Troubled USAir defers taking 40 Boeing jets

May 14, 1994|By Bloomberg Business News

WASHINGTON -- USAir Group Inc. has deferred delivery of 40 Boeing 737 aircraft amid signs that competition from low-cost carriers is worsening the company's financial outlook.

The Arlington, Va., airline also plans to forgo options to purchase another 76 Boeing jets, according to documents the company filed yesterday with the Securities and Exchange Commission. The deferrals, along with the cancellations, will substantially reduce USAir's capital expenditures between 1995 and 2001, the airline said.

In conjunction with these revisions, USAir also said it would take several steps to counter increased competition from low-fare rivals, particularly Continental Airlines. USAir anticipates that Houston-based Continental will begin service in additional USAir markets in July at steep discounts to USAir fares.

"The company expects that Continental's latest actions will have a material adverse effect on the company's financial condition, results of operations, and prospects," USAir said in the document. At Baltimore-Washington International Airport, where USAir is the dominant carrier, Continental has increased its daily flights from seven to 33 during the past year, and Continental's passenger count at BWI has jumped to 102,930 in March from 17,634 in the same month last year.

USAir already slashed fares up to 70 percent in February to avoid losing market share to competitors such as Continental and Southwest Airlines, which has also made inroads at BWI.

USAir posted a net loss of $196.7 million in the first quarter of 1994.

The aircraft deferrals pertain to firm orders for 40 Boeing 737 aircraft scheduled for delivery between 1997 and 2000. Under an agreement reached yesterday with the Boeing Co., USAir will take delivery of the 40 aircraft between 2003 and 2005.

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