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Press Release Source: US Airways Group, Inc.
US Airways Group, Inc. Reports Profitable First Quarter 2006
Tuesday May 9, 7:30 am ET
Highlights of the New US Airways Group, Inc. First Quarter 2006 Results Before the Cumulative Effect of a Change in Accounting Principle:
* First quarter 2006 profit of $64 million or $0.75 per diluted share.
* Excluding special items, first quarter 2006 profit of $5 million or $0.05 per diluted share.
* As of March 31, 2006, the Company had $2.6 billion in total cash and investments, of which $1.6 billion was unrestricted.
TEMPE, Ariz., May 9 /PRNewswire-FirstCall/ -- The new US Airways Group, Inc. (NYSE: LCC - News) today reported a first quarter 2006 profit before the cumulative effect of a change in accounting principle of $64 million or $0.75 per diluted share. This compares to a profit before the cumulative effect of a change in accounting principle of $28 million or $1.29 per diluted share for the same period last year. Results for the new US Airways Group's first quarter 2006 are being compared to America West's standalone results for first quarter 2005 due to the former US Airways Group and America West Holdings Corporation merger on Sept. 27, 2005. Although the merger was structured so that America West became a wholly owned subsidiary of the new US Airways Group, America West was treated as the acquiring company for accounting purposes under Statement of Financial Accounting Standards No. 141 "Business Combinations."
US Airways Group's first quarter 2006 results include a $90 million gain associated with the forgiveness by Airbus of a Company loan, which represents the return of certain aircraft deposits previously paid to Airbus as restructuring fees in conjunction with the merger. In addition, the Company recognized a $26 million unrealized gain related to the airline's fuel hedges. These gains were offset in part by $46 million of merger-related transition expenses and $11 million of costs incurred in connection with the extinguishment of certain debt instruments as part of the loan refinancing completed with GE Commercial Finance on March 31, 2006. The Company also recognized a $1 million gain from the cumulative effect of a change in accounting principle upon the adoption of SFAS No. 123R, "Share-Based Payment." Excluding these special items, the Company reported a first quarter 2006 profit of $5 million or $0.05 per diluted share versus a loss excluding special items of $16 million or $1.09 per diluted share in the first quarter of 2005. See the accompanying notes in the Financial Tables section of this press release for a reconciliation of Generally Accepted Accounting Principles (GAAP) financial information to non-GAAP financial information.
US Airways Group Chairman, President and CEO Doug Parker stated, "We are extremely pleased to post a profitable first quarter. We couldn't be more proud of our 35,000 employees who are doing a wonderful job of integrating our two airlines and taking care of our customers.
"While we recognize we are early in the integration process and we have much work yet to do, these results highlight the tremendous value we have achieved through the merger of US Airways and America West. Unit revenues were up significantly at both airlines as our customers experienced the value of our expanded network. While fuel prices remain an industry problem, the merger synergies are allowing us to keep our non-fuel related costs in line. With our merger we set out to build an airline that could be profitable in an extremely challenging environment and today's results confirm that our outstanding employees are making that goal a reality.
"Looking forward we anticipate a very strong spring and summer and now expect to be profitable for the full year 2006, even after accounting for merger related expenses and with continued high fuel costs."
Revenue and Cost Comparisons
The revenue environment during the first quarter 2006 showed considerable improvement over the same period in 2005. For the America West standalone network, total revenue per available seat mile (RASM) increased 16.2 percent during the first quarter 2006 to 10.27 cents while mainline yields increased 13.2 percent to 11.52 cents as compared to the same period last year. For the US Airways standalone network, RASM increased 27.7 percent to 13.34 cents while US Airways mainline yields increased 19.0 percent to 13.97 cents as compared to the same period last year.
Continued high fuel prices led to material cost increases for the new US Airways Group. Had fuel price per gallon remained constant for mainline and Express versus the first quarter 2005, US Airways Group's first quarter 2006 operating expenses would have been $183 million lower. On a standalone basis, America West's mainline operating costs per available seat mile (CASM) increased 11.2 percent to 8.76 cents for the first quarter 2006, largely driven by a 37.3 percent increase in the price of fuel from $1.42 to $1.95 per gallon. Excluding fuel and special items, America West's mainline CASM increased 4.2 percent from 6.45 cents for the first quarter 2005 to 6.72 cents for the first quarter 2006 on a 1.4 percent decrease in available seat miles (ASMs). US Airways standalone mainline CASM during the first quarter 2006 increased 8.8 percent to 11.44 cents, primarily driven by the increased price of fuel. Excluding fuel and special items, US Airways' standalone mainline CASM increased 4.3 percent to 8.42 cents for the first quarter 2006 on a 16.3 percent decrease in ASMs.
