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 The Brancatelli File

joe US AIRWAYS' PLAN B
FROM OUTER SPACE


BY JOE BRANCATELLI

August 16, 2001 -- The buccaneering Wolfmen who run US Airways yesterday premiered Plan B from Outer Space, another episode in their five-year series of stinkeroo strategic plans designed to rescue the carrier from its own mismanagement.

Okay, okay, I'm exaggerating. US Airways management didn't really call yesterday's post-merger dog-and-pony show Plan B from Outer Space. But they should have. The entire silly charade in New York resembled nothing so much as the worst movie ever made, Ed Wood's exquisitely awful Plan 9 from Outer Space.

As recently as a couple of months ago, US Airways executives were publicly insisting "there is no Plan B" for saving the airline if the United merger didn't go through. So that probably explains why yesterday's little adventure looked and sounded as if it had no plot, no real strategic cohesion, no vision and no discernable sense of purpose. Just as Plan 9 from Outer Space was hilariously slapdash, so, too, is US Airways' Plan B from Outer Space.

Check it out yourself. A summary of Plan B in all its chaotically cheesy glory is posted at the US Airways Web site. You'll probably be as dumbstruck as the analysts and other airline observers, none of whom could figure out exactly what the US Airways executives were talking about yesterday.

Just as Ed Wood had stray plot lines, extraneous bits of dialogue and god-awful sets strewn about Plan 9 from Outer Space, the US Airways Plan B is full of incoherent route swapping and aircraft substitutions and goofy collections of spit and baling wire masquerading as strategic initiatives. Plan B has got squadrons of flights coming and going to Florida; Airbus jets replacing older planes; international aircraft with an undefined mix of two- and three-cabin configurations; the flotsam called Metrojet emerging from and receding into the background at awkward moments; and vast fleets of regional jets inexplicably appearing all at once in the skies over the East Coast.

And just as Ed Wood mindlessly tacked some old footage of Bela Lugosi in his dotage onto the first reel of Plan 9 from Outer Space, US Airways rolled out chairman Steve Wolf for a three-minute zombie cameo at the beginning of the three-hour Plan B from Outer Space. Wolf appeared, muttered a few introductions and then vanished, never to been seen or heard again. If it wasn't for the fact that he received a compensation package of more than $11.5 million last year, you'd never have known from yesterday's show that Wolf ever had anything to do with US Airways, its precipitous financial decline and recent operational deterioration or the misbegotten merger that consumed more than a year of management attention.

But Wolf and his 11.5 million pieces of silver bring to mind the one clear theme we can discern from Plan B from Outer Space. Along with Rakesh Gangwal (who earned a whopping $12.1 million last year for underplaying his role as US Airways chief executive and president), Wolf is planning to go back to US Airways employees and demand more contract givebacks. This is the most bizarre twist of all in the otherwise formless, shapeless mush of Plan B from Outer Space.

Now it is true that US Airways has the highest labor costs in the airline industry. The Wolfmen never fail to mention that tidbit whenever they babble on about the state of US Airways. Yesterday's scenes had Gangwal pining for a labor-cost structure that resembles the relatively low costs of Continental and the super-efficient model of Southwest.

THE HIGH COST OF US AIRWAYS MANAGEMENT

AIRLINE

FISCAL 2000 TOTAL OPERATING REVENUE

TOP EXECUTIVES 2000 TOTAL COMPENSATION

REVENUE PER $1 OF COMPENSATION

Southwest

$5,649,000,000

$1,294,153

$4,365.01

Continental

$9,989,000,000

$9,213,542

$1,084.16

US Airways

$9,269,000,000

$23,698,354

$391.12

Source: Market Guide at Fool.com

But what is never mentioned by the Wolfmen is that US Airways also suffers from the highest management costs in the airline industry. And while contract concessions have brought US Airways labor costs within 20 percent of the industry average, the US Airways management-cost disparity is simply obscene.

As you can see from the chart, Wolf and Gangwal's combined total compensation packages last year exceeded $23.5 million. That's 2.5 times the combined packages earned by Continental's current top executives, chairman and chief executive Gordon Bethune and president Larry Kellner. And Wolf and Gangwal last year raked in almost 20 times the combined compensation earned by Southwest chairman Herb Kelleher and president Colleen Barrett. Worse, Southwest reported more than $4,000 in revenue in 2000 for every dollar it paid its two key executives. Continental generated more than $1,000. By contrast, US Airways last year only managed sales of about $390 for every dollar of compensation awarded to Wolf and Gangwal.

Plan B from Outer Space had everything but those little tidbits. It droned on about how US Airways employees will be expected to further narrow that 20 percent cost gap if the airline is to survive. But not a line of dialogue was devoted to the plunder of the airline by its top bananas.

And there's more. While they did nothing last year--no contingency planning for a world without a United merger, no fuel hedging to shield the airline from rising fuel prices and no tactical or strategic responses to the growing threat from low-fare carriers--the top five executives of US Airways earned a combined total compensation of $28.5 million. That is almost 12 times more than the combined total compensation of $2.4 million awarded to Southwest's five key executives. It's also 2.7 times more than the $10.4 million earned by the five top executives at American, the nation's largest carrier. And American registered $19.7 billion in sales last year compared to just $9.2 billion at US Airways.

It's always interesting to discover what lands on the cutting room floor. The Wolfmen conveniently excised all references to their nifty little financial subplot from the final cut of their atrocious Plan B from Outer Space.

This column originally appeared at biztravel.com.

Copyright 1993-2004 by Joe Brancatelli. All rights reserved.