No one -- least of all, USAir's officials -- would have predicted it: $42 million in profits for the Washington-based airline for the first nine months of 1980, a 75 percent increase over the same period of record 1979.
Add in October, and USAir's profits to date total $51.7 million, 85 percent over the same period of 1979. In contrast, take the combined totals of American, Pan Am, United, TWA and the other six major airlines that are called the "trunks" in the industry. As a group, they lost about $138 million during the first nine months of the year with only Delta and TWA reporting increased year-to-date earnings over 1979.
It's obvious USAir is doing something right. And yet, this is the same airline -- called Allegheny then -- whose chairman, Edwin I. Colodny, complained to Congress barely two years ago that with deregulation, the smaller airlines like USAir could be overrun by the large carriers with financial resources, "the Uniteds of this world."
"I must confess that the concerns I originally expressed concerning deregulation have yet to be realized," Colodny now admits. Recounting his airline's and the other regional airlines' efforts to get some special protection in the event of deregulation, Colodny now says, ". . . We fought the wrong battle. As it turned out, Congress gave everybody equal opportunity to lose money as well as to make it."
Congress did provide a good deal of equal opportunity, but in fact, the regional carriers like USAir also had inherent strengths they hadn't fully appreciated that enhanced their viability when deregulation came along, especially with the accompanying escalating fuel costs and economic downturn.
They had two-engine airplanes, ideally suited and cost-effective for the short-haul routes the larger airlines with larger airplanes could not operate profitably and would drop.
As the larger airlines dropped the short-haul routes, the smaller airlines were left in some cases with monopoly markets -- markets then not subject to the competitive price wars that have affected the earnings of the "Uniteds."
Deregulation also allowed the smaller airlines to expand to longer haul routes, letting them keep for themselves for the first time the passengers they used to pick up on short routes and then deliver to the larger carriers for the longer haul routes.
The smaller airlines generally have done well under deregulation, and USAir has done "exceedingly well," as Colodny puts it. "We certainly decided that we were going to come up with a program to run the airline as profitably as we could under deregulation, and that meant making necessary changes in the route structure that would benefit us," Colodny said in an interview.
For one, that meant dropping service to nearly a dozen cities over the past two years, cities such as Ithaca, Elmira and Binghamton, N.Y.But because of the unique "Allegheny Commuter" system the airline sponsors, most of those cities did not lose service altogether; it was picked up by some of the commuter airlines in the Allegheny system. It's an ideal situation for USAir. It continues to receive the traffic feed from the commuters -- about 900,000 passengers will be transferred between USAir and its commuters this year -- and it uses its own jet time for more productive flying -- to new markets such as New Orleans, Arizona, Florida, Texas.
The company policy has been one of controlled growth, Colodny says. "Simply because the lid came off the cookie jar is not a reason to gorge and get a bellyache," Colodny has been fond of telling audiences.
The selection of new markets has been keyed to USAir's major strength out of Pittsburgh and Philadelphia, he explains in the company headquarters, a not-very-fancy hangar at Washington's National Airport. "We've simply continued to do what we had been trying to do for some years, namely expand our longer-haul flying to some markets such as Houston and Florida where we were able to capitalize on the more productive use of our aircraft plus improve our seasonality."
With a route structure largely concentrated in the Northeast without a balance to sunny places, USAir had always lost money during the first quarter of the year -- until 1980, when good winter weather and new Sunbelt markets gave USAir a profitable first quarter for the first time in its 43-year history.
The fare flexibility afforded the airlines under deregulation has also played an important role in USAir's profitable path, according to Colodny.
"The ability to implement fare increases on a very timely basis to cover the very radical fuel increases of last year really has been very significant," he says. "Under the old system we had tremendous lag in recovery of inflationary costs." There is growing concern in the industry that fare increases may drive away increasing numbers of potential travelers, and Colodny says they reviewed the market carefully before deciding to implement a 6 percent fare increase at the end of this month.
"But at the same time, we will not reduce the discount on the Super Savers as much as most of the other airlines," he said. About 70 percent of USAir's passengers are business travelers on full fares, with about 30 percent traveling on discount fares.
Another factor with unmistakable benefits in USAir's recent successes was the name change of the airline a year ago from Allegheny -- with its regional connotation to USAir. Before the change, no amount of advertising could change its image even though one ad campaign boasted truthfully that the then-Allegheny flew more flights than TWA, to more American cities than American, carrying 4 million more passengers a year than Pan Am. Besides the change in the public perception of the airline, the employes have undergone a change too, USAir officials say.
The new image and the new operating freedoms presented by deregulation appear to have paid off in tangible terms for USAir, its employes, passengers and shareholders:
Its stock price has nearly tripled in the past year from about $6.50 to about $18 last week.
Shareholders began to get dividends -- albeit small ones -- again this year, for the first time since 1966.
Its debt-to-equity ratio went from 85/15 at the end of 1975 to about 49/51 at the end of June.
Its net profit margin at the end of last year was one of the best in the industry. Its operating ratio this year is the best in the industry, Colodny says.
Over the past two years when many other airlines were laying off employes, USAir was adding them at a rate of 10 percent a year.
Passenger traffic, down 5 percent through the first 10 months of 1980 for the domestic airlines generally, is up at USAir.
Its complaint level, internally and at the Civil Aeronautics Board, is way down.
As for its future, Colodny is optimistic, but not specific. With the scheduled delivery of 12 more DC9 aircraft next year and three 727-200, the now all-jet airline is currently looking at new routes -- to such cities as Denver, Dallas, Miami, Milwaukee, Atlanta and others -- and will make decisions during the first quarter of next year.
Its one-time goal to go to London has been abandoned and its plan to go to California is on hold. "Being a transcontinental airline today may be an invitation to big losses," he told shareholders at the company's annual meeting in April.