July 23, 2008
US Airways Net Loss Worst Since 2005
By Thomas Olson, The Pittsburgh Tribune-Review
Jul. 23--US Airways Group Inc. on Tuesday reported a net loss of $567 million in the three months ended June 30, a period of record-high fuel prices that have dragged down airline results.The loss was US Airways' worst since the merger with America West Airlines in September 2005 and compared with a $263 million profit a year ago.
The carrier's bottom line also was depressed by a $622 million, non-cash charge to write down goodwill from the merger. Goodwill is an intangible asset, usually an acquisition's brand name, whose value is written off over time.
"This jet fuel thing is out of control. Everybody is losing money," said Darryl Jenkins, a veteran airline consultant in northern Virginia. American, United, Delta and Continental airlines all reported quarterly losses in the past week.
US Airways' fuel costs spiked at $1.09 billion last quarter, or 65 percent higher than the $658 million a year ago. Jet fuel prices that averaged $2.15 a gallon in second-quarter of 2007 climbed to an average of $2.99 a gallon last quarter, "an unprecedented rise," CEO Doug Parker said.
On an operating basis, however, US Airways' loss was not as bad as analysts expected. Those results equaled a loss of $101 million, or minus $1.11 a share, excluding special items such as the goodwill write-down. Wall Street analysts had estimated a $1.29 per-share loss, according to Zacks Investment Research.
Industry losses have led to "some good management now," said Jenkins, who has long criticized airlines for taking losses just to undercut competitors. He applauded US Airways' decision yesterday to cut capacity 1 percent to 2 percent more in the fall in order to reduce losses.
Pittsburgh will not see significant changes to US Airways' flight schedule, said President Scott Kirby on a conference call. The airline already said it would cut direct flights to Harrisburg this fall and trim flights to St. Louis and Richmond, Va., but add flights to New York's LaGuardia, Newark, Boston and Charlotte. It operates about 68 daily flights here.
Nor will there be significant layoffs in Pittsburgh, where US Airways employs about 2,100, Kirby said. The airline last month said it would slice 2,000 from its employment rolls by fall, largely through attrition and voluntary layoffs. Much of the cuts were to the Las Vegas base and management ranks at headquarters in Tempe, Ariz.
Parker said US Airways' a la carte pricing strategy would raise more than $400 million in revenue this year. That's $100 million more than initially estimated in June, when the airline said it would charge $15 to check a bag, $2 for a non-alcoholic beverage, and $7 for an alcoholic one, up from $5.
Total revenue grew 3.2 percent to almost $3.26 billion. Total cash at quarter's end equaled $2.8 billion, a level Parker called "strong."
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