carrier USD1.7 billion in total revenue.While Mr Kirby notes some pundits believed US Airways would be forced intobankruptcy or liquidation, he does acknowledge the carrier had to borrow a lot andscrimp and scramble to survive. But US Airways rebounded in 2010, posting a USD447

million profit as the effects of what company management believes are permanentstructural changes in the airline business capacity discipline, strict cost control and anexpansion of ancillary revenues -- began to take effect.Profits at US Airways in 2011 plummeted 75% year-over-year to USD111 million. Butthe airline relishes the results as its fuel expense in 2011 increased USD1.3 billion versusthe year prior. The difference between 2008 and 2011, according to Mr Kirby, was in2011 85% of the USD1.3 billion fuel cost price increase was passed onto the passenger inthe form of higher fares.

At the same time US Airways and the industry recovered the expense of staggering fuelprice increases in 2011, the carrier continued its mission to keep what it deems as a

distinct cost advantage relative to its legacy peers. From 2007 to 2011 for a stage-lengthadjusted for 981 miles, US Airways estimates its cost grew 6.6% compared with an 18%hike at low-cost legend Southwest Airlines. Carrierexecutives realise US Airways cannot let the cost gap it has with other carriers shrink inlight of the airlines major hubs of Phoenix, Charlotte and Philadelphia producing lowerrevenues than the hubs of its major network peers. Mr Parker cautions US Airways needsto maintain the cost advantage to avoid the position the old US Airways found itself inprior to merging with America West and facing liquidation no revenue advantage and acost disadvantage.

US Airways estimates its unit costs excluding fuel will increase roughly 1% in 2012

compared with other carriers offering guidance of a 3%-4% increase, says carrier CFODerek Kerr. The airlines mainline unit costs excluding fuel and special items for 2011was USD 8.37 cents, USD 9.39 cents for the combined mainline and US AirwaysExpress operation. Another element contributing to US Airways profit rebound isancillary revenues, whose introduction is a permanent and systemic change to theindustry, says Mr Kirby. The growth in ancillary revenues, largely stemming frombaggage fees, helped US Airways grow its total unit revenues from USD 13.60 cents in2008 to USD 15.06 cents in 2011. It believes the largest revenue generating potential liesin its Choice Seats offering, which allows passengers to select their preferred seatingchoice for a fee. Revenues from its Choice Seating option, which is allocated to roughly7%-8% of its seats, should reach roughly USD100 million this year. US Airways is alsointroducing a preferred access offering through its website in April giving customers theoption to pay extra for earlier boarding and expedited security.While US Airways merchandising efforts are not as aggressive as some of its legacypeers Delta Air Lines aims for USD1 billion in merchandising revenue in 2013 itrecorded USD537 million in ancillary revenue during 2011. Mr Kirby believes if USAirways could increase annual revenue from the Choice Seats products to USD300million to USD400 million per year once the product is available through third-partydistributors including traditional and online travel agents. The carrier is working with


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global distribution system firm Sabre to offer its pay-for-a-preferable seat product andhopes to have one large online travel agency distributing the product for sale. Currently itis available through the US Airways website, kiosks and phone reservations system.

All airlines are facing high levels of uncertainty in their modeling for 2012 due the

precipitous rise in oil prices, and US Airways is no different. The carrier has not had anyfuel hedging in place since 2008, ultimately determining locking in a set price was costprohibitive. The strategy helped the carrier achieve record profits in 2010, but fuel costscrimped US Airways profits last year. At the moment US Airways is cautiouslyoptimistic about demand patterns despite the run-up in fuel prices. Mr Kirby says bothleisure and corporate demand has remained strong. He does acknowledge the carrier sawsome weakness in February and the 7% year-over-year rise in unit revenue for the monthwas below 10% forecast in January. But he says as the carrier goes through March themonth looks much like January when US Airways unit revenues grew 10% year-over-year. Mr Kirby comments that it is remarkable to talk about 7% RASM [revenue peravailable seat mile] as a disappointment.

But Southwest Airlines has already warned of a first quarter loss almost solely driven byhigher fuel prices, and has said fare increases seemed to less effective. Mr Kirby admitsthe year-over-year unit revenue comparisons become tougher going forward after therewas essentially a fare hike every week during the first three months of 2011.In the worst case scenario, if fuel continues its rise, US Airways management believescarriers will cut capacity if the higher fuel prices depress demand. They believe theindustry has shown it will decrease supply accordingly in the past when oil prices haverisen to record levels. As for US Airways going forward, Mr Parker makes no apologiesthat its goals for 2012 are identical for 2011, and serve as the basis for the carriers long-term strategy going forward reliable operations, maintain its cost advantage, maximise

revenue and engage employees. Yet the consolidation pioneer does not rule out USAirways playing a role in future mergers. Mr Parker says it makes sense for the carrier toexamine opportunities as they arise, and US Airways continues to investigate a tie-upwith American. I suspect thats where well be for quite some time as the bankruptcyunfolds, he says.

V. Conclusion & Recomm endat ion

US Airways, along with US Airways Shuttle and US Airways Express, operates morethan 3,000 flights per day and serves more than 200 communities in the U.S., Canada,Mexico, Europe, the Middle East, the Caribbean, Central and South America. The airline

employs more than 32,000 aviation professionals worldwide and is a member of the StarAlliance network, which offers its customers more than 21,000 daily flights to 1,290airports in 189 countries. Together with its US Airways Express partners, the airlineserves approximately 80 million passengers each year and operates hubs in Charlotte,N.C., Philadelphia and Phoenix, and a focus city in Washington, D.C. at Ronald ReaganWashington National Airport. US Airways was the only airline included as one of the 50best companies to work for in the U.S. by LATINA Style magazines 50 Report for 2010and 2011. For six years in a row, the airline also earned a 100 percent rating on the


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Human Rights Campaign Corporate Equality index. The Corporate Equality index is aleading indicator of companies attitudes and policies toward lesbian, gay, bisexual andtransgender employees and customers. US Airways also ranked #1 among its competinghub-and-spoke network carriers for 2010 performance as rated by the Wichita StateUniversity/Purdue University Airline Quality Rating (AQR). After our researching about

the company profile, our team strong recommended all the customer to fly with USAirways as the best choice of travelling.

Strategic Management Group Assignment

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