TEMPE, Ariz. (AP) -- Doug Parker has an idea that's novel, for an airline CEO. The chairman and chief executive of US Airways Group Inc. believes that his industry should seek the kind of growth and profits taken for granted in the larger business world. That won't be easy. US Airways' share price is languishing below $3, and the carrier had to negotiate some breathing room on its lending covenant.
Parker sat down at the company's headquarters this week for an interview with The Associated Press.
Q: You've talked about making airlines profitable and growing like other businesses. But what if the industry continues as it is now?
A: That would be unfortunate. We can continue to play this game and play it reasonably well. I just think it's a really inefficient way to run a business. We could do so much better. Obviously it's been like this for 30 years, it could be like that for longer. ... It's also reasonable to assume that it can't stay like this. It's largely because of the turmoil that's going on in the credit markets, the banking markets, the aircraft leasing markets. Ways that these kind of losses have been financed over time are certainly less likely to be there in the future.
Q: Can US Airways survive if the industry stays the way it is now?
A: It's hard to speculate of course as to what scenarios we're talking about. Vis-a-vis our competitors we feel very good about our relative positioning. We're running a good airline. We're more domestic-focused than a lot of our competitors. A domestic entity, at least in today's world, is a better place to have airplanes than the international arena because on the domestic side a lot of capacity has come out, and it's not as hard-hit as the international side. And relative to cash position we're pretty much in the middle of the pack. Relative to our competitors I think we're well-positioned.
Q: It seems Wall Street is valuing US Airways shares as though there's a pretty serious liquidity threat.
A: It's hard to tell how Wall Street is valuing any company at this point. The same could be said for any number of companies, and certainly any large airline. But having said that, we certainly believe we don't understand why the stock is valued as low as it is. But that's not for us to manage. What we need to do is run our airline. If we're right, the stock will appreciate. At any rate, at this point we're not spending a whole lot of time trying to convince people the stock is undervalued. That's for investors to decide.
Q: Is there any Chapter 11 danger for US Airways?
A: No. Again, we feel good about the liquidity we have on hand. We're actually in the period of the year when we start to build cash. Oil prices have fallen so much on a year-over-year basis, that ... we think that in 2009 we could be a profitable airline even if total revenues for the company fell 15 percent year-over-year. So put all those things together and while no one's happy with the current economic environment we are operating in, I think we have done all the right things to manage through it.
Q: Is the US Airways business model predicated on a significantly improved economic environment?
A: No. Again, you go back to, we could actually be profitable with 15 percent lower revenues than last year. I'm not sure revenues won't be down even more than that, or they could be down somewhat less than that. That we don't know. But what we know is we can withstand a pretty significant downturn in this business.
I like Parker's quick "one-word" answer to the question of whether there's any Chap. 11 danger for LCC.
If you follow the financials of this company, his answer is obvious. The problem is that Wall St. has been ignoring these financials. You have to bet that some day they will matter, but this is obviously a very tough game at the moment.
LCC had to renegociate their loans just to avoid liquidity problems.
Airbus is planning on delivering 25 aircraft to LCC but 5 of those aircraft, which are the biggest 330's, are not financied yet. iahphx and Parker are screaming at the tops of their lungs that they have no problem finding financing, yet, where are the bankers?
Oil has come down, but fares are dropping even further. Southwest has lanched a massive fare sale that goes thru summer travel, a time when LCC is expecting to sustain itself.
Tempe and iahphx is also pointing out their international market is less than others. In the past year, Beijing, Tel Aviv and Rio have been announced and further expansion plans into South America is hoped for/being planned for.
With so much juggling, it's no wonder that Tempe is trying to put out the BK talk. The smell of smoke and fear is keeping this stock down.