US Airways Flies To Europe For Rebound

<B>US Airways Flies To Europe For Rebound</B>

By David Jonas

<I>Philadelphia</I> - Now that it has made peace with its flight attendants union, US Airways is getting back to the business of pulling out of a financial tailspin. It's pinning its hopes on a wave of transatlantic expansion anchored here to trigger high-yield traffic, reduce unit costs and lure potential alliance suitors.

Last week, the carrier launched daily nonstop service between Charlotte, N.C., and Frankfurt and will begin Philadelphia-Manchester flights next week. Charlotte-Paris service launched last month and Pittsburgh-London service will begin in July, nine months after British Airways vacated the route. Additionally, U.S. Airways seriously is evaluating several other European destinations, including Amsterdam, Athens, Barcelona, Brussels, Genoa, Milan and Zurich.

Much of the transatlantic growth will be handled by new Airbus 330-300 aircraft, the first of which entered service earlier this month between Philadelphia and Paris. Nine more of the new widebodies--which include a brand new first class and revamped business class--will be delivered throughout this year and 2001, with another 20 on option. US Airways is the first U.S. carrier to fly the plane. Several others have opted for a similar product from Boeing, the 777.

With the influx of international traffic, US Airways is positioning itself to become more of a global player, a strategy that ideally would be augmented by alliance participation. "We will join an alliance, we have to. It's a natural extension and now we have a superior product," said Rakesh Gangwhal, president and CEO, to Business Travel News at the launch in Philadelphia. "We have a large, diverse East Coast network, we just have not yet capitalized on it."

Indeed, US Airways' strength lies in its north-south traffic in the Eastern United States, and its shuttle business routes in the northeast corridor. That network could serve to feed transatlantic operations for an alliance grouping, though none have publicly identified US Airways as a potential partner.

However, Mark Schwab, US Airways vice president of international, said the carrier is in discussions with all major alliances and intends to select its new mates by year-end. "Because of our unique East Coast strength and this new capacity on the transatlantic, we have a clear need to steer people to our airline," he said. "We would be a great fit with any of the groupings out there, except one." Though he would not specify which is the unlikely choice, clearly it is the emerging Air France/Delta partnership due to the significant network overlap with Delta.

The airline recently appointed Rita Cuddihy, a long-time US Airways veteran, as its vice president of alliances to discuss opportunities with the global groupings and decide the best course of action.

For now, US Airways will progress with international expansion on its own, as it has gradually over the past few years. In fact, when service to Manchester begins next week, US Airways will have more than 1,400 daily seats between Philadelphia and Europe, compared with just over 100 in 1995. Overall, transatlantic capacity is expected to increase 30 percent this year, compared with 16 percent in 1999, while revenue, driven by a changing mix toward high-yield passengers, will increase even further.

As a result, corporate sales efforts on both sides of the pond have intensified. "Our emphasis traditionally had been 75 percent leisure and 25 percent corporate," Schwab said. "Now that has flip-flopped. Our focus is evolving ourselves into a corporate travel airline."

The idea is the more service that is added, the more attractive US Airways becomes to multinational firms, based both in the United States and in Europe. "As more companies consolidate purchasing power, we are trying to react and offer deals that work for them globally," Schwab said. "Step one is to add outbound European traffic to domestic deals we are cutting with corporations here. Step two is to fold in their travelers based overseas and headed to the U.S."

With so much more capacity in the market, and a brand new product, US Airways has become more attractive to buyers. "They are a great airline possibly to deal with because they are hungry for the business," said Joe Broessler, vice president of international rates and tariffs at Hickory Travel System in Saddlebrook, N.J. "They have to find a way to fill all those extra business class seats and have many more perks to offer."

Indeed, Bill Patient, corporate travel buyer for Philadelphia-based Elf Atochen, said the addition of first class makes US Airways' transatlantic service stronger and more competitive. "On top of that," he said, "the aggressive growth is inviting competition, always a good thing."

Stamford, Conn.-based Thomson Corp. is another large US Airways customer looking to expand a successful domestic relationship into international territory. "We have had some talks and are doing some things that are very creative and will help our partnership grow across the Atlantic," said Chris Staal, Thomson's new director of corporate travel. "We are a global company and they are becoming more of a global player. As a result, we are trying to take the good things we have done here and translate them to our folks in the U.K., for example, so they also can benefit from our relationship."

However, the carrier recognizes there still is a long way to go, especially in today's hotly contested transatlantic environment. While US Airways is talking expansion, many others have reduced transatlantic capacity or scaled back growth plans. Attracting European corporations, in particular, presents a challenge, as they generally have long-standing relationships with the likes of Air France, British Airways and Lufthansa, including large stockpiles of frequent flyer points compiled by their travelers.

Nevertheless, the A330 brings US Airways into the cabin improvement trend now sweeping transatlantic travel and making the carrier a more viable option for buyers. The first class cabin features six fully reclinable seats, power and dataports, in-seat satellite telephones, personal entertainment system, seven-course dining and access to departure and arrival lounges in European gateways. An expanded Envoy business class features greater seat pitch (60 inches) and recline (160 degrees) with a new menu, while a roomier economy class offers up to 34 inches of seat pitch and fewer middle seats. Additionally, personal entertainment systems at all 266 seats allow for greater flexibility than many competing products, enabling passengers to pause, fast forward, rewind and choose programming whenever desired.

Several other carriers are in the process of improving their transatlantic offerings. British Airways, for example, is refurbishing both business and economy and adding a new cabin in between. Other carriers are adding sleeper seats to first class, including American, United and Swissair, while Virgin is giving business class passengers the option of double beds. Sabena also is rolling out a new business class product.

US Airways' transatlantic expansion will be anchored by a $400 million international terminal now under construction in Philadelphia. "We want to make sure Philadelphia is one of the more competitive, if not the best gateway on the East Coast," Schwab said. In fact, Lufthansa already added Philadelphia last summer and Air France moves in later this year.