US Air yet to fly out of `difficulties'

Carrier says it'll show no profit for third quarter

Shares tumble nearly 8%

Canceled flights are blamed for loss of revenue

Airlines

September 16, 1999|By Robert Little | Robert Little,SUN STAFF

Stock in US Airways Group Inc., parent to the nation's sixth-largest airline, dropped nearly 8 percent yesterday after the company announced that it will not earn a profit in the third quarter because of lost revenue from a spate of flight cancellations.

The company's shares closed on the New York Stock Exchange at $25.4375, down $2.1875, and their lowest closing price in the past year. The shares closed as high as $62.25 in January.

US Airways has struggled to fly a full schedule this summer as it launches a new computer system for ticket information and continues to weave the spin-off airline MetroJet into its regular operations. The problems have reduced passenger revenue, and the company's shares have tumbled.

In July and August, the airline canceled an average of 130 flights a day, or about 6.4 percent of its scheduled flights.

"This poor operational performance is creating passenger dissatisfaction, which, we believe, is impacting our ability to generate revenue," US Airways wrote in a letter to investors and analysts, filed Tuesday with the Securities and Exchange Commission. The company said it does not expect to report a profit for the third quarter of 1999, which ends Sept. 30, and that the "difficulties" will likely continue into the fourth quarter.

US Airways, the second-largest carrier at Baltimore-Washington International Airport, reported earnings of $1.51 per share in the third quarter last year.

The Arlington, Va.-based airline said some flight cancellations have resulted from labor troubles. The airline is negotiating with the union representing its mechanics and cleaners, and those workers have ordered more planes grounded for repairs than usual. The talks could spark a strike or lockout after midnight Sept. 25.

"Obviously, the issue of Sept. 26th is very critical for their earnings forecast -- is there or isn't there going to be a strike," said Julius Maldutis, an analyst for CIBC World Markets. "And, also, can they get their operational problems in line?"

Maldutis reduced his rating for the company from a "buy" to a "hold" yesterday, "until we see those two issues resolved."

A spokesman for US Airways said the company would not comment on its earnings forecast, but the company's letter said it expects the problems to be resolved.

"We firmly believe that once our major labor negotiations are completed, our operational difficulties will largely be behind us and all our employees will be able to focus on running a quality airline," it read.

Pub Date: 9/16/99

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