US Airways prospects looking up in 2008

The carrier also is promising to fly one of the most modern fleets in the industry. US Airways will be busy upgrading its fleet in 2008, replacing numerous old Boeing 737s with new Embraer 190s. By the first or second quarter, US Airways expects to finish a $20 million upgrade of its international Boeing 767 jets with new seats and video screens.

More than two years after America West bought the former US Airways, the company has yet to combine employee contracts for pilots, flight attendants, mechanics and fleet service workers.

The pilots are going to be an especially difficult bunch to deal with in 2008.

They've been fighting internally over seniority for almost a year as staff lists from America West and US Airways were combined. In August, pilots from the former US Airways, who are known within the company as "East" pilots, walked out on negotiations, demanding immediate pay raises before they come back.

Meanwhile, another group of disgruntled East pilots is trying to form a new union that would revise the seniority rules.

US Airways continues to work on its employee contracts, but Gee said ongoing delays with the pilots will naturally complicate the flight attendants' contract because "you can't do one without the other."

Investors have told US Airways executives they're worried about the company's lack of international flights, and for good reason, Calyon Securities analyst Ray Neidl said.

In addition to offering customers more options, a robust international presence helps airlines offset high domestic operations costs by allowing them to raise prices overseas, Neidl said.

US Airways is working on expanding its international service. To that end, the carrier is snapping up wide-body jets, and company officials said they expect to command a fleet of 17 Airbus A330-200s by 2011.

Kirby told analysts at a Calyon Securities conference early in December that the airline is growing its international capacity by 15 to 20 percent per year. "And we have more growth prospects ahead of us than most other carriers simply because we are starting from a lower base."

Though high oil prices will continue to dog US Airways and other carriers, Neidl said he expects US Airways to overcome its problems and have a good performance in 2008. He's put an "Add" rating on US Airways stock.

"I'm still looking for only an economic slowdown next year, not a recession," he said. "If that's the case, they should be able to make money in that type of environment, even with the oil prices staying at high levels."

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