US Airways Group Inc. Chief Executive Doug Parker said Wednesday the airline industry needs to get much smaller to stay viable, and consolidation is one of the keys to bringing the sector back to profitability.
Speaking at the carrier’s annual meeting in New York, Parker applauded the merger of Delta Air Lines Inc. and Northwest Airlines — saying the creation of the world’s biggest carrier was a major step toward better streamlining the industry. But he noted that the combined company has less than one-quarter of the U.S. market, leaving a great deal of room for further consolidation.
United Airlines walked away from a deal last year to combine with US Airways, but has not ruled it out at some point.
At the meeting, Parker also reiterated the carrier’s plan to rake in $400 million to $500 million this year by charging for things such as checked bags and choice seating. He said extra fees are here to stay.
Parker said that the fees, or “ancillary revenue,” have allowed the airline to compensate for revenue lost last year to high fuel prices, and this year to the steep drop off in the economy.
Parker said that although some customers were turned off by the bag fees, the added charges have reduced the number of bags flowing through the system by 20 percent — and allowed baggage handling systems to operate more efficiently. Making this arduous process smaller and more streamlined has allowed the Tempe, Ariz.-based airline to improve its on-time performance, Parker said.
Data released by the Transportation Department on Tuesday showed nearly 80 percent of US Airways nonstop flights were on time in April, making the carrier ninth of 19 airlines reporting those results.
In addition to $15 for a first checked bag and $25 for a second, US Airways currently charges for other a la carte items like choice seats in coach and pillows and blankets. It began charging for drinks like soda and juice last year, but reversed its plan in March when no other airlines followed suit.
Parker told shareholders that the company will continue to strive for margin improvement — a great deal of which has come from extra fees — and other operational adjustments to prepare for “another difficult year for the airline industry.”