US Airways' second-quarter net income down 5.5% But $1.95 a share exceeds the estimates

July 23, 1998|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

US Airways Group Inc. reported yesterday that net income declined 5.5 percent in the second quarter, which ended June 30.

The net income was $194.3 million, down from $205.6 million in the second quarter of 1997. US Airways, the dominant carrier at Baltimore-Washington International Airport, attributed the decline to the expiration of tax breaks.

The company's tax rate increased from 11.4 percent in the second quarter of 1997 to 40.3 percent in 1998, said Richard M. Weintraub, a company spokesman.

Earnings per common share were $1.95, up from $1.92 in 1997. The results beat Wall Street estimates by 15 cents a share, according to a survey of eight analysts by Zacks Investment Research, which tracks earnings predictions.

Arlington, Va.-based US Airways, the nation's sixth-largest airline, reported a second-quarter operating profit of $373.6 million on revenue of $2.3 billion. The operating profit was 46.2 percent higher than in the second quarter of 1997, and revenue was up 3.8 percent.

"It was a difficult quarter because of the weather, and our capacity was down, but we were able to be profitable," Weintraub said.

"It was all a function of our revenues continuing quite high, of the economy doing well and our ability to refine route structure to fly more profitably. We're now doing a better job of getting our expenses under control, which has been helped by fuel costs being down."

Weintraub also attributed the quarter's success to the "advent of MetroJet, which gives us a competitor in the low-cost field." US Airways launched MetroJet June 1 to directly compete with low-fare rival Southwest Airlines, which is undertaking a major expansion at BWI. By Sept. 9, MetroJet will fly to 12 cities, and additional destinations are expected to be announced this year. Eventually, as much as 25 percent of the US Airways system will be flown by MetroJet, the company said.

"We have not broken out MetroJet's effect in dollar terms, but its operating performance and load factor are well ahead of expectations," Weintraub said.

Edward J. Starkman, an analyst in Seattle with Warburg Dillon Read LLC, has a "buy" rating on US Airways.

"It's a radically changing company that's on the cusp of showing real improvements," Starkman said.

"Domestic business for the airline industry is extremely strong, and US Airways is predominantly a domestic airline with a route system anchored in a strong section of the country."

US Airways shares rose 87.5 cents to $75 yesterday.

Pub Date: 7/23/98

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