US Airways prospects looking up in 2008

By CHRIS KAHN

AP Business Writer

updated 4:01 p.m. ET Dec. 30, 2007

PHOENIX - US Airways Group Inc. is eager to ring in the new year after getting beat up on Wall Street in 2007.

Though the company consistently surpassed analysts' earnings expectations, shares for the Tempe, Ariz.-based carrier have taken a 12-month nose dive. By December, investors saw their stock drop three-quarters in value.

US Airways shares reached a 52-week low of $14.41 from a high of $62.50, while the AMEX Airline Index of major carriers fell to $34.29 from a high of $66.92.

Surging oil prices are certainly to blame for sinking US Airways stock along with every other airline. But the carrier also endured a regular stream of bad news as management struggled to combine operations two years after America West Airlines bought the former US Airways.

In January, US Airways whiffed on a hostile bid for Delta Air Lines. Then check-in kiosks temporarily failed in March as the company combined reservations systems, and a spring ice storm stranded thousands of passengers.

The unions rebuffed management's efforts to merge staffs from the former America West and US Airways. Meanwhile, customers ranked US Airways at the bottom of the industry in service.

Company officials point to a number of reasons to be optimistic in 2008.

They've fixed a glitch-prone reservations system, and in September the Federal Aviation Administration awarded the combined airlines a single operating certificate. They've hired former Northwest Airlines executive Robert Isom to smooth out the airline's operation. And as passengers clogged airports during the busy holiday travel season, US Airways posted its best on-time performance of the year.

"Now is a time where we can all get together, get on the same page, get a new play book and go forward," US Airways spokesman Phil Gee said.

Still, if the carrier is going to have a better year in 2008, it's going to have to deal with a number of issues that President Scott Kirby has told analysts investors say weigh on its stock.

If its customers are any indication, US Airways has a lot of work to do. The carrier posted a higher rate of customer complaints than any other major carrier throughout much of the 2007. During parts of the year, US Airways also had the worst record on mishandled baggage and late flights.

In response, the company has added a few more minutes between flights to help its schedule run smoothly.

"It's something we needed to do to get the airline back on track," Gee said.

"If you run your operation on time, you're not going to have misconnected bags, misconnected passengers. Everything kind of falls in line if you run an on-time airline."

In November, the carrier posted its best on-time performance of the year with 81 percent of its flights arriving within 14 minutes of their posted schedule.

Besides operating on schedule, US Airways also is hoping to make the in-flight experience better next year with new meals on domestic and trans-Atlantic flights. And it's experimenting with a new seat-back entertainment system that would allow customers to pick their own movies to watch during the trip. The system should be ready by spring.

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