US Airways posts 2Q loss of $248 million

Fewer passengers, falling fares take toll

Deal with Midway in works

July 19, 2002|By Paul Adams | Paul Adams,SUN STAFF

US Airways reported a second-quarter loss of $248 million yesterday, marking another in a series of losing quarters for the nation's seventh-largest airline as it tries to restructure by cutting $1.3 billion in yearly costs and flying more small regional jets.

The Arlington, Va.-based airline joined all carriers except Southwest Airlines in reporting steep losses for the quarter as a result of falling fares and fewer passengers. The loss amounted to $3.64 per share, up from a loss of $24 million, or 36 cents per share, in second-quarter 2001.

Sales for the April-June quarter were $1.9 billion, down 24 percent from $2.5 billion reported in 2001.

The airline, which ended the quarter with $602 million in cash, remains in default on certain public and private debts. Company officials said a bankruptcy filing is possible if the airline is unable to secure deals with its creditors and win final approval for a $900 million government loan guarantee.

"US Airways' continuing losses are an enormous disappointment to all of us, and it is imperative that we move quickly to reverse this trend," said David N. Siegel, US Airways' president and chief executive.

Analysts said the financial results likely will have little bearing on the company's efforts to restructure and obtain $1 billion in new financing, which is considered critical to its survival. Instead, analysts are focused on whether the airline completes cost-cutting deals with its key labor unions and restructures its East Coast route system to boost revenue. Tentative deals have already been struck with its pilots and flight attendants unions.

"[Today's earnings] are a look at what happened yesterday and not what's happening today or tomorrow," said Michael Boyd, an Evergreen, Colo., aviation consultant. "Tomorrow will be very different for US Airways."

The airline carried 19 percent fewer passengers in the second quarter, roughly equal to a 20 percent cut in capacity implemented after the Sept. 11 terrorist attacks. Fares also declined about 12 percent, the company said.

US Airways, which lost $2 billion last year and $269 million in the first quarter of this year, was expected to report a loss of $3.48 per share. The earnings were released after markets closed yesterday. The company's shares closed down 30 cents, or 8.8 percent, to $3.10 per share.

The earnings news came as Midway Airlines Corp., which filed for bankruptcy protection in August, signed a letter of intent to begin operating as a US Airways Express carrier. The deal will add another 18 regional jets to US Airways' system by April next year. The carrier hopes to add hundreds of the jets to its fleet.

Midway shut down Wednesday night and will resume operations with five 50-seat regional jets beginning in October. The airline will remain independent, but US Airways is negotiating to buy a "substantial minority interest" over the course of the eight-year agreement.

Half of the pilot jobs at Midway will go to furloughed US Airways pilots, who have historically resisted the introduction of smaller jets because they result in lower pay. The deal is contingent upon Midway obtaining $5 million in financing and securing pay and benefit concessions from its pilots and flight attendants unions.

"It's sort of the last, final hope for Midway," said Stuart Klaskin of Klaskin, Kushner and Co., a Miami-area aviation consulting firm. "People at Midway have proven they are not capable of running an airline."

Klaskin said the agreement would partially solve US Airways' shortage of regional jets, which are cheaper to operate on short-haul routes that attract fewer passengers.

However, the strategy could prove risky for Midway if US Airways ultimately is unable to restructure and stay in business.

"If they tie themselves exclusively to US Airways, it might not be in their best interest," said one airline consultant.

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