US Airways Group Inc.LCC

Morningstar Rating

Stock Research and Analysis

by Basili Alukos, CPA

Although the firm has made tremendous strides, we still think that its bloated cost structure and fierce competition from rivals trying to capture fleeting demand forebode a rocky future for US Airways.

Due to its poor characteristics, the airline Read more

Bulls Say

US Airways has the largest international presence amongst its low-cost peers. This presence should allow the firm to capture market share and boost revenues because international flights carry higher yields.

US Airways is a member of the Star Alliance--the world's largest airline alliance. This membership expands the firm's route network to more than 160 countries, providing tremendous revenue opportunities.

US Airways' mishandled baggage ratio of 2.86 per 1,000 passengers reported in June 2009 is its lowest ratio since November 2003. If this improvement persists, US Airways could win customer loyalty while cutting wasteful expenses. Read more

Bears Say

Although US Airways has demonstrated commendable cost improvements, its 2008 cost structure, measured by cost per available seat mile adjusted for stage length, was almost 70% higher than rival Southwest, up from 50% during 2007.

US Airways estimates that a $1 increase in the price per gallon of crude oil results in a $1.4 billion increase in annual expenses. Despite this massive increase, US Airways has minimal fuel hedges, leaving the firm highly exposed to higher oil prices.

Almost 90% of US Airways' employees work under union representation, with a significant portion of these contracts amendable within the next year. We expect that new contracts will challenge operating profitability. Read more

Strategy

Cost containment is US Airways' top priority, as the firm attempts to preserve its precious liquidity during a challenging air-travel market. Operationally, US Airways will continue to improve efficiency Read more

Management

Chairman, president, and CEO Douglas Parker has spent his entire career in the airline industry. Parker earned the CEO position in 2005 after US Airways' merger with America West Airlines, where he served as president, chairman, and CEO since 2001. Read more

Profile

After merging with America West in 2005, low-cost carrier US Airways is the fifth-largest airline in the United States as measured by available seat miles (ASMs). The airline Read more

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