Loss adds to doubt on USAir's future

October 25, 1994|By Suzanne Wooton | Suzanne Wooton,Sun Staff Writer

USAir Group Inc., adding to growing concerns about its viability, reported yesterday that it lost $180.1 million in the third quarter and predicted more dismal results through the end of the year.

Despite continuing cost-cutting efforts, USAir said losses for the first nine months of 1994 have already exceeded its losses for all of last year. The company, which is struggling to compete with a surge of low-cost carriers, has lost $2.5 billion since 1989.

"The depth of their loss, particularly in the face of others [airlines] beginning to turn the corner, does make you ask how much longer USAir can go on," said Alex C. Hart, an analyst for Ferris, Baker Watts Inc. in Baltimore.

USAir Chairman and Chief Executive Seth E. Schofield said yesterday that the losses "further underscore the urgent need to reduce our operating costs to a level competitive with the industry."

Earlier this year, USAir, the largest carrier at Baltimore-Washington International Airport, asked its labor unions to come up with $500 million a year in concessions for each of the next three years.

Despite the company's quarterly loss, USAir officials reiterated yesterday that the airline expects to end the year with $400 million in cash. Even so, the concessions are seen by most airline analysts as crucial if the carrier is to avoid filing a Chapter 11 bankruptcy petiition.

"They're conserving cash yet continuing to lose money," Mr. Hart said. "You've got to conclude this can't go on."

Two weeks ago, the airline's 5,200-member pilots union broke off negotiations after USAir announced plans to sell off some of its largest aircraft, a move that would result in some pilots being assigned to lower-paying jobs flying smaller planes.

And yesterday, pilots appeared to be unswayed by the airline's continuing heavy losses.

"We have a plan to participate in the company's restructuring . . . but they have not responded with a realistic plan," said Richard Obermeyer, a spokesman for the USAir branch of the Air Line Pilots Association.

Last week, union leaders met with U.S. Transportation Secretary Federico Pena, who had asked the leaders to brief him about the apparent lack of progress. Talks are continuing between USAir and unions representing flight attendants and machinists, but neither side has publicly discussed details.

"We will continue to work with our labor groups to find ways to reduce the cost of doing business at USAir, and we are moving ahead with our management action plan to re-engineer the company," Mr. Schofield said.

The Arlington, Va.-based airline has the highest operating costs in the industry. Faced with mounting competition from such low-cost, discount airlines as Continental and Southwest, USAir has been forced to keep its fares low and has been unable to cover its huge costs.

"Continental and Southwest are giving them a fit," said Mr. Hart.

For the first nine months of 1994, USAir lost $362.9 million, compared with a loss of $276.6 million for the same period a year ago. The third-quarter loss of $3.32 per common share compared to $3.33 a share in the same period a year ago. Revenues in the latest quarter were flat at $1.75 billion.

The latest results include a one-time gain of $28.3 million from the sale of assets and a one-time expense of $67.7 million to establish a reserve for nonoperating aircraft and for the cost of realigning its West Coast route system.

The carrier's problems have been compounded by two recent crashes. On July 2, 37 people died when a USAir plane crashed in Charlotte, N.C., and 132 people died near Pittsburgh in a Sept. 8 crash.

Mr. Schofield said yesterday that fourth-quarter revenues were expected to be lower than previously expected. Public concern about the airline's safety record was likely to lead to reduced bookings.

Yesterday, USAir's stock price closed at its record low of $4.125 a share, down 12.5 cents.

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

Arlington, Va. .. .. .. .. ... Symbol ... ... Cls. .. ... Chg

.. .. .. .. .. .. .. .. .. ... U .. .. .. ... 4 1/8 .. ... -

Period ended

9/30 .. .. .. .. ... .. .. .. 3rd qtr. .. .. Year ago .. .. Chg.

Revenue .. .. .. .. ... .. .. $1,750,773 ... $1,748,608 ... +0.1%

Net Income .. .. .. ... .. .. $(180,063)* .. $(177,629)** ... --

Primary EPS .. .. .. .. .. .. $(3.32)* .. ... $(3.33)** .. ... --

... ... ... ... ... ... .. .. 9 mos. .. .. .. Year ago .. .. Chg.

Revenue .. .. .. .. .. .. ... $5,316,225 .. ..$5,280,717 ... +0.7%

Net Income .. .. .. .. ... .. $(362,905)* .. $(276,576)*** .. --

Primary EPS ... ... ... .. .. $(7.06)* .. .. $(6.17)*** .. .. --

* Includes net charge to earnings of $39.4 million, or 65 cents a

share for assorted one-time events.

** Includes one-time expenses of $67.2 million, or $1.13 a share, related to workforce reductions.

*** Includes net charge to earnings of $52.3 million, or 97 cents a share, for assorted one-time events and a charge to earnings of $43.7 million, or 82 cents a share, for changes in accounting for postemployment benefits.

Figures in thousands (except per share data and footnotes.)

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