Us Airways 3rd Qtr Conference Call Bullet Points


May 18, 2003
US Airways Third Quarter Analyst Conference Call Bullet Points

US Airways held its third quarter analyst conference call on October 21 and discussed the company’s financial performance and business plan in its second quarter operating outside of bankruptcy. Conference call speakers included chief executive officer Dave Siegel, chief financial officer Neal Cohen, executive vice president of marketing and planning Ben Baldanza, and senior vice president of corporate development and express Bruce Ashby. The following bullet points provide information primarily from the conference call, augmented with information from the press release:

Financial Overview

The company recorded a net loss of $90 million for the third quarter.

Results for the latest period include $24 million in noncash stock-based compensation expenses resulting from the issuance of stock to employees covered by collective bargaining agreements. Without this charge, the net loss would have been $66 million.

"While we continue to make significant progress in an industry that is showing some signs of recovery, we simply cannot be satisfied with losing less money than before when the goal is to be profitable and successful," Siegel said in a prepared statement. "The rapid growth of low-cost competitors coupled with dramatic and fundamental changes in corporate travel practices present even greater challenges going forward," Siegel added.

Siegel told analysts, "Our goal is to be profitable, and these results are simply not acceptable. Clearly, we need to take out additional costs."


Third quarter total operating revenue rose 1.1% to $1.77 billion from $1.75 billion the year before, although passenger revenue declined slightly.

Mainline unit revenue was up 7.8%.

The company said it expects fourth-quarter revenue per available seat mile (RASM), to be up as much as 6 percent year-over-year.

US Airways RASM gain was 10.1 percent year-over-year, whereas the industry experienced a gain of 9.4%. US Airways had a .7% revenue premium over its peers.


The mainline cost per available seat mile (CASM), excluding fuel and unusual items, was 9.52 cents for the quarter, which was a decrease of 1.1% versus the same period in 2002.

The third quarter of 2002 included certain benefits related to the implementation of the company's restructuring of approximately $59 million while the third quarter of 2003 includes stock-based compensation expenses of $24 million related to stock grants given to US Airways' organized labor groups. Absent these items, year-over-year CASM, excluding fuel and unusual items, declined 6.8 percent.

As a result of having substantially restructured aircraft financial obligations during its formal reorganization, the company’s aircraft-related interest expense declined 48 percent, resulting in a year-over-year improvement in unit cost including aircraft ownership of 8.5 percent.

US Airways pays about 75% of its aircraft leasing obligations in the first and third quarter, therefore, there should be some debt relief in the fourth quarter.

The company said it expects fourth CASM) to be down as much as 10% year-over-year.

Siegel said the carrier would need to get unit costs below 9 cents to be competitive in the future.

The airline estimated severe thunderstorms, hurricanes, and the northeast blackout cost it about $20 million in the third quarter. US Airways had 70 bad weather days, a 50% increase over normal weather related disruptions.

Fuel expense was up 11.8% from the same period in 2002. US Airways' fuel position is 55 percent hedged for the fourth quarter of 2003 and 30 percent hedged for 2004.

Capacity/Load Factor

Load factor was 76.9%, up 5.1 percentage points from 71.8% year-over-year. System wide mainline capacity, measured in available seat miles (ASM’s), fell 10% and revenue passenger miles (RPM’s) fell 3.8%, resulting in the higher load factor.

"Industry overcapacity and changes in business travel purchasing patterns reduced fares, diluting yields in an already depressed marketplace," Baldanza said in the press release.

Mainline capacity will remain flat and to slightly up 1 percent in the fourth quarter.

General financial/business plan information

US Airways said it ended the quarter with $1.94 billion in cash, including $1.38 billion in unrestricted cash. Unrestricted cash fell $42 million in the third quarter.

"Although our performance for the quarter is disappointing, we are encouraged by the fact that unit revenue is improving while at the same time our unit costs continue to decline. We must remain focused on effectively controlling our costs and preserving liquidity," Cohen said. However, Siegel has said challenges still remain for the company to hit targets for introducing regional jets into service, which is a key component of the company’s business plan.

The company’s route network has 98 RJs, up from 91 at the end of the second quarter. Much of the “future RJ growth will be internal (60 CRJ-200s at PSA and 85 EMB-170/175s at MDA),†Ashby said.

MDA is finalizing its FAA review and is now scheduled for its first revenue flight on February 8.

This winter US Airways, US Airways Express, and the GoCaribbean network will serve 35 destinations.

It is important to note when it emerged from bankruptcy, the company said it did not expect to be profitable before 2005.

Online internet check-ins doubled.

The company now receives about 130,000 additional bookings per week from its domestic code share alliance with United Airlines. The airline said the code share benefit is advancing faster than anticipated. The company believed it would take 3 to 3.5 years to realize the full benefits of the United alliance, but management now believes that timeline will be shortened to 2 to 2.5 years.

The company has 443 Kiosks located at 83 airports and about 60% of the customers use this automated tool.

The In-flight Café product is offered on 364 daily flights. The company tested a $5 snack option and saw a 15% increase in purchased food. This program will be put into full service on November 5.

The Shuttle is doing better, revenue is up, and the government is paying more for Shuttle flights.

When asked a question by an analyst about 2004 mainline ASM’s, Siegel made a curious statement. Siegel said that 2004 (mainline) ASMs would be (publicly) “discussed at a later time,†hinting the company could see a change in this area.

When asked a question about the Pittsburgh hub negotiations, Siegel said the company is “trying to find a solution†to keep the airport a hub. Today the company has “35 mainline jets†assigned to the hub, “about the same size as Continental in Cleveland,†Siegel said. The company intends to “upgrade 50-seaters to 70-seaters (RJs)†going forward, Ashby noted.