Liquidity
As of March 31, 2006, the Company had $2.6 billion in total cash and investments, of which $1.6 billion was unrestricted. US Airways completed a $1.1 billion refinancing in the first quarter, which was used to replace approximately $1.1 billion of outstanding debt at lower interest rates and with an extended amortization period. The refinancing transaction was subsequently upsized to $1.25 billion in April 2006.
Summary of Integration Progress
The Company's integration efforts remain on track. The following list includes a summary of integration progress the Company has achieved since closing the merger between America West Holdings and US Airways Group last September 2005.
Operations
* Achieved the top ranking in on-time performance among all major
airlines as reported by the Department of Transportation (DOT) for
the fourth quarter 2005 and the first quarter 2006.
* Consolidated operations at the 30 airports where both airlines operated
prior to the merger (seven airports remain to be integrated).
* Signed an amended agreement with Embraer, agreeing to place an initial
firm order for 25 Embraer 190 aircraft and an additional firm order for
32 Embraer 190 aircraft with options for up to 50 additional aircraft.
Finance
* In April, completed a $1.25 billion refinancing, which was used to
replace approximately $1.1 billion of outstanding debt at lower
interest rates and with an extended amortization period.
* In April, announced redemption of approximately $112 million in
principal amount of America West Holdings Corporation's 7.50 percent
convertible senior notes due 2009. These notes were converted into
approximately 3.9 million shares of common stock.
* Combined all insurance programs for the new airline, which is
anticipated to save an additional $41 million annually.
Marketing
* Added numerous fares in several east coast markets including
Philadelphia, Charlotte, Pittsburgh and New York/LaGuardia.
* Released new US Airways Vacations web site with improved functionality
and eliminated the America West Vacations brand.
* Established Dividend Miles as the new Company's frequent flyer program,
and created mechanisms for reciprocal benefits, accrual and redemption.
* Introduced a new affinity card with Barclays Bank.
* Announced three new European destinations, Lisbon, Milan and Stockholm,
which will begin service this summer.
* Integrated certain inflight services, including the inflight magazine,
entertainment and level-off and safety videos.
Labor Relations
* Reached a Transition Agreement with the airline's pilots and flight
attendants.
* Reached a Transition Agreement with a new labor alliance between the
Communication Workers Association and the International Brotherhood of
Teamsters, which represents the airline's customer service employees.
* Received single carrier certification by the National Mediation Board
(NMB), and recently received notice that the NMB will hold an election
in order to achieve single representation for the combined airline's
fleet service workers.
* Recalled 55 furloughed US Airways pilots and up to 510 US Airways
flight attendants.
* Began bringing some of the currently outsourced reservations work back
in house by increasing hiring in Winston-Salem, North Carolina and
Reno, Nevada.
Culture
* Paid out six consecutive monthly bonuses to employees below officer
level for achieving on-time performance goals in October 2005 through
March 2006 (totaling approximately $10 million).
* Implemented new internal communication programs designed to ensure
senior management visibility among all areas of the combined airline's
operation.
* Unveiled the first of five heritage planes that will feature throwback
liveries of the four major airlines that comprise the new US Airways
(Allegheny, America West, Piedmont and PSA).
* Began an aggressive leadership development training program that will
ultimately touch all leaders at US Airways Group.
Analyst Conference Call/Webcast Details
US Airways will conduct a live audio webcast of its earnings call today at 12:30 p.m. EDT, which will be available to the public on a listen-only basis at www.usairways.com and www.americawest.com under the Public/Investor Relations tab. An archive of the call/webcast will be available in the Public/Investor Relations portion of both Web sites through June 9, 2006.
The airline also updated its investor relations guidance on its Web sites (www.usairways.com and www.americawest.com). Information updated includes cost per available seat mile (CASM) excluding fuel and transition expenses, fuel prices and hedging positions, estimated interest expense/income and merger related transition expense guidance. The investor relations update page also includes the airline's capacity, fleet plan for 2006 and estimated capital spending for 2006.
