Thursday, January 28, 2010

US Airways Gambles on Shuttle Market

US Airways Group (LCC) announced Q4 earnings and wrapped up the year by saying things are better. Investors look to the future so when in the press release they declare that shuttle routes between Boston, Washington DC and New York will be growing to 99% of ASM (Available Seat Miles) you just have to start worrying about the future. This is short haul stuff. The Obama administration is looking to make significant improvements in traffic and pollution. US Airways is thinking through the rear view mirror hoping that the economy will improve and travellers return to their same old habits.

This is a very pro-active political administration. They are in a hurry to make change. By betting 99% of your ASM you have gambled the company on the wrong strategy. Watch for special surcharges and taxes imposed by the Federal government on short haul high pollution air routes. You will be priced out of the market.

With a market cap of approximately $800 million you will become road kill. Chairman and CEO Doug Parker did not address the issue and may not be aware that it exists. When you look at the board of directors you are not impressed with their backgrounds and ability to contribute to the company.