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Pulling Us Airways Out Of A Dive


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PULLING US AIRWAYS OUT OF A DIVE

CEO Rakesh Gangwal's obsession with saving cash has helped turn the ailing airline into a moneymaker

Rakesh Gangwal doesn't talk much, but when he does, his words count. Recently holed up in a dim meeting room with two dozen execs, the president and chief executive of US Airways stood behind his chair, leaning chin in hand while pondering a delicate problem. A growing number of passengers had been complaining about rude service, particularly at the airline's international terminal in Philadelphia, where part-time workers make up 42% of the staff. After listening to the discussion for a few minutes, Gangwal quickly and calmly pronounced his solution. "Take the number of full-time workers up to 70%," he said in a matter-of-fact tone. End of discussion.

Gangwal, a slight man who speaks with a trace of an accent from his native India, has been making dozens of swift yet coolly considered decisions since taking over as CEO last May. And over the past two years, since joining US Airways with Stephen M. Wolf, his longtime mentor and now chairman of parent US Airways Group, Gangwal has impressed the aviation industry with his resolute cost cutting and the role he has played in the quick turnaround of an airline that was once nearly bankrupt.

Along the way, his tough calls have brought no shortage of controversy. Last year, Boeing Co. sued US Airways for $220 million, claiming breach of contract after the airline canceled an order; instead, the airline is turning to Airbus Industrie--which recently sold it options for up to 30 new jets--to build its fleet. (The Boeing suit has since been settled out of court.) Meanwhile, Gangwal's cost-cutting campaign has pushed frustrated unions to the brink. A quiet, disciplined man with an obsession for efficiency, Gangwal readily admits he is "driven to succeed." But, he is quick to add, "to me it is very important that my drive does not become an issue of personal grandiosity."

That may explain why Gangwal, 45, one of aviation's most influential leaders, remains so little known outside industry circles. The longtime No.2 to Wolf, Gangwal deserves much of the credit for retooling US Airways into a profitable player ranked No.1 in on-time arrivals. The pair have shut money-losing routes, inked a pilots' contract that saves $88 million a year, and launched a low-cost shuttle, MetroJet. The result: Earnings in '97 soared nearly fourfold, to $1 billion on revenues of $8.5 billion.DESTINATION EUROPE. A detail-driven man, Gangwal spends his days obsessing over load factors and yield management while Wolf has charted the carrier's broad strategy. Indeed, Wolf has gradually all but handed over the running of the airline to his protege. With the pair now focused on European expansion, for example, Wolf is negotiating access with local governments while Gangwal tackles the nettlesome task of actually entering the new markets.

If the turnaround has brought US Airways far, however, it remains a critical time. The carrier is well behind the giants as the industry consolidates. If it is to remain a strong, independent player, Gangwal must rebuild it into a carrier with global reach. That's why he's now deep into the numbingly technical details of combining US Airways' frequent-flier miles with those of American Airlines Inc. But larger rivals such as Delta Air Lines and United Airlines have long operated broader route systems and are bulking up even more through an array of partnerships.

It's all a long way from home for Gangwal, a native of Calcutta. The Gangwal family was decidedly middle-class, but India's poverty was never far from view. As a teenager, he volunteered with Mother Teresa, preparing medication for leprosy patients and collecting recyclables to earn money for the mission. The volunteer work provided an early lesson in frugality that has stayed with him after more than 20 years in the U.S. "Here we have these huge [trash] containers that are emptied regularly. I still can't Quite get used to that" level of waste, he says.

Gangwal studied engineering at the elite India Institute of Technology in Kanpur. But he already had his sights on business--and that meant studying in the U.S. "I knew American universities had written the book on MBA programs," he says. He graduated with a degree in finance from Wharton in 1979. Gangwal has been working and living in the U.S. ever since, thougH he retains close ties to India, where his father, Kapoor, still lives. Gangwal has remained a vegetarian. When he married his wife, Shobha, in 1984, it was a union arranged by the couple's families. A U.S. citizen, he still visits India often.

Following a stint as an analyst at Booz-Allen & Hamilton Inc., Gangwal got into the industry in 1984 while working on a consulting job at United Airlines Inc. "When I joined United, I really thought I would work only a year or two, then do something else," he says. "I guess the jet fuel gets into your blood." By 1987, when Wolf was appointed CEO to revitalize the struggling airline, Gangwal was already on his way up. In 1992, Wolf put him in charge of planning, giving Gangwal wide-ranging influence over the airline's strategy. "I noticed he was always prepared and, more important, he was right," says Wolf. He was also a quick study. Says Jack Ekey, then United's general manager of customer service: "I was absolutely astounded by the speed" at which Gangwal learned.

A good thing, too. Feisty Southwest Airlines Co. was moving aggressively into United's turf in California. More seasoned United execs were convinced the airline could rely on its higher-margin business traffic while leaving cost-conscious leisure travelers to Southwest. But Gangwal argued that United needed its own budget service to compete.

Gangwal kicked off the United Shuttle in Los Angeles and other big Western markets in 1994. He also slashed unprofitable East Coast routes and cut operations at Washington's Dulles Airport. To remind himself that passengers will "always migrate to the lower price," Gangwal traded in his fancy gold watch for the $14 Timex that he still wears.

Wolf and Gangwal have since shared the ups and downs of their joined-at-the-hip careers. Wolf was forced out of United after an employee buyout in 1994. Gangwal, by then Wolf's top lieutenant, was spared. "His style is not to be as overt as Wolf," says Kevin Lum, head of United's flight attendants' union. "Wolf won't hesitate to tell you that he hates you. Rakesh would at least conduct business with you."

Still, Gangwal and Wolf were too much of a team to split, and Gangwal followed Wolf to Air France. There he revamped the carrier's schedule, cut routes, and implemented a hub system. That was the easy part; getting the carrier's 28 bickering unions to go along took more doing. But he eventually won them over by assigning employee task forces the job of implementing his big plans. By letting employees work out the details, Gangwal made them feel they were part of the decision-making process even as he pushed through his own agenda. He acted "with a lot of authority," says Patrice Durand, chief financial Officer at Air France. "But he was careful not to brutalize people.""MY WAY." These days, Gangwal is still calling the shots. With the exception of Wolf, he consults no one, not even his top managers. And even Wolf has minimal input on Gangwal's daily decisions. "He's very demanding. He can border at times on being unreasonable," Ekey says. But having helped save three struggling airlines, Gangwal offers no apologies. "You're darn right it's my way, because we're trying to get something done," he says.

That remains true today, despite US Airways' much improved health. Like all caRriers, it has benefited mightily from high prices and the strong economy. But it is still struggling with its pilots' union over countless grievances and has been fighting an uphill battle for access to some of Europe's key cities. For Gangwal to fully succeed in remaking US Airways into a strong global competitor, the man who hates to kill time talking will have to make his carefully chosen words count like never before.By Lorraine Woellert in Washington, with David Leonhardt in ChicagoReturn to top


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