US Air pact boosts its stock

Share price goes up 10 percent, 2 days after attendant pact

Airlines

March 28, 2000|By Robert Little | Robert Little,SUN STAFF

Travelers were happy over the weekend, and so Wall Street was happy yesterday as word of US Airways' new labor agreement with its flight attendants gave the airline a 10 percent boost on the New York Stock Exchange.

Shares in the Arlington, Va.-based airline rose $2.25 to close at $24.625 yesterday, two days after the deal with flight attendants averted a systemwide shutdown of the carrier.

Analysts said the airline's tentative deal with its 10,000 flight attendants not only resolved a four-year labor dispute but also plugged one of the last holes in the recently troubled operation.

"It was the last open wound on the labor side, and it seems to be resolved," said Thomas Longman, an analyst for Arnhold and S. Bleichroeder Inc. in New York. "The airline is now considerably improved from where it was last summer."

Last summer, US Airways was in the red, embarking on a nine-month span of losing money and dealing with operational problems such as computer glitches, maintenance delays, flight cancellations and labor battles.

The airline still has the highest cost-per-mile in the industry, mostly because its airplanes fly shorter routes than other airlines.

But after three quarters of losing money, US Airways has cut some expenses by forming its low-fare subsidiary, MetroJet, and it has fixed its computer problems and resolved its maintenance schedule delays.

And as of Saturday, its labor trouble seemed behind it as well.

US Airways and the Association of Flight Attendants announced an agreement Saturday on a five-year contract that gives the flight attendants a 10 percent raise and improved pension benefits.

The contract is subject to approval by the union membership, but union leaders have called it a victory and airline officials said it "allows the company to compete in the marketplace."

Planned shutdown

US Airways executives had planned to shut down Saturday if the deal with the attendants had not been reached, a tactic that would have cost the carrier $15 million to $20 million a day.

But even the threat of a shutdown will likely affect the company's returns, analysts said.

While US Airways has resolved many of its problems, it has not shown the consistent performance gains necessary to signal a complete recovery.

"The numbers are still going to look pretty bleak for the first half of the year, and the company did bleed some revenue because of this dispute," said Raymond F. Neidl, an analyst for ING Barings. "It's not time to start singing."

Considered last obstacle

But many considered the flight attendants' contract the last obstacle to the airline's plan to expand its low-cost service and pursue an alliance with an international carrier that could broaden its reach.

And given US Airways' relatively low stock price -- it is down 54 percent this year -- some analysts also expect speculation of a merger or takeover to surface again.

"The company, no matter how you slice it, is right now in a better position financially than it had been," Longman said.

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