Usair Still Battling Losses

January 26, 1994|By Suzanne Wooton | Suzanne Wooton,Staff Writer

USAir Group Inc. yesterday reported a $393.1 million loss for 1993, far less than the previous year but dismal enough to suggest that the beleaguered carrier may not soon pull out of its 4 1/2 -year downward spiral.

A turnaround, analysts say, will hinge on a tenuous combination of factors, including economic growth to generate more passengers as airlines reduce the number of planes they must fill.

In addition, the Arlington, Va.-based USAir must continue cutting its costs, which are the industry's highest, largely due to its extensive route structure and work rules.

"If all the 'ifs' don't work out, they're going to be in big trouble," said Alex C. Hart, an airline analyst for Ferris, Baker Watts Inc. of Baltimore. "With strong economic growth, we could start to see a turnaround by the second or third quarter."

USAir's net loss of $393.1 million, or $8.48 a share, compared with losses of $1.2 billion, or $27.23 a share, the previous year. Revenues, however, rose from $6.7 billion in 1992 to $7.1 billion in 1993.

The results announced yesterday include a fourth-quarter loss of $116.5 million on revenue of $1.8 billion. That compared to $254 million in losses on $1.6 billion in revenue for the same quarter of 1992.

"While we have made substantial progress in reducing our losses for the year and for the fourth quarter, our financial results remain unsatisfactory," USAir Chairman Seth E. Schofield said.

USAir stock closed yesterday at $15.125, up 12.5 cents.

AMR Corp., the parent company of American Airlines and the only other domestic carrier to have reported its 1993 financial results so far, lost $110 million in 1993, partly because of a crippling strike by its flight attendants in November.

One wild card in the recovery efforts for USAir and other airlines will be the fare wars, which show every sign of escalating through 1994.

"Fare discounting continues to be pretty rampant across the board," said Mr. Hart.

So far, USAir has responded to the onslaught of competition from low-fare airlines by adding flights, lowering its fares and instituting quick-turnaround discount flights in markets like Baltimore, where it is under attack from Southwest and Continental Airlines.

USAir is the largest carrier at Baltimore-Washington International Airport, handling nearly half the airport's 27,000 daily passengers.

It remains to be seen, however, whether the increase in traffic anticipated by USAir will be enough to offset the impact of low fares.

Overall, 1993 began as a relatively promising year for USAir. In March, British Airways invested $400 million in the carrier, giving it badly needed cash and access to the global market that British Airways serves.

Buoyed by a $2 million operating profit during the first three months of 1993, the company had hoped for a profitable second quarter. But with a continued sluggish economy, traffic failed to increase substantially in the spring.

At the end of the third quarter, USAir reported $177.6 million in losses -- even as every other domestic carrier turned a small profit for the first time in years. That prompted the airline in November to announce plans to lay off 2,500 workers, a move anticipated to cut operating costs by $200 million in 1994.

The bright spot for USAir remains its alliance with British Airways, which has promised to invest another $350 million in the airline pending changes in U.S. regulations regarding foreign ownership.

A foreign entity cannot own more than 25 percent of a domestic airline's voting stock.

But the Clinton administration has recommended increasing that to 49 percent provided that the British government gives U.S. carriers more access to Heathrow Airport in London.

"At that point there's another $300 to $400 million in British Airways money ready to flow into USAir," said Mr. Hart.

USAir Group Inc.

.. .. .. .. .. .. .. .. .. ..Ticker .. .. .. .. ..Yesterday's

.. .. .. .. .. .. .. .. .. ..Symbol .. .. .Cls... .. .. .Chg.

.. .. .. .. .. .. .. .. .. .. .U .. .. .. ..15 1/8 .. .. .. ...+Period ended

Dec. 31 .. .. .. .. .. ...4th qtr. .. .. .Year ago .. ..Chg.

Revenue .. .. .. .. .. .$1,802,491 .. ...$1,634,828 ..+10.3%

Net Income .. .. .. .. .$(116,540) .. .. $(254,041) .. ...--

Primary EPS* .. .. .. .. ..$(2.29) .. .. ...$(5.66) .. ...--

.. .. .. .. .. .. .. .. ...Year .. .. .. ..Year ago .. .Chg.

Revenue .. .. .. .. .. .$7,083,208 .. .. .$6,686,412 ..+5.9%

Net Income .. .. .. ..$(393,116)** .. ..$(1,228,916) .. ..--

Primary EPS* .. .. .. ...$(8.48)** .. .. ...$(27.23) .. ..--

* Applicable to common stock.

** Includes nonrecurring charges of $156.2 million, or 80 cents a share, for accounting change, work force reduction and wage concessions.

Figures in thousands (except per share data.)

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