US Airways (LCC) CEO: If Oil Stays at $120, Only the Rich Will Fly

This morning on CNBC's "Squawk on the Street," CNBC's Erin Burnett and David Faber interviewed Doug Parker, Chairman and CEO of US Airways (LCC).

The key points from Parker:

Any airline paying $110 for oil is losing money

Parker defends the airline industry's new love for a la carte pricing by comparing to a flight to a hotel stay or a baseball game where the initial purchase does not guarantee you a free drink or other amenities

Simply raising ticket prices and keeping other amenities would be unfeasible

Airlines are no less safe or reliable today because of $120 oil

Airlines will continue to lose money until fuel prices come down or flying becomes an expensive luxury

US Airways does not need to consolidate with anyone, but the industry is well-served by such consolidation.

Full Transcript:

CNBC's Erin Burnett: JOINING US IS DOUG PARKER, CHAIRMAN AND CEO OF U.S.
AIRWAYS. WE APPRECIATE YOU'RE TAKING THE TIME TO JOIN US. YOU KNOW, THE
BOTTOM LINE QUESTION THAT EVERYONE SEEMS TO HAVE HERE IS IT FEELS TOO
AMERICANS LIKE NICKEL AND DIMING. I GET CHARGED FOR A COKE, YOU CHARGE
FOR THE BAG, YOU CHARGE FOR CURB-SIDE CHECK-IN. PEOPLE ARE SAYING, JUST
PLEASE CHARGE ME A HIGHER FARE, GIVE ME THE HIGHER FARE SO I DON'T FEEL
LIKE I'M BEING NICKEL AND DIMED. WHY DO YOU BREAK IT DOWN?

US Airways' Doug Parker: BECAUSE WE THINK IT'S THE BEST THING TO DO FOR
CUSTOMERS.LOOKING THIS ENVIRONMENT, ALL AIRLINES ARE RAISING FARES. YOU
WILL SEE MORE OF THAT AS SEATS COME OUT OF THE SYSTEM. WE ARE TRYING
HARD TO COVER THE COST OF TRANSPORTATION. AIRLINES ARE NOT DOING
IT.ANYONE PAYING $110 A BARREL FOR OIL IS LOSING MONEY RIGHT NOW. AND WE
ARE JUST NOT COVERING THE COST OF TRANSPORTATION. THE FIRST THING WE TRY
DO IS RAISE TICKET PRICES TO COVER THAT WITH AS MANY SEATS AS WE HAVE IN
OUR SYSTEM, WE CANNOT DO THAT. YOU ARE SEEING FIRST SEATS GO AWAY. THE
NEXT THING YOU ARE SEEING US DO IS TRYING TO FIGURE OUT OTHER WAYS TO
GET REVENUES OTHER THAN RAISE TICKET PRICES. AS WE HAVE DONE AFTER 9/11
BY CHARGING FOR A MEAL, WHICH HAS BEEN ACCEPTED WIDELY BY CUSTOMERS, YOU
ARE SEEING AIRLINES CHARGE CUSTOMERS WHO WANT TO USE THE SERVICE, AND IT
IS LIKE A CHECKED BAG, FOR THOSE SERVICES, NOT CHARGING THOSE WHO DON'T
WANT TO USE THEM.

David Faber: MR. PARKER, DAVID FABER. I WANTED TO YOU RESPOND TO
MR.
FLORES BY SAYING AN AIRPLANE IS A DIFFERENT ENVIRONMENT AND WE SHOULDN'T
HAVE TO CHARGE FOR THINGS LIKE WATER.

Parker: LOOK, FIRST OFF, THANKS FOR APOLOGIZING TO THE FLIGHT
ATTENDANTS. THEY LET YOU KNOW WHEN YOU DON'T TREAT THEM WELL. THEY'RE
VERY VOCAL.

Faber: THEY CERTAINLY ARE.

Parker: THEY'RE FANTASTIC. THE FACT OF THE MATTER IS, YOU KNOW, I WAS IN
A HOTEL THIS WEEKEND THAT WAS NOT CHEAP. WHEN MY KIDS WANTED A WATER, IT
COST MONEY OUT OF THE REFRIGERATOR. WHEN I TOOK THEM TO THE YANKEE
GAME IT WAS MORE THAN $2 FOR A WATER AT THE GAME, EVEN THOUGH THE TICKET
WAS EXPENSIVE. THAT'S THE WAY -- FOR WHATEVER REASON, IN THE AIRLINE
BUSINESS, THAT HAS NOT BEEN THE MODEL. BUT IN THIS WORLD WE HAVE TO
CHANGE THE RULES. OUR BUSINESS HAS NOT BEEN THE ONE THAT'S THE MOST
PROFITABLE EVERY TIME IT HAS LOST MORE MONEY OVER TIME THAN OTHER
INDUSTRIES. WE NEED TO CHANGE THE MODEL. I THINK THIS IS THE
RIGHT ONE.
THIS IS ONE WHEREBY THOSE WHO WANT TO USE THE SERVICE CAN PAY FOR IT
THOSE WHO DON'T CAN EITHER CARRY IT ON OR NOT USE IT. WHAT WE HAVE FOUND
-- WE FOUND THE VAST MAJORITY OF CUSTOMERS ARE SAYING THEY DON'T WANT
IT.
WE ARE SEEING MUCH -- VERY, VERY FEW PEOPLE SAY THEY WANT TO PAY THE $2
FOR WATER OR SODA. THAT'S FINE BY US. THE FACT OF THE MATTER IS GETTING
THAT SODA ON TO THE AIRPLANE, HAVING IT CARRIED ON, SOMEONE DELIVERING
IT, FLYING IT AROUND THE COUNTRY IS COSTING US, AT LEAST $2 A CAN. IF
PEOPLE DON'T WANT TO PAY THAT, IT'S BETTER OFF FOR US NOT TO CARRY IT
AROUND.

