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US Airways boss: Airlines will adapt

You think gas prices have got you down? Try filling up a few hundred planes every day.

As chairman and chief executive of US Airways, Doug Parker is in charge of keeping Charlotte's dominant carrier flying, even as “our industry is under a bit of turmoil these days,” he said Thursday.

Based in Tempe, Ariz., US Airways has its largest hub in Charlotte. The carrier posted a profit of $427 million in 2007, but a historic jump in oil prices – and the ripple effect on fuel costs – is expected to send the company to a staggering loss this year.

Parker sat down with Observer editors and reporters to discuss the state of the airline industry and how US Airways is adapting to soaring fuel prices. Comments have been edited for brevity and clarity:

On US Airways' on-time arrivals this year after frequent delays in 2007:

“Those issues are well behind us now. For the first five months of this year, US Airways is No. 1 in on-time performance among the 10 largest airlines. Last year over the same period, we were 10th out of 10. The facts are the facts. Our team has done a great job.

“That now all pales to the financial crisis our industry is in. While running a good airline is really important, right now everyone rightfully is concerned about the viability of the airline industry and individual airlines.”

On raising fares to cover higher fuel costs:

“If US Airways alone tries to increase fares and everyone else doesn't match, we end up losing more customers than we get by the higher fares. While we all try to increase fares, there's clearly a limit. The result is we charge less than it takes to transport people, on average, and the industry loses a lot of money, which is where we are now.”

On the future of air travel:

“The industry will figure out a way to be profitable. We will adapt. The industry we end up with, though, is not one that anybody's going to like. It will have fewer seats, fewer flights to fewer markets. It will become more like before deregulation, when it was more of a luxury good than something people are used to using as a way to get around the country. That's certainly not what we're in favor of, but that's where we'll end up, I fear, if oil prices stay where they are.”

On the effect of oil prices:

“Every $10 a barrel of increase in oil prices to US Airways is worth $400 million. If we can get $20 a barrel off, that's $800 million. We have analysts projecting US Airways is going to lose $1 billion this year – numbers we're not objecting to.”

On how long US Airways can lose $1 billion a year:

“Not many. That's not the plan.”

On some analysts predicting US Airways could file for bankruptcy protection:

“We're not fans of that scenario and don't plan on seeing it happen. I think that whole scenario is flawed. The fact is, our profit margins are the best in the industry right now. We're certainly not the weakest performer or close to it. As I told our employees, if there are other airlines whose strategy is based on US Airways going away, they're going to need to find another strategy. We are not playing that game.”

On the prospect of more fees:

“We're trying to be creative and figure out ways to cover the cost of transportation that is as customer-friendly as it can be. I've heard people ask, ‘Why don't you just raise my fare?' It's kind of a perverse argument, I think. Why would anyone say, ‘Don't charge me $15 for a first bag, just add $15 to my ticket.' Because that would affect everyone.”

On US Airways still being one of the worst airlines for customer complaints:

“They're a lot better, but they're still near the bottom. One, perception lags reality. If we canceled 1 percent of our flights and Southwest canceled 1 percent of their flights, we're going to get more complaints because of our history. It takes a while for customers to forget.

“Two, we have been more aggressive on these new fees and policies than others have been. We think it's the right thing to do, but it drives complaints.”

On whether he has paid any of the new fees:

“I have not, because I haven't checked a bag. I never check a bag.”

On his last flight that arrived late:

“It's been a while. Honestly, I can't remember the last time I had a late flight. … I fly first class more often than not, but other than that, it's no different from everyone else. I don't get any special treatment.

“And I share the frustration. It's not the same product it was 10 or 15 years ago. But we're losing a lot of money, and we have to figure out ways to cover the cost of transportation.”

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