How US Airways defied the odds
With crisis after crisis, just how was this airline able to come back from the brink? Merger with America West is set to close on Tuesday Visiting family in New Jersey, Bruce Lakefield spent much of his Christmas weekend on the phone.
His fragile airline, US Airways, was confronting a public relations nightmare. It was canceling flights by the hundreds, stranding thousands of passengers. Workers were calling in sick. The airline lacked the staff to replace them.
Lakefield was worried.
"Everybody was of course scared about what the next shoe to drop would be," he recalls.
Then an interesting thing happened. He and other executives started receiving e-mails from employees who wanted to help. Volunteers sorted missing bags. Others served coffee and snacks to waylaid passengers. It wasn't pretty, but the company had survived yet another jam.
To the airline's top leaders, US Airways' Christmas debacle was perhaps the most dramatic example of how it defied the odds. In crisis after crisis, they say, the company and its employees made precisely the right decisions at the most desperate moments to avoid total collapse.
In the past week, five high-ranking current and former US Airways executives spoke with the Observer about the airline's tumultuous path in the last year and a half. Though they rarely grant interviews, they say they now feel free to talk, because a bankruptcy judge has approved their plan to leave bankruptcy court. The airline's merger with America West is scheduled to close Tuesday.
They say they inherited a deeply flawed airline and quickly went to work to fix it. Along the way, competition grew tougher, and oil prices climbed higher, making their task more difficult.
At times, some privately doubted the airline would survive.
They acknowledge taking painful steps to end pensions, slash wages and eliminate thousands of jobs. Yet they say those were the only decisions they could make if they wanted to preserve the airline.
"We came into an airline that had major, major problems in an industry that's dysfunctional," Lakefield says. "We found a solution that saves tens of thousands of jobs."
One of the most daunting challenges was squeezing more money from the airline's employees.
By late 2003, it was becoming clear to the company's leaders that the cutbacks they made in the airline's first bankruptcy case just a year earlier were insufficient.
In one meeting, then-CEO Dave Siegel and the company's chief financial officer told senior management they needed to draw up a new plan to save the airline.
At that, all heads turned to Jerry Glass, the airline's senior vice president who oversaw relations with the airline's unions.
As the airline's biggest expense, labor was an obvious target, though not an easy one. Glass, a self-described liberal Democrat from New York with a hardball reputation, would have to return, hat in hand, to labor unions that had already given up plenty in two prior rounds of concessions.
Though some employees thought Glass relished the chance to clash again with the airline's unions, he says he didn't welcome the task. "If you think there's enjoyment out of that, you need your head examined," he says.
Talks dragged. To kick start them, the airline's board forced out Siegel as a peace offering, replacing him with Lakefield.
Still, the company struggled to convince its unions of the impending crisis. Glass says he was brutally honest with the unions, giving them access to internal financial reports that showed the company wasn't exaggerating its need for cuts.
Yet the pilots' union, the focus of most of the airline's initial negotiating effort, was deeply divided over tactics. It had installed a new negotiating team just as talks began.
The second bankruptcy filing allowed the airline to postpone or reduce some payments. It also helped accelerate labor talks, because the company could invoke bankruptcy powers to force wage cuts if necessary.
The combination of US Airways and America West -- officially described as a merger -- is looking more and more like a takeover.
US Airways is asking a bankruptcy court to allow it to pay as much as $55 million to executives and other white-collar workers to encourage them to stay with the company.
US Airways' revenue per available seat mile and stock price have soared.