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 The Brancatelli File

joe DEATH BY VIDEO
AT US AIRWAYS


BY JOE BRANCATELLI

March 25, 2004 -- Especially when I chronicle the folly of the Big Six airlines, this column sounds like a one-man radio play-by-play broadcast. It spits out a nonstop stream of facts, figures and blow-by-blow accounts and then, during breaks in the action, it squeezes in some analysis and opinion.

But this week is different. Because the hollow men who run US Airways have been calculating enough (and clueless enough) to post the video feed of yesterday's death-be-not-proud meeting between chief executive David Siegel and an in-studio group of stone-faced employees, I can concentrate on being your color man. The play-by-play is posted on the Web for you to see, so consider this column color commentary packed with pithy observations, timely context and some much-needed doses of truth and reality.

Fire up your computer's media player, set aside an hour (that's the length of the video presentation) and let's you and I watch US Airways chief Siegel walk his carrier down the aisle to oblivion.

Now remember: This presentation, while purportedly aimed at employees, is actually management's attempt to bamboozle everyone: lenders, creditors, suppliers, the media and, of course, frequent travelers. That's why it's up on the airline's public Web site. And remember that employees are being asked to take a third round of pay cuts while the airline continues to hemorrhage cash and passengers. Southwest Airlines arrives at US Airways' Philadelphia hub in May and the carrier has already been told by its auditors that it is not a going concern. Lastly, since this has been released to the public, you must assume that this is apparently the absolute best that the self-obsessed and delusional top management at US Airways can do.

What do we see as the video opens? Well, we can immediately tell that this is going to be another one of those rally-the-troops presentations that we endure in our own businesses. But look at how cheesy everything is: Siegel's creepy ear-to-ear grin in the opening shot; his garish yellow tie; the cardboard-cutout, blue-sky background. And check out the audience of employees: no smiles and no hope. They don't trust this guy. They look disgusted, distracted, bored and numb. They don't believe a word he's saying.

Siegel does a remarkably good job of explaining why airlines like JetBlue, Southwest and AirTran are making money and winning passengers. He admits it: They give the customers more, charge them less and have better ideas. Later, however, he claims that US Airways offers better service than "those guys." I dunno, Davey...

As the video rolls on, however, you'll be thinking: My god, this speech should have been delivered four years ago. This is all so old news. If Siegel and his acolytes have just realized all this now, it's already too late to save US Airways.

Watch as Siegel keeps getting off-message. It's clear that his braintrust (such as it must be) has told him to repeatedly brand carriers like Southwest as "low-cost airlines." That way he can tell employees how much of a financial hit they must take. But he keeps slipping and calling them "low-fare airlines" at regular intervals. That's substantially different, as we'll see in a moment.

Here's something to watch for as the video drones on: the vision thing. Where is it? There not only isn't a single original thought here, there isn't a glimmer of an idea of the kind of airline that Siegel wants US Airways to be. As Siegel talks, think about how the parents talk in all those Peanuts television specials. You know: Wah-h-h, Wah-h-h, Wah-h-h. All mawkish sound. No substance. No ideas at all. "We can't beat them [Southwest] at their own game," Siegel says at one point. But he never, ever explains what the US Airways game is.

And you know what's astonishing? The more the video rolls, the more Siegel admits that he has no idea at all about what US Airways can or will be doing. Listen: US Airways management hasn't decided about the future of the Pittsburgh hub. US Airways management hasn't decided about its fleet. US Airways management hasn't decided whether to drop first-class cabins. The US Airways "board continues to consider asset sales."

When Siegel finally gets to the core of what he sees as US Airways' problem, he comes to cost. US Airways costs 10 cents a mile to operate, he complains. Carriers like Southwest are operating at 6 cents a mile. "We're a 10-cent carrier and they are 6-cent carriers," he says at one point. Sounds pretty daunting. No business likes to be competing when it operates with a 40 percent higher cost structure.

