USAir's losses in quarter less than expected

October 23, 1992|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Three months of brutal airline fare wars have left their mark on USAir Group Inc., which reported yesterday that it lost $55.4 million for the July-to-September third quarter.

Although the losses were steep, they were less severe than during the same period last year and in this year's second quarter.

Wall Street analysts had expected the Arlington-based company's losses to grow and said that with higher fares and cost-cutting measures now in place, USAir could begin a turnaround to profitability.

"The losses are a direct result of the fare wars," said Robert Decker, an industry analyst for Duff & Phelps Inc. "They were moving in the right direction until the fare war."

The losses came against a backdrop of red ink throughout the industry.

Delta Air Lines Inc., for example, reported losses yesterday of $106.7 million for its third quarter. Delta is also engaged in a cost-cutting program and announced this week that it would immediately furlough 200 pilots indefinitely.

On Wednesday, AMR Corp., parent of American Airlines, announced its worst summer loss ever. The Fort Worth-based airline said it lost $85 million, or $1.13 a share, in contrast to a profit of $70 million, or $1.02 a share, a year earlier.

USAir's losses came on $1.7 billion in revenues and amounted to $1.45 a share, compared with the loss of $1.72 a share that analysts had expected. The company has lost $203 million so far this year, compared with losses of $306 million for the first nine months of 1991.

The company's stock closed yesterday on the New York Stock Exchange at $15.625, unchanged. Three years ago, USAir was trading at more than $50 a share.

"While our third-quarter results are unsatisfactory, there are signs that fares are returning to more compensatory levels," said Seth E. Schofield, chairman, president and chief executive of USAir.

In addition to the fare wars, underlying problems that are crippling much of the industry were blamed by analysts for the losses.

Despite increased travel during the summer round of fare-slashing, the recession has caused people to travel less and businesses to cut travel budgets.

USAir is the major carrier at Baltimore-Washington International Airport, with more than 60 percent of the market.

In an effort to reverse the losses, USAir has been cutting costs. Recent agreements have cut pilots' and machinists' pay. The savings are expected to top $100 million.

But in the long run, the company's surest bet would be for the proposed deal with British Airways to be approved by Britain and the United States, said Julius Maldutis, an analyst for Salomon Brothers Inc.

That deal, which would pump $750 million into USAir in exchange for 44 percent of the company, would create the world's largest airline operation and would set a precedent for a large foreign stake in a U.S. carrier.

U.S. and British negotiators are continuing to work toward an accord to allow the two airlines to merge. Yesterday, the two sides met for a second day in unscheduled talks but did not reach an agreement.

The deal became a theme in the presidential campaign Monday night, when Ross Perot argued in the candidates' final debate that the proposed merger would ruin the U.S. airline industry and compromise national security.

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