UPDATE 3-US Airways posts loss, says more cost cuts critical
October 21, 2003 1:41:00 PM ET
(Adds details on IAM injunction, S&P comment, stock price)
By Meredith Grossman Dubner
CHICAGO, Oct 21 (Reuters) - US Airways Group (UAIR) on Tuesday reported a net loss in its second quarter operating outside of bankruptcy, and executives said the company still has a long way to go in reducing costs.
The No. 7 U.S. airline, which emerged from bankruptcy protection on March 31, posted a third-quarter loss of $90 million, or $1.69 a share, compared with a loss of $335 million, or $4.92 a share, in the same quarter of 2002.
But in a conference call with analysts and reporters, Chief Executive David Siegel said the company's costs are still too high, even after eight months in bankruptcy. He said unit costs, a key gauge of expenses measured in costs per available seat mile, need to be below 9 cents.
In the third quarter, unit costs excluding fuel were 9.52 cents.
"Our goal is to be profitable, and these results are simply not acceptable," Siegel said. "Clearly, we need to take out additional costs."
Wall Street analysts grilled US Airways executives on the conference call about the company's strategy, with one analyst saying it was not possible to shrink the airline and remain dominant simultaneously.
Discount carrier Southwest Airlines (LUV), which has among the lowest costs in the industry, has unit costs in the range of 6 cents, as does JetBlue Airways (JBLU). Delta Air Line's (DAL) new low-cost subsidiary, Song, has unit costs in the range of 7 cents.
"I'm concerned that they haven't returned to profitability," Blaylock & Partners analyst Ray Neidl said of US Airways. "They restructured their costs and they still lost money in what's supposed to be one of their better quarters."
Standard & Poor's said its ratings and outlook on US Airways were not affected by what it called "disappointing" results.
Shares of Arlington, Virginia-based US Airways were up 66 cents, or 8.2 percent, to $8.76 in their first day of trading on the Nasdaq, although analysts said the gain was probably due to thin market conditions. The company, which had traded over-the-counter during bankruptcy, earlier this month filed to list its shares on Nasdaq.
STILL MORE WORK TO DO
Siegel recently said revenue was not improving at the pace the airline had hoped. Operating revenue for the third quarter was about unchanged at $1.77 billion, compared with $1.75 billion the year before. Passenger revenue declined slightly.
Still, the company said it expects fourth-quarter unit revenue to be up as much as 6 percent year-over-year while capacity remains flat to up 1 percent.
The airline estimated that hurricanes cost it about $20 million in the third quarter as it was forced to reschedule thousands of flights in the Caribbean, Florida, and parts of the mid-Atlantic and Northeast regions of the United States.
US Airways said it ended the quarter with $1.94 billion in cash, including $1.38 billion in unrestricted cash.
It is adding smaller regional jets that seat up to 70 passengers after cutting its main fleet of larger planes by a third during its reorganization. Siegel has said challenges still remain for US Airways to hit targets for introducing regional jets into service.
When it emerged from bankruptcy, the company said it did not expect to be profitable before 2005, although government aid helped offset big operating losses in the second quarter.
Also on Tuesday, a judge in Pittsburgh granted the International Association of Machinists an injunction that prevents US Airways from outsourcing aircraft maintenance.
The union filed the suit earlier this month after the carrier said it would subcontract heavy maintenance on 10 Airbus narrowbody aircraft to ST Mobile Aerospace Engineering Inc., based in Mobile, Alabama.
US Airways said it would halt the maintenance work while it appeals the court order. REUTERS
© 2003 Reuters
October 21, 2003 1:41:00 PM ET
(Adds details on IAM injunction, S&P comment, stock price)
By Meredith Grossman Dubner
CHICAGO, Oct 21 (Reuters) - US Airways Group (UAIR) on Tuesday reported a net loss in its second quarter operating outside of bankruptcy, and executives said the company still has a long way to go in reducing costs.
The No. 7 U.S. airline, which emerged from bankruptcy protection on March 31, posted a third-quarter loss of $90 million, or $1.69 a share, compared with a loss of $335 million, or $4.92 a share, in the same quarter of 2002.
But in a conference call with analysts and reporters, Chief Executive David Siegel said the company's costs are still too high, even after eight months in bankruptcy. He said unit costs, a key gauge of expenses measured in costs per available seat mile, need to be below 9 cents.
In the third quarter, unit costs excluding fuel were 9.52 cents.
"Our goal is to be profitable, and these results are simply not acceptable," Siegel said. "Clearly, we need to take out additional costs."
Wall Street analysts grilled US Airways executives on the conference call about the company's strategy, with one analyst saying it was not possible to shrink the airline and remain dominant simultaneously.
Discount carrier Southwest Airlines (LUV), which has among the lowest costs in the industry, has unit costs in the range of 6 cents, as does JetBlue Airways (JBLU). Delta Air Line's (DAL) new low-cost subsidiary, Song, has unit costs in the range of 7 cents.
"I'm concerned that they haven't returned to profitability," Blaylock & Partners analyst Ray Neidl said of US Airways. "They restructured their costs and they still lost money in what's supposed to be one of their better quarters."
Standard & Poor's said its ratings and outlook on US Airways were not affected by what it called "disappointing" results.
Shares of Arlington, Virginia-based US Airways were up 66 cents, or 8.2 percent, to $8.76 in their first day of trading on the Nasdaq, although analysts said the gain was probably due to thin market conditions. The company, which had traded over-the-counter during bankruptcy, earlier this month filed to list its shares on Nasdaq.
STILL MORE WORK TO DO
Siegel recently said revenue was not improving at the pace the airline had hoped. Operating revenue for the third quarter was about unchanged at $1.77 billion, compared with $1.75 billion the year before. Passenger revenue declined slightly.
Still, the company said it expects fourth-quarter unit revenue to be up as much as 6 percent year-over-year while capacity remains flat to up 1 percent.
The airline estimated that hurricanes cost it about $20 million in the third quarter as it was forced to reschedule thousands of flights in the Caribbean, Florida, and parts of the mid-Atlantic and Northeast regions of the United States.
US Airways said it ended the quarter with $1.94 billion in cash, including $1.38 billion in unrestricted cash.
It is adding smaller regional jets that seat up to 70 passengers after cutting its main fleet of larger planes by a third during its reorganization. Siegel has said challenges still remain for US Airways to hit targets for introducing regional jets into service.
When it emerged from bankruptcy, the company said it did not expect to be profitable before 2005, although government aid helped offset big operating losses in the second quarter.
Also on Tuesday, a judge in Pittsburgh granted the International Association of Machinists an injunction that prevents US Airways from outsourcing aircraft maintenance.
The union filed the suit earlier this month after the carrier said it would subcontract heavy maintenance on 10 Airbus narrowbody aircraft to ST Mobile Aerospace Engineering Inc., based in Mobile, Alabama.
US Airways said it would halt the maintenance work while it appeals the court order. REUTERS
© 2003 Reuters
