- The Washington Times - Friday, February 6, 2004

US Airways Group yesterday reported a $98 million loss in the fourth quarter of 2003 that industry analysts described as bad, but not necessarily fatal, for the troubled airline.

Analysts have been saying that unless the Arlington carrier can significantly cut its expenses by April, a return to bankruptcy — and more likely liquidation — appears inevitable.

“It’s not good news to lose $100 million, but it does show they’re making progress,” said Michael J. Boyd, president of the Boyd Group, an Evergreen, Colo., aviation consulting firm. “The loss is something they can deal with. They can get through this.”

However, the airline still is in jeopardy of another bankruptcy filing, analysts said.

“They can avoid it if they can get their cost cuts in there in short order,” said Ray Neidl, an airline industry analyst for the Wall Street investment firm of Blaylock & Partners. Mr. Neidl gave US Airways stock a “sell” rating.

US Airways officials say the $98 million loss shows signs of improvement. A year ago, the carrier reported a $794 million loss.

“Throughout the year, we made progress in reducing our losses, but regrettably, we are behind in our plan for achieving sustained profitability,” Chief Executive David Siegel said in a statement.

Competition from low-fare carriers creates one of the biggest obstacles for US Airways.

Not only do they offer customers lower fares, but they also have lower operating expenses than the “network carriers,” or big airlines that operate out of regional hub airports.

US Airways, the seventh-largest airline, has some of the highest operating expenses in the industry.

The airline’s unit costs, or costs per available seat mile, were 10.22 cents for the quarter on its main-line flights, a decline of 7.2 percent from a year earlier but still about 25 percent higher than its competitors.

In addition, US Airways must repay a $900 million government loan that helped lift it out of bankruptcy in March. The Air Transportation Stabilization Board, the federal agency that oversees the airline loans, is scheduled to review US Airways’ progress toward repayment on June 30.

As a result, the airline is scrambling for further cost reductions.

“Everything is on the table, from distribution costs to labor costs to how we schedule our airline,” said Chief Financial Officer Neal Cohen in the company’s statement in its quarterly report.

US Airways’ management held a meeting with its union leaders yesterday after the release of the quarterly report to update them on the company’s progress.

The company is auditing its assets to determine what could be sold to raise cash, which could include the Northeast Corridor flights and gates at hub airports.

“The company has made no decision to sell off any assets,” spokesman David Castelveter said. “It’s begun only an exploratory process to determine where those assets are and what value those assets might have if the company were to make a decision to sell assets.”

Any such sale is nearly certain to result in layoffs.

“We’re not going to let ourselves default on the loan,” Mr. Castelveter said. “We’ll continue to have discussions with our employee groups on how to reduce our costs.”

The airline’s demands for concessions have led the Air Line Pilots Association (ALPA) to call for the resignation of Mr. Siegel, saying he is an inept manager.

Yesterday, the airline reached an agreement with its pilots over pay rates, health insurance and other benefits for the airline’s upcoming regional-jet service.

Dawn Deeks, spokeswoman for the Association of Flight Attendants, which represents about 5,200 US Airways flight attendants, said unions already have made significant concessions.

“If they’re serious, they need to talk about changing business decisions, management decisions,” she said.

For the full year, US Airways reported earnings of $1.46 billion, including $214 million in government compensation. In 2002, the airline lost $1.65 billion.

Operating revenue dropped 2 percent to $6.85 billion in 2003 from $6.98 billion a year earlier.

US Airways Group stock closed up 10.71 percent yesterday at $4.65 per share on Nasdaq.


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