Re: I have a dream
Date: January 12, 2004 11:13AM
I didn't start this to get into a back and forth discussion on the merits of USAir's management decisions. I really see no reason to go there. However, I do think it is important to look at the matrix here.
USAirways has mentioned that it wants to sell one hub. They have not mentioned which one.
If you analyze the hubs you would have to come to the conclusion that the only hub that is marketable is the Charlotte hub. It is the only hub that one can forecast steady passenger traffic that is not immediately subject to change from some outside factor.
In other words, one could make a reasonable financial projection for investment and financing purposes that would allow the accountants and bankers to look at the Charlotte hub as an asset with value and a steady cashflow in an area with an increasing population.
On the other hand, the PIT hub does not show asset value. If an airline wanted to come into PIT tomorrow and set up a major hub, they would not need USAirways to do it. There are plenty of gates available in this area of declining population.
With the LUV factor at PHL, this hub has only one potential customer and that is LUV itself. My opinion is that LUV will not buy PHL from USAirways. LUV didn't buy in California and they didn't buy at BWI. They are now the largest airline in California and at BWI and USAir did not receive anything from LUV. My opinion is that LUV isn't going to start paying US now. They are trying to put US out of business, not add to their coffers. No other airline is going to be willing to go up against LUV at PHL, so what can the hub asset value be at PHL? My opinion is that PHL would be the worst investment out of all of the USAir pieces available today.
The handwriting is so clear on this airline. Although East Coast operations have always survived intact before, it is going to be difficult (probably impossible) to pull this off again. I'm not trying to alarm you like USAirways management has done so many times. I'm trying to just give you the facts.
RSA is going to protect their invesment come hell or high water. When they went into this, they had some idea of the breakup value of this airline. USAirways has some really nice pieces that others would like to steal. However, that will not happen. There is too much greed in this business. USAirways will get top dollar for the Shuttle and for the DCA operation simply because many other airlines want it and they are going to either get it or make someone pay big to get it.
The most likely airline candidate for the purchase of the Charlotte hub would be Continental. I have no idea how Continental would handle the USAirways employees, but it could be ugly. On the other hand, it might not be ugly. Bethune came out of Piedmont and knows the Charlotte operation very well.
The most likely airline candidate for the purchase of the Shuttle would be American.
The DCA operation is going to be the wildcard. There will be a lot of interest there from legacy carriers as well as the discounters.
There will probably be no sale of the PHL or PIT hub because no one will be interested in buying those pieces.
So as employees, and people that have a passion for this airline, you have a decision here. Do you let someone like Continental come in and buy this hub? Or do you explore the possibility of putting an employee group together to buy the hub? My opinion is that even if an employee group did not get this hub, they would have more negotiating power with someone like Continental if they were in the finals to purchase the hub.
What's it worth?
Bankers put a worth on major businesses like this based on the profits that are generated by that business. Generally, a major business is worth about 3 times EBITA which is term investment bankers use for net cash flow before interest expense and taxes. If it is a really hot business then it can be worth more than 3 times EBITA.
USAIRWAYS has hired investment bankers to determine the value of these assets. What those investment bankers are probably doing right now is determining what the EBITA is for the hubs and the shuttle as well as the assets for each. They will put packages together that will be sent out to qualified companies with this information.
I don't know what the USAIRWAYS numbers are, but I'll give you this example as it relates to the shuttle. These are examples only and are not based on any USAirways numbers.
If the shuttle is throwing off $100 million a year in EBITA then the shuttle would be worth at least $300 million dollars. However, the shuttle could be considered a "hot item" because it excludes other competitors from offering the same service. In this case, the Shuttle could be worth up to 6 times EBITA which would mean the shuttle could be worth $600 million dollars if it were throwing off $100 million a year. This is just an example, but you get the idea of how this works.
How many Piedmont Employees are there?
In order to pull something like this off, it would take a lot of dedicated folks. I have no idea how many Piedmont employees there are. How many would be interested in trying to acquire the Charlotte hub?
The First Opportunity.
It is my opinion that this is the first opportunity that has been available since 1987 to actually acquire this Piedmont piece of the business. She is battered and has been abused. She has been mis-managed and treated like a wicked step child. Pieces of her have been ripped apart up buried in the desert. Her children (the employees and former employees) have watched this happen for the past 15 years and have felt helpless. Her children have grown up and learned a lot over the past 15 years. They've learned how to be tough and how to survive. They have never given up, although they surely wanted to. Now her children may have a chance to rescue her and return her to her former glory.
Do You Really Want To Do Something?
If any of this sounds like something that you want to investigate then I would suggest that we set up a committee to explore this further. Who wants to be on the committee? To help explore the possibility of flying the up and coming airline back home, committee members should be former Piedmont employees, spouses of employees, or residents of North Carolina. Also please feel free to re-post this message and my first dream message on any board that you think might benefit from it.