ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, May 23, 1996 TAG: 9605230047
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: ASSOCIATED PRESS
USAir, which last year posted its first profit since 1988, is being squeezed out by larger and smaller airlines and cannot remain competitive unless it can expand, its chairman said Wednesday.
Such an expansion would point the nation's fifth-largest airline in a new direction after several years of trimming itself.
Stephen M. Wolf, who became chairman and chief executive officer of USAir Group this year, said his preference was to reorganize internally. Merger discussions with United Airlines fizzled last year, and a flirtation with American Airlines went nowhere.
In remarks at USAir's annual shareholders meeting and with reporters afterward, Wolf disclosed an assessment similar to one made privately last month with USAir employees.
``We're the last midsize carrier that has not come to grips with our cost structure,'' he said. ``I don't believe we can stay competitive as an airline. We have to grow.''
Wolf said USAir, based in Arlington, Va., is far from having the low-cost operations that discount, ``niche'' carriers such as ValuJet and Southwest Airlines have. Despite signs of service reductions by discount carriers after the ValuJet crash in Florida this month, he predicted the low-cost airlines will continue to compete with lower fares.
The remaining option is to expand, but USAir is having difficulty catching up with the nation's three largest airlines - American, Delta and United - which he said continue to grow at a faster rate.
Being larger would enable USAir to negotiate better prices with aircraft builders and to offer ``a broader, more attractive'' frequent flyer program, Wolf said.
Although USAir is the leader in travel between East Coast destinations, accounting for 40 percent of the market, such travel accounts for less than one-fifth of USAir's East Coast revenues, Wolf said. (USAir provides about 43 percent of Roanoke's daily flights, according to the Roanoke Regional Airport Commission. Because it uses larger planes than the other airlines there, it supplies 61 percent of the available seats on departures.)
Wolf said USAir had two main weaknesses: higher costs associated with labor and with making shorter flights using smaller aircraft; and service quality not getting full attention during the years of cutbacks. He said he wanted to make USAir the carrier of choice rather than one of convenience.
To overcome years of operating losses, Wolf said, the airline cut less-profitable routes and reduced its aircraft inventory. He said by the end of the year, the airline will have 62 fewer aircraft than it did in 1990.
``This is not a strategy upon which we can build the company,'' he said.
He said an expansion would take several years. ``Change is always difficult, but the status quo is not an option,'' he said.
USAir has about 42,000 employees, most of them on the East Coast.
LENGTH: Medium: 62 lines ILLUSTRATION: PHOTO: (headshot) Stephen M. Wolfby CNB