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No breakup of US Airways, assures Gangwal

Ela Dutt
India Abroad Correspondent in Washington

Rakesh Gangwal, president and chief executive officer of US Airways, on Tuesday assured employees and the public that the airline would not be broken up into segments following the breakdown of merger talks with United Airlines.

In a statement in which US Airways chairman Stephen M Wolf joined him, Gangwal maintained that they have no intention to, and will not, recommend a breakup of US Airways to its board of directors.

"As a result of the decision by UAL Corporation to withdraw from the merger agreement with US Airways, we have received numerous questions from employees, customers and public officials regarding the potential breakup of the airline, as well as unsolicited calls from our competitors expressing interest in parts of the company," Gangwal and Wolf said.

"The uncertainty regarding a potential breakup weighs heavily on our employees, and we feel it is important to address this issue now," they added.

The announcement comes in the wake of last Friday's meeting between Gangwal and union officials where he told them the future of the company would be decided at a special board meeting on July 18.

This, however, did not sit very well with the union membe. Gangwal and Wolf made their statement on Tuesday after analysts predicted US Airways had few options but to sell the airlines to its unions or break it up.

"Since we joined the company in 1996, the people of US Airways have met a variety of challenges successfully while consistently showing their dedication to running a quality airline. It is with that same focus and dedication that we will need to jointly address the challenges and opportunities going forward." Gangwal and Wolf said.

The statement is in line with Gangwal's traditionally collaborational relationship with labor, in stark contrast to the usual confrontation style most executives adopt.

Calcutta-born Gangwal is the first Indian American to head a major US airline. Rono Dutta is the other one, and he heads United.

The graduate of Indian Institute of Technology, Kanpur, with a business degree from Wharton, is credited with turning around the fortunes of this ailing airline.

"When I came here, it was a very troubled company," Gangwal told his alumni magazine at Wharton in 1998.

"People had given up hope of US Airways ever being a force in the marketplace."

He seems to be at the crossroads again despite having turned the airline around.

Gangwal turned US Airways into a profitable player ranked number one in on-time arrivals. He shut down money-losing routes, drew up a contract with pilots that save the company $88 million a year, and launched MetroJet shuttle, a low-cost operation.

By 2001, however, the company reported massive losses, as a general economic downturn affected travel. In April this year, US Airways reported a first quarter net loss of $171 million and an operating loss of $228 million, or $2.55 a diluted share.

Gangwal blamed a weak economy, low-cost competitors and network carriers for the poor performance.

Compared to the first quarter of 2000, Gangwal's airline's passenger revenue per available seat mile declined 7.6 percent, the airline said.

Wolf, who had at one time headed United, then said it was necessary for US Air to become part of a larger network like the one that promised to come into being with the proposed merger. But UAL withdrew from the deal.

In one of its earlier reports after Gangwal took over at US Air, The Washington Post made a virtual legend of him saying --"when people think of aviation heroes, they're apt to picture John Wayne in the movie The High and the Mighty or Charles Lindbergh crossing the Atlantic alone in the tiny cockpit of the Spirit of St Louis. It's probably safe to bet they would never once picture a small, mustachioed man with a Wharton business degree and passion for the arcane airline practice known as yield management. In an industry where performance in the cockpit is the measure of stardom, Gangwal is on his way to becoming a superstar."

With the fate of the airline hanging in balance, Gangwal's star status is in question.

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