Ailing Carrier Posts Loss of $90 Million
US Airways Group Inc.'s chief executive said yesterday that more belt tightening will be needed to make the company profitable, despite seven months of bankruptcy protection that allowed the airline to drastically cut wages and shed more than $2 billion in debt.
Even though its third-quarter revenue increased slightly and it lost less money than in the same period last year, analysts said, the Arlington-based airline's low-cost competition is growing and it must find ways to reduce costs quickly.
US Airways, which emerged from bankruptcy in March, reported a loss of $90 million ($1.69 per share) in the third quarter, compared with a loss of $335 million ($4.92) in the same period a year earlier.
Revenue increased to $1.77 billion from $1.75 billion.
Chief executive David N. Siegel said the airline was hurt by competition from low-cost carriers along US Airways routes and a shift to discount fares by business travelers who are increasingly buying tickets on the Internet.
"The company will continue to restructure its business needs to take out additional costs and continue to restructure the business to adapt to the challenges in the industry," Siegel said.
The nation's seventh-largest airline said its third-quarter results were also affected by the weather. Disruptions from Hurricane Isabel cost US Airways about $20 million in revenue, it said.
In a conference call with Wall Street analysts yesterday, Siegel defended the airline's business plan of increasing its use of regional jets on smaller routes and expanding into leisure destinations such as the Caribbean. Helane Becker, airline analyst at Benchmark Co., said US Airways might need to pursue a less costly business plan or find more ways to trim operating expenses. Depending on how quickly it can cut costs, the company may be forced to sell more stock or face another bankruptcy filing or other restructuring, Becker said.
"They have to do something, either in bankruptcy or out," she said.
Low-cost carriers continue to expand in US Airways territory. Tomorrow, AirTran Airways -- which already serves Dulles International and Baltimore-Washington International airports -- will begin flying out of Reagan National Airport. And America West Airlines founder Edward Beauvais said he plans to launch a low-cost airline next year that will operate out of Pittsburgh International Airport, one of US Airways' largest hubs.
US Airways could be forced to seek additional wage cuts from employees, said Blaylock & Partners analyst Raymond Neidl. But that could be difficult. The airline's executives and labor unions have been at odds. Yesterday, a U.S. District Court judge in western Pennsylvania issued a preliminary injunction forbidding the airline to outsource maintenance repair work on 10 of the airline's Airbus A319 jets.
The airline's machinists union asked the court to block US Airways' attempt earlier this month to outsource the jobs, which the union said was in violation of its contract and would jeopardize jobs. "US Airways' ill-advised attempt to violate our collective-bargaining agreement did nothing but aggravate an already tense worker-management relationship," said Robert Roach Jr., general vice president of the International Association of Machinists and Aerospace Workers.
US Airways said it will comply with the ruling and will halt the outsourcing. But executives added that the airline will also seek an emergency stay and will appeal the decision to the U.S. Court of Appeals for the 3rd Circuit. The carrier has said it lacks the facilities to do scheduled heavy maintenance on the twin-engine aircraft.
Also yesterday, about 40 million new US Airways shares began trading on the Nasdaq Stock Market. The shares were issued as part of the company's bankruptcy reorganization. They trade under the symbol "UAIR."
Next week, US Airways will temporarily return to bankruptcy court in Alexandria to defend calculations used to determine its pension liability. The federal Pension Benefit Guaranty Corp. took over the company's underfunded pension plan for pilots as part of the bankruptcy reorganization.
In a filing with the bankruptcy court Monday, the PBGC said the airline miscalculated how much pension liability the agency would have to assume. The airline argues that the plan's total liabilities are $2.12 billion, but the agency said the liabilities are closer to $3.44 billion.
The agency is asking the bankruptcy court -- which approved the original pension allocation plan -- to redistribute shares of the reorganized airline that were paid out to other US Airways creditors. If the judge honors the agency's request, it will mean that its stake in the airline would increase to about $28 million, from about $14 million now, an agency spokesman said.
Siegel said the airline disagreed with the PBGC's calculations.
