- The Washington Times - Monday, January 31, 2005

US Airways Group Inc. yesterday reported a fourth-quarter loss of $236 million, more than double its loss a year ago.

Lower revenue and higher fuel prices contributed to the dismal year for the company, where sales fell nearly 6 percent to $1.66 billion in the fourth quarter.

For the year, the Arlington carrier lost $611 million.

US Airways, which filed for bankruptcy Sept. 12, isn’t alone in slogging through a pitiful year. Nearly all major carriers reported losses. Delta Air Lines Inc. led the list of failures with a record industry loss of $5.2 billion in 2004.

Low-fare carriers Southwest Airlines and JetBlue Airways also saw profits fall, a sign of the widespread losses in the industry. Southwest earned just $56 million in the fourth quarter, while JetBlue’s earnings fell 88 percent to $2.4 million.

In bankruptcy filings, US Airways predicted losses for last year would exceed $700 million.

“They actually came in a little better than expected,” said Ray Neidl, senior analyst at Calyon Securities USA Inc.

Industry losses will reach about $5.5 billion in 2004 and $2.5 billion this year, Mr. Neidl predicted.

US Airways’ fourth-quarter earnings report showed some signs of efforts to cut labor costs.

Securing concessions from labor unions is the linchpin of a plan to cut the cost of operations by $1.5 billion annually and remake itself in the image of low-cost carriers like Southwest. Agreements from unions will account for $1.1 billion in annual savings.

“We have overcome what many claimed to be insurmountable obstacles, and our dedicated employees deserve the credit for working with us,” US Airways President and Chief Executive Officer Bruce Lakefield said yesterday.

Agreements from unions to cut wages, some of which were in place before the end of the year, already have helped US Airways trim expenses. Personnel costs fell from $662 million in the fourth quarter a year ago to $518 million.

“The question is whether they can keep service quality and employee morale high while cutting labor costs,” said Vaughn Cordle, chief analyst at Airline Forecasts LLC in the District.

If not, he said, consumers may flee to other airlines.

A debacle during the holidays in Philadelphia left thousands of passengers without their luggage. Any fallout from that episode is likely to manifest itself in the current quarter, Mr. Cordle said.

The airline carried 14.1 million passengers in the fourth quarter, up 4.4 percent. Load factor, or the percentage of seats filled, rose to 71.9 percent from 71.2 percent a year earlier.

But lower fares from increased competition and more-expensive fuel offset the increase in the number of passengers.

The company spent $1.31 per gallon of fuel, a 49 percent increase. For the quarter, US Airways spent $322 million on fuel, up 57 percent from $205 million a year ago.

Despite concessions from labor groups, the airline’s costs are still too high, Mr. Neidl said.

Unless costs come down, US Airways will have difficulty finding the $250 million it needs to emerge from bankruptcy, he said.

But he also predicted the company will survive through winter.

US Airways ended the fourth quarter with $1.36 billion in cash. The company has been funding operations by using cash pledged as collateral on a $900 million loan backed by the federal Air Transportation Stabilization Board. On Jan. 13, the company secured court approval extending its use of the cash collateral through June 30, when the airline plans to emerge from bankruptcy.

US Airways said in its quarterly report that it spent $35 million in legal fees in 2004 because of its bankruptcy filing.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide