Eisner Communications helps chart US Airways' low-cost flights

Daily Record, The (Baltimore), May 4, 2004 by Kara Kridler

Baltimore-based Eisner Communications is trying to help US Airways Inc. defend its turf and return to profitability as a low-cost competing airline moves into the Philadelphia market.

In an effort to counter Southwest Airlines' May 9 arrival at Philadelphia International Airport, Eisner launched an advertising campaign tagged GoFares. They're Unbelievably Low.

Arlington, Va.-based US Airways is touting its new low-fare prices to seven destinations, including three in Florida. The new fares start at $29 and go up to $499 each way. There are no Saturday night stay or round-trip purchase requirements.

US Airways announced a loss of $177 million for the first three months of this year, which is a $105 million improvement over the first quarter of 2003, according to the airline. This excludes some one-time reorganization items associated with the company's filing of bankruptcy in August 2002 and emergence five months later.

The price points are the keys US Airways is trying to market, said Amy Kudwa, a spokeswoman for US Airways. Prices being equal, we have an unbelievable product.

US Airways is offering more seats than its low-cost competitors, Kudwa said.

The airline does not have immediate plans to beef up its presence at Baltimore/Washington International Airport, which it once dominated until it hit hard times and Southwest quickly became the leading carrier. Now we are concentrating on our program in Philadelphia, Kudwa said.

Now, with this new competition in the market, US Airways has to work harder to retain its customers, said Stephen Etzine, executive creative director of Eisner.

The company has a reputation for high prices, Etzine said. So, we tackled this with assumptive advertising that makes [U.S. Airways] reputation for higher prices the joke.

I think US Airways wants to be perceived as a progressive and aggressive leader who is willing to defend their turf, he said. They want to shed the pinstripe - image and talk like the upstart airlines.

But being hip and marketing low fares are the easy part for an airline, said Richard Aboulafia, vice president for the Teal Group Corp., an aerospace and defense consulting firm in Fairfax, Va.

The hard part - the only thing that matters - is being low cost, Aboulafia said. You have to have a cost structure that makes being low cost profitable.

The real issue is that revenue is still down because prices are transparent between competitors, he said.

In the absence of improved revenue, the only options for US Airways are a complete restructuring or winding up as part of another carrier, he said.

US Airways is continuously looking at ways to bring costs down on a wider basis, including coordinating with labor unions to reduce distribution costs, Kudwa said. President and Chief Executive Officer David N. Siegel, who clashed with the airlines' unions, stepped down April 19 in an attempt to help the company and the employees take necessary steps to return it to profitability.

Southwest does bring competition for US Airways, Aboulafia said. Low-cost airlines are doing well. Southwest is the most consistently profitable airline.

Still, Barry Biffle, managing director of marketing for US Airways, said the airline's transformation is much bigger than trying to compete with low-cost carriers.

This is the biggest campaign we have ever launched, he said. It is more than just about competing with Southwest. This is a big part of what US Airways is doing to transform itself.