USAir Group

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USAir Group

1911 Jefferson Davis Hwy.
Arlington, Virginia 22202
U.S.A.
(703) 892-7000

Public Company
Incorporated: March 5, 1937 as All American
Aviation, Inc.
Employees: 13,789
Sales: $4.407 billion
Market value: $1.222 billion
Stock Index: New York

In 1978 Allegheny Airlines conducted a passenger survey in which customers were asked to rate the different airline companies. Included in the list of choices was a nonexistent airline called “USAir.” The customers rated US Air highly, in fact, it was even ranked ahead of Allegheny. After deregulation, when Allegheny was searching for a new name that didn’t give the impression of being a small and regional airline, it chose US Air.

The company was originally incorporated in Delaware in 1937 as All American Aviation by a glider pilot named Richard C. du Pont, of the Delaware du Ponts. On May 12, 1939 the airline began to deliver mail around the mountains of Pennsylvania and West Virginia. Since many communities did not have airstrips, the company devised a system employing hooks and ropes that enabled the mail-plane to drop off one mailbag and pick up another without landing. Du Pont’s method brought regular mail service to a number of once-isolated communities and was widely imitated. Later, All American began transporting passengers on its limited network. Despite the addition of more destinations the airline remained a small operation, serving many remote communities throughout the Alle-ghenies.

When the United States became involved in World War II, du Pont went to work on the Army’s glider program in California. In 1943 du Pont was killed in a glider crash. The mailbag snare he developed, however, was adapted by the Army’s Air Corps and used to rescue downed pilots behind enemy lines. In addition, he helped to develop a glider which could be picked up by an already airborne airplane. This system was used in the evacuation of Allied troops from the Remagen beachhead in Germany.

After the war the company changed its name to All American Airways. On January 2, 1953 the name was changed again to Allegheny Airlines. That same year the government chose Allegheny to operate shuttle services between smaller eastern cities and major cities or destinations served by larger airline companies. Allegheny was provided a subsidy to operate these services to communities which otherwise would have had no air service.

The company experienced a period of healthy growth for several years in the 1950’s and 1960’s. The old DC-3s it was flying were replaced with new Convair 440s, Convair 540s and Martin 202s. The operations and maintenance base was also relocated from Washington, D.C. to a modern complex in Pittsburgh. Allegheny began buying jets in 1966. On July 1, 1968 the company acquired Lake Central Airlines and on April 12,1972 purchased Mohawk Airlines. By the mid-1970’s Allegheny had become a major regional airline.

Concurrent with this steady growth, Allegheny was obliged to operate the government-assigned “feeder” services. Starting in 1967, however, Allegheny began subcontracting these routes to smaller independent carriers. This arrangement satisfied Allegheny’s obligations to the Civil Aeronautics Board. The independents were able to make a profit on the routes because they had lower costs, they were not unionized, and their equipment was better suited for the rural “puddle jumper” routes. The CAB was more than pleased to release Allegheny from its obligations (and discontinue the subsidies) and therefore supported the company’s subcontracting arrangements. Since the independents fed passengers mostly to Allegheny, the company itself had become a large regional airline.

Even as a larger airline, however, passengers had a particularly low opinion of Allegheny. It became widely known for its nickname “Agony Air.” In many cities the airline had a monopoly on air service, so there was no incentive to improve, or even maintain, a certain level of customer service. The company’s on-time record was poor, its customer service was described as unpleasant, and flight cancellations were common.

Fortunately for Allegheny its chairman and president, Edwin Colodny, had previously served with the CAB. This provided him with the experience and knowledge of how to acquire and protect the company’s right to fly to certain destinations, and how to successfully raise fares. Before any of his policies could be put into effect, however, the Airline Deregulation Act of 1978 was passed. Vigorously opposed to the passing of this Act, Colodny argued that permitting all airlines to freely enter into any market deregulation would allow the larger airlines, with their vast resources, to raid markets served by smaller companies with the intention of driving them out of business. This did not happen. Instead, the larger airlines used their new freedom under deregulation to contend with their more immediate competition, namely, each other. Regional operators like Allegheny were virtually unaffected. But deregulation did have an effect on the regional air carriers. For the first time Allegheny was allowed to operate long haul routes to Texas and the West Coast. With such an opportunity, the company clearly required an improvement upon its “Agony Air” reputation. Colodny decided to begin with a new name. He chose ”USAir” over several other names, including “Republic Airlines” (which was later used by the old Minneapolis-based North Central Airlines). Allegheny officially became USAir on October 28,1979.

Under the name of USAir the company launched an advertising campaign which claimed that they “carry more passengers than Pan Am, fly to more cities than American, and have more flights than TWA.” This coincided with the inauguration of new routes to the southwest. These new services were originally intended to prevent company jets from remaining idle during the traditional winter slump in the northeastern markets. In addition, USAir planned to implement a Pittsburg-London route, but withdrew the application due to fears of “overambition.” According to Colodny, “overexpansion is the most tempting of all possible sins of airline managements under deregulation. And, if overdone, it can result in a serious bellyache. In designing a route system, a carrier must limit its ego.” As a result, the airline has concentrated on consolidating its current markets and strengthening its central Pittsburg hub.

Colodny claims that two-thirds of American air travel is in markets under 1000 miles. USAir has made it a point to avoid “overambition” and has instead concentrated on developing these local markets. However, the short duration of these flights means that the airplanes must make more take-offs and landings. The frequency of these takeoff and landings, in turn, increase maintenance costs. This explains why there is so little difference in the price of a ticket for a 100-mile flight and a 400-mile flight.

Presently classified as a “major/trunk” carrier, the company flies DC-9s, B-727s, 737s, and even a few British Aerospace BAC-111s. The 111s are expensive to fly but inexpensive to maintain. Recently, USAir has ordered new unpainted jets except for the logo and markings, to lower aircraft weight and save money on fuel and maintenance.

The airline’s on-time record has significantly improved as a result of strict attention to scheduling and the “first flight of the day” standard, which prevents late starts from pushing back the whole day’s schedule. The airline has also perfected a system of efficient bad-weather maintenance. These measures have contributed to what campany officials claim is the second lowest number of complaints to the CAB (Delta is first) based on passenger volume.

In order to remain competitive with other airline companies which are merging into even larger companies, the USAir Group announced in December 1986 that it would be acquiring Pacific Southwest Airlines (PSA) for $400 million. The announcement surprised many industry analysts because USAir’s predominantly East Coast airline network has few integration points with PSA which is concentrated along the West Coast. PSA is operated as a subsidiary of the USAir Group and will later be absorbed by USAir. The merger increased the amount of traffic on USAir by 40% and gave USAir landing rights in a number of cities on the West Coast.

USAir is presently in a strong financial position, having obtained and protected a significant share of passenger traffic in its various markets. Barring unforeseen difficulties with its normal but “industry-volatile” debt-equity ratio, a labor dispute, or a competitor’s attempt to penetrate one of its markets, the airline should continue to experience steady growth and consistent profits.