Someone Up There Loves America WestEric Schine
Most U.S. airlines greeted the end of 1991 with a measure of optimism. How, they wondered, could 1992 be any worse? But America West Airlines Inc. was another story. As the new year dawned, competitors, analysts, and travel agents began a death watch on the bankrupt carrier. Chief Executive and airline co-founder Michael J. Conway had taken draconian measures, laying off 15% of his employees, cutting pay by 10% for the remaining 12,000, and grounding 15 planes. But most observers were predicting the Phoenix-based carrier would be gone by the time the cactus bloomed.
Well, the cactus have been in flower since February, and America West is still flying. Conway, the rough-talking son of a Brooklyn cab driver, is now thumbing his nose at the doomsayers. He's kicking off an ambitious plan to build a hub in Columbus, Ohio, and is restructuring routes to move away from competition with formidable Southwest Airlines Co. "This airline is too tough to die," boasts Conway. Few would support that claim, but many observers are suddenly more upbeat. America West, says Standard & Poor's Corp.'s Philip Baggaley, has "leveled off at the treetops."
EASTERN EXPOSURE. Passengers have finally used up the half-priced tickets sold in desperation in 1991, which had put a strain on cash flow. In January, the carrier reported achieving the lowest costs in the industry. And bookings are up, Conway says. Two months ago, advance bookings were 30% below 1990 levels. Conway has since bombarded travel agents with letters--even dinners--and many have come back. February's advance bookings were on a par with 1990's, before the war battered traffic.
Conway has overhauled the airline's strategy. Until recently, it flew mostly short haul, operating mainly from its hubs in Phoenix and Las Vegas. But it suffered in the competition with Southwest, which has rock-bottom prices. So, Conway is moving toward longer flights, flying to more Eastern cities and reducing service at Western hubs.
At the center of the strategy is the airline's launch of a new hub in Columbus. As of Mar. 1, America West is operating 26 flights daily. Rapid expansion has gotten the airline in trouble before. But Conway is gambling that Columbus, which boasts such corporate headquarters as The Limited, and Banc One, will bring in high-paying business travelers. Conway claims America West can reduce average fares for that market by 30% and still bring in 30% more than it's getting at its Las Vegas hub.
The CEO also believes a Columbus hub will help raise badly needed cash. The airline had just $38 million of unrestricted cash as of Jan. 31 and will get $15 million when the sale of its Nagoya route to Northwest Airlines Inc. is cleared. But Conway is trying to raise $100 million more, partly by tapping local businesses.
Conway hopes to line up commitments by April, two months before the airline is due to submit a reorganization plan to the bankruptcy court. Still, staying alive ultimately depends on an economic rebound. "If they can make it to that elusive recovery," they have a great shot at survival, says analyst Helane Becker of Lehman Brothers Inc. That's still a big "if," but not as big as before.