US Airways Group Inc.'s chief executive said yesterday that more belt tightening will be needed to make the company profitable, despite seven months of bankruptcy protection that allowed the airline to drastically cut wages and shed more than $2 billion in debt.
Even though its third-quarter revenue increased slightly and it lost less money than in the same period last year, analysts said, the Arlington-based airline's low-cost competition is growing and it must find ways to reduce costs quickly.
US Airways, which emerged from bankruptcy in March, reported a loss of $90 million ($1.69 per share) in the third quarter, compared with a loss of $335 million ($4.92) in the same period a year earlier.
Revenue increased to $1.77 billion from $1.75 billion.
Chief executive David N. Siegel said the airline was hurt by competition from low-cost carriers along US Airways routes and a shift to discount fares by business travelers who are increasingly buying tickets on the Internet.
"The company will continue to restructure its business needs to take out additional costs and continue to restructure the business to adapt to the challenges in the industry," Siegel said.
The nation's seventh-largest airline said its third-quarter results were also affected by the weather. Disruptions from Hurricane Isabel cost US Airways about $20 million in revenue, it said.
In a conference call with Wall Street analysts yesterday, Siegel defended the airline's business plan of increasing its use of regional jets on smaller routes and expanding into leisure destinations such as the Caribbean. Helane Becker, airline analyst at Benchmark Co., said US Airways might need to pursue a less costly business plan or find more ways to trim operating expenses. Depending on how quickly it can cut costs, the company may be forced to sell more stock or face another bankruptcy filing or other restructuring, Becker said.
"They have to do something, either in bankruptcy or out," she said.
Low-cost carriers continue to expand in US Airways territory. Tomorrow, AirTran Airways -- which already serves Dulles International and Baltimore-Washington International airports -- will begin flying out of Reagan National Airport. And America West Airlines founder Edward Beauvais said he plans to launch a low-cost airline next year that will operate out of Pittsburgh International Airport, one of US Airways' largest hubs.
US Airways could be forced to seek additional wage cuts from employees, said Blaylock & Partners analyst Raymond Neidl. But that could be difficult. The airline's executives and labor unions have been at odds. Yesterday, a U.S. District Court judge in western Pennsylvania issued a preliminary injunction forbidding the airline to outsource maintenance repair work on 10 of the airline's Airbus A319 jets.
The airline's machinists union asked the court to block US Airways' attempt earlier this month to outsource the jobs, which the union said was in violation of its contract and would jeopardize jobs. "US Airways' ill-advised attempt to violate our collective-bargaining agreement did nothing but aggravate an already tense worker-management relationship," said Robert Roach Jr., general vice president of the International Association of Machinists and Aerospace Workers.
US Airways said it will comply with the ruling and will halt the outsourcing. But executives added that the airline will also seek an emergency stay and will appeal the decision to the U.S. Court of Appeals for the 3rd Circuit. The carrier has said it lacks the facilities to do scheduled heavy maintenance on the twin-engine aircraft.
Also yesterday, about 40 million new US Airways shares began trading on the Nasdaq Stock Market. The shares were issued as part of the company's bankruptcy reorganization. They trade under the symbol "UAIR."
Next week, US Airways will temporarily return to bankruptcy court in Alexandria to defend calculations used to determine its pension liability. The federal Pension Benefit Guaranty Corp. took over the company's underfunded pension plan for pilots as part of the bankruptcy reorganization.
In a filing with the bankruptcy court Monday, the PBGC said the airline miscalculated how much pension liability the agency would have to assume. The airline argues that the plan's total liabilities are $2.12 billion, but the agency said the liabilities are closer to $3.44 billion.
The agency is asking the bankruptcy court -- which approved the original pension allocation plan -- to redistribute shares of the reorganized airline that were paid out to other US Airways creditors. If the judge honors the agency's request, it will mean that its stake in the airline would increase to about $28 million, from about $14 million now, an agency spokesman said.
Siegel said the airline disagreed with the PBGC's calculations.
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