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."
Revenue
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.
Costs
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 www.chipsplace.com, 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.
Respectfully,
Chip
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."
Revenue
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.
Costs
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 www.chipsplace.com, 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.
Respectfully,
Chip