Burnett: THE OTHER PERCEPTION THE PUBLIC IS HAVING, WE KNOW FLYING HAS
BECOME UNPLEASANT FOR A LOT OF REASONS, YOU HAVE OVERTAXED WORKERS, LONG
LINES AT CHECK-IN, FEWER FLIGHTS, SEATS, BUT THEN THESE CHARGES ADD UP
TO A CHEAPER ENVIRONMENT. THEN PEOPLE SAY, GOSH, IF THEY'RE HAVING SO
MUCH TROUBLE MAKING MONEY, BLEEDING MONEY,
CAN I BE SURE MY AIRLINE IS
SAFE. ARE THEY MAKING SURE ALL THE PLANES ARE CHECKED? IF THEY'RE
CUTTING CORNERS WITH ME, MAYBE THEY'RE CUTTING CORNERS SOMEWHERE ELSE.

Parker: THAT'S THE WRONG ASSUMPTION. WE'RE BRINGING THE PRODUCT EXACTLY
WHERE CUSTOMERS TELL US THEY WANT IT TO BE. GIVE ME SAFE, RELIABLE
SERVICE. GET MR. WHERE YOU SAID YOU WILL GET ME ON TIME. MY BAGS WHEN I
LAND AND TREAT ME WITH RESPECT IN BETWEEN. THAT'S WHAT WE ARE DOING AT
U.S. AIRWAYS. THAT'S WHAT YOUR TICKET PRICE PROVIDES YOU WITH. WE ARE
THE NUMBER ONE AIRLINE IN ON-TIME PERFORMANCE SO FAR IN 2008. AS IT
RELATES TO OTHER SERVICES THAT PEOPLE MIGHT WANT, LIKE A CHECKED BAG
VERSUS PEOPLE WHO CARRY ON, WE THINK THE RIGHT THING DO IS CHARGE FOR
THAT. I ASSURE YOU, WE ARE NOT CUTTING CORNERS ON OTHER THINGS. WE ARE
MAKING SURE THAT'S WHERE OUR FOCUS IS.

Faber: MR. PARKER, THE POINTER ERIN WAS MAKING EARLIER ABOUT NICKEL AND
DIMING, TO
THE EXTENT YOUR COSTS CONTINUE OR HAVE GONE UP DRAMATICALLY,
WHY NOT JUST DOUBLE THE TICKET PRICES AND GET IT OVER WITH ALREADY?

Parker: BECAUSE WE CAN'T. IN TODAY'S FUEL PRICES, THE COST -- THE
AVERAGE COST OF FUEL FOR A ROUND TRIP PASSENGER IS ABOUT $300, JUST TO
COVER THE COST OF THE JET FUEL. BY THE TIME WE PAY FOR FLIGHT
ATTENDANTS, PILOTS, THE
AIRPLANE, WE WOULD BE CHARGING $650, $700 JUST TO BREAK EVEN. WITH THIS
MANY SEATS FLYING AROUND THE UNITED STATES IT'S IMPOSSIBLE TO CHARGE
$600, $700 ON AVERAGE FOR A ROUND TRIP TICKET IT CAN'T HAPPEN.

Faber: WHAT YOU ARE GOING TO DO? AT THE END OF THE DAY YOU'RE EXPLAINING
THAT YOU WILL CONTINUE TO LOSE MONEY UNTIL YOU DO THAT OR FUEL PRICES
COME DOWN.

Parker: PRECISELY. IF FUEL PRICES STAY THIS HIGH, YOU WILL SEE MANY
FEWER SEATS FLYING AROUND, AND FLYING WILL BECOME MUCH MORE OF A LUXURY.
HOPEFULLY FUEL PRICES WILL CONTINUE TO FALL. IF THEY DON'T,
WILL YOU SEE FEWER AND FEWER SEATS, FEWER FLIGHTS TO FEWER MARKETS. THAT'S THE ONLY WAY TO CHARGE ENOUGH TO COVER THE COSTS WHAT WE'LL ALSO DO IS FIGURE OUT
A WAY TO COLLECT MORE REVENUE FROM PASSENGERS THAT WANT TO AVAIL
THEMSELVES OF ADDITIONAL SERVICES. THE COMBINATION OF THOSE THINGS, I
BELIEVE, SEATS COMING DOWN ABOUT 10% NEXT YEAR AND SOME ANCILLARY
REVENUES, WHICH IN U.S. AIRWAYS CASE WILL ADD 400 MILLION TO $500
MILLION TO THE BOTTOM LINE, THOSE WILL OFFSET IT. YOU WILL SEE THE
INDUSTRY PERHAPS BREAK EVEN NEXT YEAR.

Faber: REAL QUICKLY BEFORE WE GO, I WANT TO GET TO CONSOLIDATION. YOU
TRIED TO BUY DELTA OUT OF BANKRUPTCY, DIDN'T WORK. THEY ARE WITH NWA.
WHAT ABOUT U.S. AIRWAYS? CAN YOU SURVIVE? DO YOU NEED DO CONSOLIDATE?

Parker: WE NEVER NEED TO CONSOLIDATE. WE ARE PERFECTLY FINE AS A
STAND-ALONE.AS A BUSINESS THAT NEEDS TO CONSOLIDATE EVENTUALLY, BUT IT
WON'T HAPPEN UNTIL WE GET A NEW
ADMINISTRATION. THERE IS NOTHING GOING
ON NOW. THE FACT OF THE MATTER, THIS IS AN INDUSTRY THAT WILL BE
WELL-SERVED BY CONSOLIDATION.

US Airways (LCC) CEO: If Oil Stays at $120, Only The Rich Will Fly