But here's where the off-message low-fare/low-cost point becomes relevant. Let's take Siegel at his word and say that US Airways runs at 10 cents per mile and Southwest runs at 6 cents per mile. Then why are US Airways' fares so offensively high? When it launches in May, Southwest will charge $140 for a refundable, one-way, walk-up ticket between Philadelphia and Chicago's Midway Airport. Fly between Philadelphia and Chicago/O'Hare tomorrow on US Airways and you'll pay $419.10 for a nonrefundable walk-up ticket. That's three times more. A flight between Philadelphia and Chicago is 677 miles. Siegel claims that US Airways operates at a 4-cent-per-mile disadvantage against Southwest, so that's $27.08 of added cost between Philadelphia and Chicago. Yet Southwest is charging $140 and US Airways expects flyers to pay $280 more!

As Siegel blathers on, let's try one more fare/cost comparison. Operating at 6 cents per mile, Southwest will charge $168 for a refundable walk-up ticket between Philadelphia and Tampa. Fly Philadelphia-Tampa tomorrow on US Airways and you'll pay a refundable fare of $475.11. At 922 miles of flying on that route, US Airways' 4-cent-per-mile operating disadvantage works out to $36.88. Yet it charges $307 more than Southwest will be asking. That's a markup of more than 800 percent on its higher operating costs.

Now pay careful attention when Siegel turns apocalyptic. Southwest and its chairman, Herb Kelleher, are trying to kill US Airways, he claims. "They're the enemy," he says repeatedly. "They're coming to kill us. Herb Kelleher...wants our customers...wants your jobs." C'mon, folks, does anyone in business respond to this jingoist crap anymore? Besides, all last year Siegel claimed that it was Delta Air Lines that was trying to kill US Airways. Even in the last 30 days Siegel told a Washington business group that Delta's goal was to "drive us out of business." Is Siegel a fool? In denial? A really bad snake-oil salesman? Or an honest-to-goodness paranoid?

And watch for Siegel's pitch for concessions. He says he's "willing" to forgo a huge golden parachute that he can deploy in April. He's says he's "willing" to give up salary, too, and be paid more reasonably. So why hasn't he done it? If I were about to go before my entire unhappy workforce and ask for a third round of concessions, I'd have made sure that I could stand up in front of them and say, "Look, here's what I've already done personally to sacrifice." Watch the video and you can only come to one conclusion: Siegel hasn't renounced his golden parachute because he's still thinking about getting out while the getting is good for him.

Don't miss Siegel saying that "we're starting today" to fight Southwest Airlines. How come he waited until the end of March? Southwest announced it was launching Philadelphia service last October. What the hell has US Airways management been doing for the last six months?

And watch as Siegel moves on to his let's-be-like-Rocky-in-Philadelphia spiel. Obviously, the same handlers who thought Siegel could sell Herb Kelleher as a job-stealing, company-destroying madman thought Siegel could sell US Airways as Rocky. But they forgot one thing: The cinematic truth behind the hackneyed Rocky comparison.

Check out the sad and earnest Philadelphia employee who gets up during the question-and-answer section and delivers a knockout haymaker to Siegel's gut: "I really appreciate Rocky," she says ruefully. "But he lost the fight."

You can turn off your media player when you reach that point. The rest of the show is just Siegel turning out the lights at US Airways.

A postscript: Southwest Airlines announced today that it was stepping up its incursion in Philadelphia. Besides the service to six cities (Chicago/Midway, Tampa, Orlando, Las Vegas, Phoenix and Providence, RI) that launches on May 9, Southwest said it will add seven more destinations beginning July 6: Fort Lauderdale; Houston/Hobby; Los Angeles; New Orleans; West Palm Beach; Raleigh/Durham; and Manchester, NH. Advance-purchase fares begin at $29 each way. Walk-up fares start at $49.

This column originally appeared at JoeSentMe.com

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