USAir lost $684.9 million in '94 cuts due in 'planes and people'

January 28, 1995|By Suzanne Wooton | Suzanne Wooton,Sun Staff Writer

USAir Group Inc., struggling with high costs and the devastating impact of two crashes in 1994, announced yesterday that it lost $684.9 million last year, nearly half of it in the fourth quarter.

While a critical, cost-cutting agreement with its unionized workers is reportedly close after months of negotiations, USAir officials said yesterday the carrier will be forced to cut its operations and work force immediately.

"We're extremely disappointed that we have been unable to reach an agreement with our labor groups," said USAir's Chairman and Chief Executive Officer Seth E. Schofield. "Consequently, we are moving forth on other fronts."

"This will result in fewer planes and fewer people," he said.

The net loss for the year, which included $226.1 million in one-time charges, was nearly 75 percent higher than the company's loss in 1993. In the fourth quarter, the airline's parent company lost $135.2 million, or $2.55 a share, before extraordinary charges. Charges of $186.8 million for idled aircraft and obsolete inventory brought the total to $322 million for the quarter. Revenue was $1.7 billion.

In the fourth quarter of 1993, USAir lost $59.4 million, or $1.27 per share, before extraordinary charges. Including the charges, the company's loss was $116.5 million for the 1993 quarter, on revenues of $1.8 billion.

The airline has been negotiating for months with labor in an effort to secure $2.5 billion in cuts over five years. Representatives of the airline's three major unions have been meeting all week on a cost-cutting plan. None could be reached for comment yesterday.

The Wall Street Journal reported yesterday that under a tentative agreement, $1.75 billion of that amount would come from its unionized workers, including pilots, flight attendants and machinists and other ground workers.

In the meantime, USAir says it will take immediate cost-cutting steps. As its first move, the company said it will defer the purchase of eight Boeing 757 aircraft that were scheduled for 1996 delivery.

No specific plans were announced about layoffs or service cutbacks.

"We have not heard anything, and it probably will be a while before it gets down to specifics," said Theodore E. Mathison, administrator at Baltimore-Washington International Airport, one of the airline's four hubs.

In the early '90s, when USAir slashed its operating costs, the carrier cut one-third of its jet flights at BWI. At that time, USAir handled more than two-thirds of the airport's traffic.

Today, with other airlines expanding there, USAir carries only half of BWI's 34,000 daily passengers.

"I think we would share in any cuts, but it would have much less impact than it did in the early '90s," said Mr. Mathison.

Since 1989, USAir has lost more than $2.6 billion. While other carriers have started to show improvement, USAir continues its huge losses. USAir yesterday blamed part of its fourth-quarter -- losses on the continuing effect of the airline's two crashes last year. On July 2, a USAir crash at Charlotte, N.C., killed 37 of 57 people aboard. Two months later, a crash in Pittsburgh killed all 132 people aboard. Traffic has returned to normal after dropping for several months, the carrier said yesterday.

"Nevertheless, we must get our costs down," Mr. Schofield said. "It is a fact of life in this industry that something always happens to cut deeply into projected earnings."

Indeed, the crashes last year exacerbated an already gloomy picture for USAir, which has been forced to compete with discount carriers, like Southwest and Continental Airlines, which have low operating costs. USAir has the highest operating costs in the airline industry.

"High-cost carriers simply will not survive, and this is one airline that intends to survive," Mr. Schofield said. "We believe most of our employees share that determination."

According to the Wall Street Journal report, the pilots' union would give up about $180 million annually, or 26 percent of its members' current pay and benefits. The average USAir pilot earns an average annual salary of $129,000.

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