USAir loss expected for 2nd quarter Company reverses projection of profit

June 17, 1993|By Suzanne Wooton | Suzanne Wooton,Staff Writer Staff writer Galina Vainblat in the New York Bureau contributed to this article.

Reversing the company's earlier projections, USAir Group Inc. said yesterday that it expects to record a loss for the second quarter this year, largely because of a sluggish economy that has stymied growth in passenger traffic.

The surprise announcement by USAir President and Chief Executive Seth E. Schofield was prompted by a report in the June 21 Business Week that said Mr. Schofield expected the airline to earn a profit this year. The company flatly denied the report, saying it expected to report a loss for the second quarter and the full year.

"Although the company expects that results for 1993 and the second quarter will be considerably better than 1992 results, revenue increases at USAir in the month of May have not been as strong as expected due to sluggish economic conditions," Mr. Schofield said in a statement yesterday.

USAir made the unusual announcement yesterday morning because it feared the magazine article would mislead investors, said Patricia Goldman, a spokeswoman for the Arlington, Va.-based carrier, which serves more than half of the 27,000 daily passengers at the Baltimore-Washington International Airport.

USAir stock closed at $17.125, down $1.75 a share.

The company's earlier projections for a profitable second quarter had been buoyed by a $2 million operating profit in this year's first quarter.

But company officials said yesterday that the airline's performance in May, which included 4.6 percent fewer passengers than in the same period a year earlier -- had convinced them otherwise.

"There was an increase in traffic last month [over April], but it was not enormous," Ms. Goldman said. "The revenues have not been there as expected."

USAir did not provide specific estimates on its projected losses this year. Last year, the airline lost $601 million, excluding a special charge for an accounting rule change. Reflecting a dismal trend affecting most of the U.S. airline industry, USAir has lost $2 billion since 1989.

Following a speech to industry executives' Wing Club in New York yesterday, Mr. Schofield also declined to make any predictions about 1994. He said weak demand would force USAir, the nation's sixth-largest carrier, to find new ways to generate profits.

He said savings from fuel efficiency, for example, would not be passed on to customers in the form of lower fares.

Overall, 1993 appears to be a far more promising year for USAir than 1992 was. In January, British Airways invested $300 million in the U.S. airline, giving it badly needed cash and access to the global market that British Airways serves. On June 1, the two airlines began some "code sharing," linking USAir and British Airways' flights in computer reservations system.

The alliance with British Airways has been considered largely responsible for the rise in USAir's stock this year from a low of $13 a share on Jan. 4 to a high of $24 a share on April 21. USAir

also issued 11.5 million new shares of common stock last month, raising $231 million.

USAir also introduced new discount fares last month on nonstop flights shorter than 750 miles to or from Northeast corridor cities to attract more passengers who travel by train or automobile. It also lowered its fares in California to compete with the highly successful Southwest Airlines.

The lower fares probably have hurt USAir but ultimately will boost revenues, said Jeffrey Klein, a Gaithersburg attorney who tracks the airline industry.

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