US Airways was in the news quite a bit yesterday:
Standard & Poors downgraded US Airways’ credit, which seems an insignificant piece of news given all they’ve gone through. Unfortunately, the downgrade puts their credit rating at a level roughly equal to an unemployed 22 year old living with his parents. Specifically, US Airways had hoped to finance the purchase of smaller aircraft; now, the group that would have financed the purchase (GE) may pull out of the agreement. Bad credit for companies has the same effect as it does on people: those who need the loan the most can’t get the loan at a reasonable price and end up going bankrupt.
In addition to the new aircraft, another part of US Airways’ plan is to reduce its reliance on hub cities, just as America West has successfully done. The downside of this falls straight in the laps of the employees of the Pittsburgh hub. Since September 11th, about 1/3 of them have been let go. Now, US Airways is saying that it will likely reduce Pittsburgh’s status to what it is calling a “focus city” rather than a hub. It’s a great strategy overall (cherrypicking profitable routes), but it will have a major effect on the number of employees at that base.
And finally, US Airways will be one of the airlines named in a class action lawsuit brought by a passenger to halt airlines’ so-called “hidden city” ticketing restrictions (a hidden city is where you buy a one-way ticket from, say, new york to Minneapolis, with a connection in Chicago—but you get off the plane in Chicago because the one way fare to Minneapolis was cheaper than the one way fare to Chicago). Airlines have forbidden this practice, but the lawsuit claims that the airlines have illegally conspired to concoct these crazy ticketing rules.