US Airways to shut down a subsidiary

0 Comments | Deseret News (Salt Lake City), Jan 15, 2004 | by Associated Press

ARLINGTON, Va. -- US Airways announced plans Wednesday to shut down its Allegheny Airlines subsidiary by the end of March, either by merging operations into another subsidiary or by liquidation.

Allegheny Airlines, based in Middletown, Pa., near Harrisburg, employs 1,421 workers and flies 41 Dash-8 turboprop planes that each carry 37 passengers. It serves 38 cities, mostly in the mid-Atlantic region.

The job losses associated with the plan are uncertain. The airline said its preferred path is to merge Allegheny's operations into Piedmont Airlines, another turboprop subsidiary based in Salisbury, Md.

But the airline threatened that it may have to liquidate Allegheny's operations entirely if it cannot reach agreement with its unions on a consolidation plan.

"Turboprop aircraft will still have a role in our network, but it is inefficient to have two wholly owned Dash-8 operators with duplicative overhead functions for a shrinking part of the company," said Bruce Ashby, president of US Airways Express, which oversees the subsidiaries that fly under the US Airways Express banner.

Piedmont, with 2,090 employees, also operates 41 Dash-8 turboprops. Spokesman David Castelveter said the two airlines operate in many of the same cities, including the airline's hubs in Philadelphia and Pittsburgh, but that their route networks have little overlap.

"Our intention would be not to significantly shrink the size of the combined operation," he said.

In the long run, though, US Airways plans to reduce its reliance on turboprop planes in favor of regional jets, which are preferred by travelers.

Arlington-based US Airways, which employs 28,000, emerged from bankruptcy last year with the help of a $1 billion federally guaranteed loan. That money was supposed to bankroll its plan to expand use of regional jets, but the airline has struggled to meet its revenue projections under increased competition from low-fare airlines and continued weakness in high-yield business travel.

US Airways shares fell 18 cents to close at $5.12 on the Nasdaq Stock Market.

Allegheny began operations in 1946 as Reading Aviation Services and began operating commuter flights for USAir since 1973. It was purchased by USAir Group in 1986.