Today the New York Times wrote an article (for more information go to, click onto Rumor Control, and then click here for Daily Airline News for the article) discussing US Airways’ pilot pension plan. When asked a question about the column, Siegel said the company disagrees with the “spin of the articleâ€. Cohen noted the company has not changed its position regarding pension calculations. “US Airways is involved in pension litigation with the PBGC and cannot comment further,†Siegel said.

During the next couple of weeks the company expects a final decision on Washington National RJ slots increasing aircraft seat capacity limits from 56 to 71 seats.

Standard and Poor’s Statement

US Airways' results are expected to be somewhat worse than average among peer airlines in the third quarter, despite the cost and balance sheet improvements achieved in the company's Chapter 11 bankruptcy reorganization. The airline's revenues continue to be under pressure from low-cost competition and the increasing use of low-fare tickets by business travelers, and management acknowledges a need to reduce costs further. Liquidity continues to be adequate, with unrestricted cash of $1.38 billion at Sept. 30, 2003, little changed from the June 30 figure, and manageable cash obligations in the near term.

US Airways Stock News

Separately, shares of US Airways were up 11 percent to $9.05 on their first day trading on the Nasdaq under the new symbol of UAIR.


Maybe if the back stabbers who run the joint, would stop treating employees like enemy's and more like assets we could become more profitable. That is a situation that is normal at wn. They treat their employes well and the employees treat managment like wise. I would have to admit a prety freaky scenario but anything is possible right.

Next point is to wonder if they have not hired enron accountants. I mean these boyo's have garnererd 1.8b in concessions. Even cheech marins binges could not accout for such a loss.
Siegel told analysts, "Our goal is to be profitable, and these results are simply not acceptable. Clearly, we need to take out additional costs."

Interesting spin Dave.

I've got a couple of suggestions for you.

First -- and maybe this seems elementary but perhaps instead of continuing the focus on cutting costs you instead attempt to improve REVENUE.

You know. Silly things like SIMPLIFY the pricing model. Don't react to fare adjustments set by other airlines -- forge your own road. Charge what the market will support. If load-factor exceeds 80% raise the fare.

How about putting bigger airplanes on markets where they can be supported? I know RJs are "en vogue" but i'm certain that even you could see the basic financial reality that if there is DEMAND in a marketplace, it would be foolish to not support that demand with a mainline jetliner.

Maybe a few other things could be done to improve REVENUE.

You know ya have to SPEND money to make money -- How about some advertising? How about giving the airplanes a good, thorough cleaning? How about onboard internet or pay-per-view movies? How about proving the flight attendants with a 2 day course on enhanced customer service? How about a program of "secret shoppers" who can determine what kind of CUSTOMER SERVICE experience the passengers are being provided?

How about having an intern (or one of your 12000 furloughed employees) find local vendors who would be willing to donate their products in exchange for the advertisement it would provide? I/E - Cookies baked at a bakery in Harrisburg. BarbQ sandwiches from Dinosaurs in Rochester? Clam Chowder from a seafood joint in Boston. GET THE LOCAL BUSINESSES INVOLVED!

BUT -- I realize that "vision" just isnt in the formula for you Dave. Thinking outside of the box would require you to do more than simply watch what the rest of the industry is doing and follow suit. It might require you to open the purse strings and spend a few pennies -- maybe even keep a few mainline employees on the payroll rather than outsourcing the work to the nearest prison rehabilitation program.

SO -- if COSTS are still your primary concern, I have one final suggestion.

Take a frickan paycut.

You've been on the property about 3 years now, right Dave? Well -- your highest paid employee group are the pilots. So why dont you put yourself on the pilot payscale.

3rd year F/O pay ought to do the trick. Around what, $85,000 per year? Make sure that your benefits, retirement, and sick-leave policies are the same as those employees as well. Do the same with your entire senior-management staff. EVERY ONE OF THEM should be paid on par with their longevity. NOT ONE manager at US Airways should be paid a PENNY more than the highest paid line employee. You want a bonus? Fine. Lets see some performance. Lets see more than excuses! Lets see results! RESULTS for the company. RESULTS for the shareholders. RESULTS for the employees. and RESULTS for the communities that are served by this airline.

Your managers dont want to participate in the new management pay-scale? Can't retain the "talent"? FINE!!! KICK EM OUT! There are people out there who will stay and who will perform!! I would do your job (and frankly I couldn't do much WORSE) for 3rd yr copilot pay. If they dont want to participate FIRE THEM. There are extremely intelligent people either currently employed by or furloughed by US Airways who KNOW what the customer wants and who could provide it. These are the front line employees that run the company on a day-to-day basis not because of your leadership -- IN SPITE OF IT.

Heck even if you and your staff took the HIGHEST employee pay-rates you would still save the company millions of dollars a year!

You want to cut costs? LOOK IN THE MIRROR. Quit and find somebody who CARES about US Airways to run it. Find somebody who has been a part of the US Airways family for 30 years -- somebody who cares about the long-term success of the airline, her employees, and her customers.

You are not that man. Prove me wrong.

You're a newhire employee Dave, and you're on probation. So far, nobody is impressed.
Lets see.....july,august,september....91 days.
"the company reports 70 bad weather days during the quarter...a 50%

My god...that s terrible...there must be articule after articule and a whole
weeks worth of programming on the weather channel s storm stories about
the worst summer in history.......NOT.

We must count cloudy days as bad weather or a ground delays progam for
atl as being severely adverse. Granted it wasn t the greatest summer but
it wasn t the worst either. anyone buying that garbage.
DAve 'Lorenzo's' probation is OVER_AINT IN THE UNION_

DUMP HIS A$$ OUT NOW____________AND TAKE HIS perks also!!!!

"fly on the wall, hawk'whatever the hell you call it!!!!! :down: