USAir reports record quarter $200.8 million profit represents 78% rise from 1995

July 25, 1996|By Suzanne Wooton | Suzanne Wooton,SUN STAFF

Reflecting an industrywide upswing, USAir yesterday reported a record quarterly profit of $200.8 million, up 78 percent, as the airline filled more of its seats with paying passengers.

Operating revenues of $2.15 billion for the quarter, compared with $1.98 billion in 1995, also set a record.

The upbeat financial news came even as the nation's airline industry struggles with a series of crashes this year that has focused public attention on safety issues.

"The industry, overall, has been knocking the cover off the ball," said Alex Hart, airline analyst with Ferris Baker Watts Inc. in Baltimore.

"But the whole industry right now is under so much public scrutiny, I don't think you can say it's out of the woods yet. There are still a lot of question marks out there that need to be resolved."

USAir's impressive second-quarter results follow a disappointing first quarter when the Arlington, Va., carrier -- hampered by severe winter weather and a government shutdown -- lost $32.3 million as other major carriers made substantial profits.

Net income for the second quarter jumped to $200.8 million, or $2.71 a share, from $112.9 million, or $1.47 a share, a year earlier.

"Beneficial economic and industry conditions, coupled with the keen focus of our employees toward making USAir the carrier of choice, produced a record quarter," USAir Chairman and CEO Stephen M. Wolf said yesterday.

Not insignificant to USAir and other carriers was the fact that ValuJet, which had pushed down fares, was forced by the Federal Aviation Administration to shut down in late May, amid concerns about safety after its fatal crash May 11 in the Florida Everglades.

But USAir, which has the highest costs in the industry, faces serious competition from other low-cost airlines.

And Wolf emphasized yesterday that the airline must cut its costs. "Unit costs continue to be an issue relative to the company's long-term competitiveness," he said.

Last year, the airline -- which handles half the 31,000 daily passengers at Baltimore-Washington International Airport -- cut $500 million from its operating expenses by eliminating unprofitable flights and slicing other costs.

Yet it failed to reach agreements with its labor unions on a proposed $2.5 billion reduction in wages and benefits over the next five years. That effort could be set back by the airline's recent strong performance.

"In the near term, it certainly doesn't make your ability to seek concessions from unions any easier," Hart said. "But they're still going to need concessions from the work force."

But Jim Gardner, a spokesman for USAir's pilots union, said: "It's too early to tell. We have adopted with Mr. Wolf a cooperative approach to USAir's profitability."

He said the pilots have had continuing discussions with USAir officials, but are not yet confronting "substantial issues."

In 1992 and 1993, USAir workers took pay cuts in exchange for receiving shares of profits once the company returned to profitability. About $73.7 million was paid in March under that plan as a result of 1995 profits. The amount of payments in 1996 will hinge on the company's year-end results.

On an operating basis, the carrier reported profits of $245.9 million for the quarter, compared with $163.1 million for the second quarter of 1995.

Overall, USAir and other airlines benefited from a reduction in capacity, with fewer planes in the air carrying more passengers. In the second quarter, USAir filled 71 percent of its available seats with paying passengers, the highest in the airline's history. That marked an increase of 4.1 percent over the second quarter of 1995.

USAir stock closed yesterday at $17.625, up 75 cents, on the New York Stock Exchange.

Also this week, Northwest Airline Corp. and Continental Airlines Inc. reported double-digit increases in second-quarter earnings. UAL Corp., parent of United Airlines, posted second-quarter earnings of $337 million, up from $215 million in 1995.

Pub Date: 7/25/96

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