USHenry:
I do not believe Atlantic Coast’s transformation from a RJ feed operator to a LCC will be successful because the RJ is not suited for that roll with its high CASM in point-to-point low yield markets.
Last week the company reported a net loss reported a second quarter 2004 net loss of $27.1 million (($0.60) per diluted share) compared to second quarter 2003 net income of $45.7 million.
The problem for US Airways is that their entrance into many East Coast markets directly effects US Airways Washington revenue. The competition will further depress US Airways’ revenue going forward at a time the company faces two critical financial tests. According to a press release US Airways said, “The company has reached agreements with its primary sources of regional jet financing to continue financing aircraft deliveries through Sept. 30, 2004. The agreements require the company to achieve its Transformation Plan in order to continue to take delivery of new regional jets.â€
"Despite posting a slight profit this quarter, our year-to-date loss of $143 million is unsustainable and the competitive environment continues to intensify. We remain under pressure to cut our costs considerably if we hope to maintain relationships with key financial stakeholders and remain viable in 2005," said David M. Davis, US Airways executive vice president of finance and chief financial officer.
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According to AW&ST, for US Airways, pitfalls loom in the much nearer term. Announcing second-quarter financial results July 27, the carrier revealed that it had to make a second set of concessions to the ATSB in order to win a waiver of June 30 financial-ratio covenants in its guaranteed loan. The next check on covenant compliance is Sept. 30, which also is the expiration date of an interim agreement on revised financing for continued deliveries of regional jets. CEO Bruce Lakefield said further concessions from US Airways' unions will be needed by then to hold both of these agreements together, as well as to avoid big fall-winter financial losses that would threaten the carrier's cash position.
AW&ST said the company’s unrestricted cash stood at $975 million on June 30, down $3 million during the quarter and thus "somewhat disappointing," according to CFO Dave Davis. "We can expect that without a lower cost structure, we will be in a cash-burn situation in the second half of the year," he said.
Respectfully,
USA320Pilot
