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Fuel Costs Blamed for US Airways Latest Losses

Posted on: Thursday, 23 February 2006, 00:00 CST

By The Associated Press

PHOENIX - US Airways Group Inc. blamed high fuel prices for its quarter-billion dollar loss in the fourth quarter. But the company's CEO said the task of merging US Airways and America West was going smoothly, and he predicted the nation's fifth-largest carrier would be profitable on an operating basis in 2006.

The loss for the quarter ended in December was $261 million, compared with $69 million a year earlier. However, the per-share loss narrowed to $3.26 from $4.66, as the latest period had a greater number of shares outstanding.

Excluding certain items, the company reported a fourth-quarter loss of $138 million, or $1.72 per share, versus an adjusted net loss of $58 million, or $3.89 per share, in the fourth quarter of 2004.

Quarterly revenue rose to $2.58 billion from $697 million, while operating expenses climbed to $2.77 billion from $748 million.

The former US Airways Group Inc. and America West Holdings Group Inc. merged on Sept. 27, 2005, and year-earlier results include only America West.

"It looks like they're making real good progress" on the merger, said Calyon Securities analyst Ray Neidl. "They'll make money this year of anywhere from zero to a hundred million even at current fuel prices, excluding the one-time merger costs."

On average, analysts surveyed by Thomson Financial had forecast a loss of $1.93 per share on revenue of $2.56 billion.

Tempe-based US Airways said continued high fuel prices led to material cost increases. Had fuel prices remained constant versus the fourth quarter 2004, fourth-quarter 2005 fuel expenses would have been $197 million lower, the company estimated.

The company lost $69 million related to fuel-hedging.

"We continue to believe that excluding one time merger-related costs, that the new US Airways will be profitable in 2006 even at today's projected fuel prices," said US Airways CEO Doug Parker.

However, excluding fuel and other special items, America West still saw its cost per available seat mile increase by 5.1 percent. As a standalone, US Airways saw its cost per available seat mile decrease by 0.8 percent.

Neidl said the increase in seat miles cost appeared to be connected to the company's available seats cutback, which were more than the company initially predicted. US Airways said it has cut back more than 60 aircraft since the merger and reduced less profitable routes.

Meanwhile, significant steps the new airline has achieved since September include consolidating operations at 30 airports, with seven only remaining, and combining all insurance and frequent flier programs. It has also reached transition agreements with the airlines' pilots and flight attendants.

US Airways was also ranked as the top in on-time performance for the quarter by the Department of Transportation.

"We still have a lot to do and we know it," Parker said, "but the progress we've seen to date gives us great confidence."

US Airways shares fell 65 cents, or 2 percent, to close at $32.50 Tuesday on the New York Stock Exchange. The airlines serves several West Virginia airports through US Airways Express regional commuters.

Source: Charleston Gazette, The

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