US Airways Group, Inc. Reports Profitable First Quarter 2006
Tuesday May 9, 7:30 am ET
Highlights of the New US Airways Group, Inc. First Quarter 2006 Results Before the Cumulative Effect of a Change in Accounting Principle:
* First quarter 2006 profit of $64 million or $0.75 per diluted share.
* Excluding special items, first quarter 2006 profit of $5 million or $0.05 per diluted share.
* As of March 31, 2006, the Company had $2.6 billion in total cash and investments, of which $1.6 billion was unrestricted.
TEMPE, Ariz., May 9 /PRNewswire-FirstCall/ -- The new US Airways Group, Inc. (NYSE: LCC - News) today reported a first quarter 2006 profit before the cumulative effect of a change in accounting principle of $64 million or $0.75 per diluted share. This compares to a profit before the cumulative effect of a change in accounting principle of $28 million or $1.29 per diluted share for the same period last year. Results for the new US Airways Group's first quarter 2006 are being compared to America West's standalone results for first quarter 2005 due to the former US Airways Group and America West Holdings Corporation merger on Sept. 27, 2005. Although the merger was structured so that America West became a wholly owned subsidiary of the new US Airways Group, America West was treated as the acquiring company for accounting purposes under Statement of Financial Accounting Standards No. 141 "Business Combinations."
US Airways Group's first quarter 2006 results include a $90 million gain associated with the forgiveness by Airbus of a Company loan, which represents the return of certain aircraft deposits previously paid to Airbus as restructuring fees in conjunction with the merger. In addition, the Company recognized a $26 million unrealized gain related to the airline's fuel hedges. These gains were offset in part by $46 million of merger-related transition expenses and $11 million of costs incurred in connection with the extinguishment of certain debt instruments as part of the loan refinancing completed with GE Commercial Finance on March 31, 2006. The Company also recognized a $1 million gain from the cumulative effect of a change in accounting principle upon the adoption of SFAS No. 123R, "Share-Based Payment." Excluding these special items, the Company reported a first quarter 2006 profit of $5 million or $0.05 per diluted share versus a loss excluding special items of $16 million or $1.09 per diluted share in the first quarter of 2005. See the accompanying notes in the Financial Tables section of this press release for a reconciliation of Generally Accepted Accounting Principles (GAAP) financial information to non-GAAP financial information.
US Airways Group Chairman, President and CEO Doug Parker stated, "We are extremely pleased to post a profitable first quarter. We couldn't be more proud of our 35,000 employees who are doing a wonderful job of integrating our two airlines and taking care of our customers.
"While we recognize we are early in the integration process and we have much work yet to do, these results highlight the tremendous value we have achieved through the merger of US Airways and America West. Unit revenues were up significantly at both airlines as our customers experienced the value of our expanded network. While fuel prices remain an industry problem, the merger synergies are allowing us to keep our non-fuel related costs in line. With our merger we set out to build an airline that could be profitable in an extremely challenging environment and today's results confirm that our outstanding employees are making that goal a reality.
"Looking forward we anticipate a very strong spring and summer and now expect to be profitable for the full year 2006, even after accounting for merger related expenses and with continued high fuel costs."
Revenue and Cost Comparisons
The revenue environment during the first quarter 2006 showed considerable improvement over the same period in 2005. For the America West standalone network, total revenue per available seat mile (RASM) increased 16.2 percent during the first quarter 2006 to 10.27 cents while mainline yields increased 13.2 percent to 11.52 cents as compared to the same period last year. For the US Airways standalone network, RASM increased 27.7 percent to 13.34 cents while US Airways mainline yields increased 19.0 percent to 13.97 cents as compared to the same period last year.
Continued high fuel prices led to material cost increases for the new US Airways Group. Had fuel price per gallon remained constant for mainline and Express versus the first quarter 2005, US Airways Group's first quarter 2006 operating expenses would have been $183 million lower. On a standalone basis, America West's mainline operating costs per available seat mile (CASM) increased 11.2 percent to 8.76 cents for the first quarter 2006, largely driven by a 37.3 percent increase in the price of fuel from $1.42 to $1.95 per gallon. Excluding fuel and special items, America West's mainline CASM increased 4.2 percent from 6.45 cents for the first quarter 2005 to 6.72 cents for the first quarter 2006 on a 1.4 percent decrease in available seat miles (ASMs). US Airways standalone mainline CASM during the first quarter 2006 increased 8.8 percent to 11.44 cents, primarily driven by the increased price of fuel. Excluding fuel and special items, US Airways' standalone mainline CASM increased 4.3 percent to 8.42 cents for the first quarter 2006 on a 16.3 percent decrease in ASMs.
Liquidity
As of March 31, 2006, the Company had $2.6 billion in total cash and investments, of which $1.6 billion was unrestricted. US Airways completed a $1.1 billion refinancing in the first quarter, which was used to replace approximately $1.1 billion of outstanding debt at lower interest rates and with an extended amortization period. The refinancing transaction was subsequently upsized to $1.25 billion in April 2006.
Summary of Integration Progress
The Company's integration efforts remain on track. The following list includes a summary of integration progress the Company has achieved since closing the merger between America West Holdings and US Airways Group last September 2005.
Operations
* Achieved the top ranking in on-time performance among all major
airlines as reported by the Department of Transportation (DOT) for
the fourth quarter 2005 and the first quarter 2006.
* Consolidated operations at the 30 airports where both airlines operated
prior to the merger (seven airports remain to be integrated).
* Signed an amended agreement with Embraer, agreeing to place an initial
firm order for 25 Embraer 190 aircraft and an additional firm order for
32 Embraer 190 aircraft with options for up to 50 additional aircraft.
Finance
* In April, completed a $1.25 billion refinancing, which was used to
replace approximately $1.1 billion of outstanding debt at lower
interest rates and with an extended amortization period.
* In April, announced redemption of approximately $112 million in
principal amount of America West Holdings Corporation's 7.50 percent
convertible senior notes due 2009. These notes were converted into
approximately 3.9 million shares of common stock.
* Combined all insurance programs for the new airline, which is
anticipated to save an additional $41 million annually.
Marketing
* Added numerous fares in several east coast markets including
Philadelphia, Charlotte, Pittsburgh and New York/LaGuardia.
* Released new US Airways Vacations web site with improved functionality
and eliminated the America West Vacations brand.
* Established Dividend Miles as the new Company's frequent flyer program,
and created mechanisms for reciprocal benefits, accrual and redemption.
* Introduced a new affinity card with Barclays Bank.
* Announced three new European destinations, Lisbon, Milan and Stockholm,
which will begin service this summer.
* Integrated certain inflight services, including the inflight magazine,
entertainment and level-off and safety videos.
Labor Relations
* Reached a Transition Agreement with the airline's pilots and flight
attendants.
* Reached a Transition Agreement with a new labor alliance between the
Communication Workers Association and the International Brotherhood of
Teamsters, which represents the airline's customer service employees.
* Received single carrier certification by the National Mediation Board
(NMB), and recently received notice that the NMB will hold an election
in order to achieve single representation for the combined airline's
fleet service workers.
* Recalled 55 furloughed US Airways pilots and up to 510 US Airways
flight attendants.
* Began bringing some of the currently outsourced reservations work back
in house by increasing hiring in Winston-Salem, North Carolina and
Reno, Nevada.
Culture
* Paid out six consecutive monthly bonuses to employees below officer
level for achieving on-time performance goals in October 2005 through
March 2006 (totaling approximately $10 million).
* Implemented new internal communication programs designed to ensure
senior management visibility among all areas of the combined airline's
operation.
* Unveiled the first of five heritage planes that will feature throwback
liveries of the four major airlines that comprise the new US Airways
(Allegheny, America West, Piedmont and PSA).
* Began an aggressive leadership development training program that will
ultimately touch all leaders at US Airways Group.
Analyst Conference Call/Webcast Details
US Airways will conduct a live audio webcast of its earnings call today at 12:30 p.m. EDT, which will be available to the public on a listen-only basis at www.usairways.com and www.americawest.com under the Public/Investor Relations tab. An archive of the call/webcast will be available in the Public/Investor Relations portion of both Web sites through June 9, 2006.
The airline also updated its investor relations guidance on its Web sites (www.usairways.com and www.americawest.com). Information updated includes cost per available seat mile (CASM) excluding fuel and transition expenses, fuel prices and hedging positions, estimated interest expense/income and merger related transition expense guidance. The investor relations update page also includes the airline's capacity, fleet plan for 2006 and estimated capital spending for 2006.
