USAir reports loss of $196 million

April 21, 1994|By Suzanne Wooton | Suzanne Wooton,Staff Writer

USAir Group Inc. yesterday reported first-quarter losses of $196.7 million, stemming from intense competition from discount carriers and severe winter weather that prompted it to scrap hundreds of flights.

The Arlington, Va.-based carrier, the largest airline operating at Baltimore-Washington International Airport, also announced it had canceled its $300 million revolving credit agreement. Some industry analysts have predicted that without sufficient credit, USAir could be forced to file for bankruptcy as early as June.

USAir spokesman David Shipley said yesterday the airline had been operating under waivers since June because it failed to meet requirements of the credit agreement. The airline said canceling the agreement frees 66 airplanes that were pledged as collateral and allows the airline to use those assets in search of other credit.

USAir had warned last month that its first-quarter loss would be near $200 million, nearly double the $105 million it lost in the year-ago quarter, which included a one-time charge of $43.7 million for an accounting change.

Since 1989, USAir has lost more than $2.2 billion, and its losses this year are expected to exceed last year's $353 million.

While its passengers increased 10 percent during the first quarter, revenues dropped nearly 2 percent, from $1.72 billion to $1.69 billion, largely because of low fares.

Cancellation of the credit agreement is seen as USAir's second strong signal to its labor unions in the past month that it could wind up in bankruptcy court without their help. In March, USAir announced that its partner, British Airways, would not invest any more money in the beleaguered carrier unless it brings its soaring losses under control.

That prompted the airline to seek new pay cuts and work rule changes from its four labor unions.

"If the unions are willing and able to be constructive enough in negotiating with the company, and the company not dig in too much, then you could pull out enough to avoid the immediate threat of bankruptcy," said Alex Hart, an airline analyst for Ferris, Baker Watts Inc. in Baltimore.

The labor coalition, representing the company's pilots, machinists, flight attendants and some ground workers, has been studying the pay-cut proposal since mid-March.

"I'm a little concerned that the unions haven't reacted a little more swiftly. They have a lot to lose," said Chris Fotos of Avmark, an Arlington, Va., aviation consultant firm. "But if they negotiate too quickly and get a bad deal, they're stuck with it."

Yesterday, a spokesman for the USAir pilots union said the talks are "not going to be a drawn-out process."

"It's our intent to make the company work," said Kelly Ison, a spokesman for the Air Line Pilots Association, which represents the company 5,200 pilots. "But we're going to address the real problem, which is not employee pay but productivity and how well USAir utilizes its workers and planes."

Since February USAir has been testing a program to reduce the time its planes spend on the ground between flights. That program is being expanded this summer.

Mr. Ison also said that canceling the revolving credit agreement "is not the major issue that it would appear." The bank agreement was scheduled to expire in September.

Yesterday, the airline's stock was unchanged, closing at $6.25 on a volume of 930,000 shares traded.

USAir Group Inc. .. .. .. .. ..Ticker .. .. .. .. .. .. .. Yesterday's

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

.. .. .. .. .. .. .. .. .. .. U .. .. .. .. .. .. .. .. . 6 1/4 .. unch.

Period ended

March 31 .. .. .. .. .. ..1st qtr. .. .. .. ..Year ago .. ..Chg.

Revenue .. .. .. .. .. .. $1,685,901. .. . .. $1,716,341 .. -1.8%

Net Income .. .. .. .. .. $(196,655). .. .. ..$(104,781)* .. --

Primary EPS.. .. .. .. .. $(3.64). .. .. .. . $(2.57)* .. .. --

* Includes a $43.7 million, or 92 cents per share, charge for accounting rule change.

=1 Figures in thousands (except per share data.)

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