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US Airways profits, warns of loss - Airline makes $34 million in second quarter
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US Airways earns $34 million in quarter, defers RJ deliveries
NEW YORK (ATWOnline.com) - US Airways Group surprised Wall Street by reporting net income of $34 million for the second quarter ended June 30, but airline executives downplayed the result and warned of coming challenges.
"While we reported a small profit, we should have done significantly better in the second quarter, which is traditionally our best. Absent an immediate and dramatic reduction in costs, this nominal profit is insufficient, and we will likely be faced with additional second-half losses," President and CEO Bruce Lakefield said. As if to emphasize the gravity of the situation, the carrier announced it was deferring deliveries of 19 regional jets from 2004 to 2006-07.
US Airways earned $13 million in the year-ago period owing to a $214 million gain associated with federal security reimbursements. Excluding one-time items, the company lost $154 million in the 2003 second quarter. Current-year results also benefited from unusual items, including gains from fuel hedging, the sale of four aircraft previously leased to a third party, the impact of new legislation related to Medicare and a favorable tax audit settlement.
A 24.4% increase in capacity at US Airways Express carriers helped boost operating revenues 10.1% to $1.96 billion while total operating expenses rose 9.6% to $1.87 billion. This resulted in operating income of $83 million, a 23.9% increase over operating income of $67 million last year.
Mainline yield fell 1.8% to 12.87 cents on an 8.7% increase in traffic, while mainline RASM increased 4% to 11.52 cents on a 3.5-point jump in load factor. Mainline CASM climbed 3.2% to 11.18 cents. Excluding fuel expense and unusual items, mainline CASM declined 12.6% to 9.4 cents.
For the six months ended June 30, the company reported a net loss of $143 million. ATWOnline calculated that on a pro forma basis, US Airways had a net profit of $1.64 billion in the first half of 2003, which included $1.92 billion in gains associated with its emergence from Chapter 11 bankruptcy and adoption of "fresh start" accounting effective March 31, 2003. First-half operating revenues rose 10.5% to $3.66 billion while operating expenses grew 7.7% to $3.72 billion, resulting in an operating loss of $59 million versus an operating loss of $140 million in the first six months of 2003.
Also yesterday, US Airways said it reached agreements with GECAS, Bombardier and Embraer to continue providing the company with RJ financing through the end of the third quarter. The new agreements became necessary after the company's credit rating was downgraded, CFO Dave Davis said.
As part of the agreement reached with Bombardier, the company will convert 23 CRJ200 deliveries to CRJ701s and CRJ900s. In addition to deferrals of 19 aircraft, Davis said continued financing support for the carrier's RJ program beyond Sept. 30 is dependent upon the successful implementation of the airline's transformation plan.
Upgrades in DC
ARLINGTON (theHub.com) - US Airways will increase its capacity by up to 90 percent to five destinations from Ronald Reagan Washington National Airport this fall with the resumption of mainline roundtrip service to Buffalo, Syracuse, Indianapolis, and Manchester, as well as first-time mainline service between Reagan National and Columbus, all beginning Sept. 8, 2004. US Airways operates nearly 180 daily departures to 46 nonstop destinations at Ronald Reagan Washington National Airport.
"We take yet another step forward with the implementation of US Airways’ Transformation Plan by upgrading these important markets with dual-class mainline aircraft," said Andrew Nocella, vice president of network and revenue management. "Lower fares are stimulating our business to the point that the smaller aircraft are no longer the optimal choice in these markets."
US Airways will upgrade one of its five daily Washington-Columbus roundtrip flights from 50-seat regional jet service to 737 service, adding 30 percent more seats and bringing mainline service to Columbus for the first time. All three daily Washington-Buffalo flights will be upgraded from 50- and 72-seat RJ service to mainline service, flown using 120-seat Airbus A319 and 126-seat Boeing 737-300 aircraft, and representing a 90 percent capacity increase in the market. Between Washington and Syracuse, US Airways currently operates one 72-seat RJ and four 37-seat Dash-8 turboprop aircraft. Beginning in August, two turboprop flights will upgrade to 50-seat RJ service, and in September, one of the new RJ flights will be upgraded to 737 service, a 38 percent increase in seat availability from today’s schedule.
Washington-Indianapolis service will shift from five daily 50-seat RJ flights to four-times daily service, with three 737s and one 50-seat RJ. The new schedule will offer customers 71 percent more seating capacity than previously had been available.
One daily outbound Washington-Manchester flight will be added to the three existing roundtrip flights, and will be operated using a 72-seat RJ. The current service is operated using 50-seat RJs, and one flight will be upgraded to 737 service, resulting in an overall seat capacity increase of 75 percent.
Plan Recap
ARLINGTON (theHub.com) - A story in today’s New York Times summarizesUS Airways’ plans to change the way it operates aircraft, shifting away from the hub-and-spoke route system and emphasizing direct flights to and from Boston, New York, Washington and Philadelphia as part of the company’s strategy to compete with low-cost competition.
The article addresses US Airways’ plans to concentrate on direct flights to and from major East Coast airports, and increase flying in the New York-Florida market, beginning this fall.
The topic was discussed on yesterday’s quarterly results conference call with President and CEO Bruce Lakefield and other senior officers. Lakefield stressed that the plan is contingent on US Airways achieving a competitive cost structure as the company works to defend its valuable East Coast market share.
In September, US Airways must comply with financial covenants in its loan agreements with the Air Transportation Stabilization Board, and will face the expiration of aircraft financing agreements with General Electric, Bombardier and Embraer.
On the call with industry analysts, CFO Dave Davis explained that if US Airways has too little cash to comply with the terms of its loan guarantees, it will have to renegotiate the aircraft financing deals on less favorable terms.
Lakefield said that without a competitive cost structure, US Airways could be in danger of a second bankruptcy filing. He again stressed the importance of completing labor negotiations swiftly, to avoid these negative consequences. Lakefield reemphasized his message in a special employee recording yesterday.
The Times article concluded with a comment from industry analyst William Warlick, of Fitch Investors Service, who noted that the competition will "fight back hard" and that they are "well prepared and ready to get into a market share game." Perhaps most telling was a quote from David Ulmer, vice president for planning at JetBlue, who noted that the lowest-cost producer will always have the advantage, and JetBlue’s costs are still well below those of US Airways.
US Air Warns of Second Chapter 11 if Labor Resists Concessions
ARLINGTON (Aviation Daily) - US Airways warned yesterday that it is considering filing for Chapter 11 protection for the second time in as many years if it is unable to win concessions from its labor group by Sept. 30, as the airline is at grave risk of defaulting on its covenants of government loan guarantee and regional jet financing deals. In a message to employees on the same day as reporting a modest $34 million second-quarter profit, CEO Bruce Lakefield sent a clear and stern message to unions that the clock is ticking and they need to start negotiating some concessions or there will be grave consequences.
"Stop dragging your feet or hoping that Chapter 11 will help you," he said. "It certainly will not." If the airline fails to win ratified concession deals well before Sept. 30, the company faces a "series of consequences" with the Air Transportation Stabilization Board and its other financial partners. "Rather than risk those consequences," which could destabilize the airline’s finances and hurt employees, the company may have to make another trip to bankruptcy court. The airline’s profit easily beat analysts’ estimates, most of which predicted a loss. US Airways’ management team stressed to employees and analysts yesterday that the positive earnings were no indication the airline has turned toward recovery. "These results should not fool anyone that our problems are behind us," Lakefield said. "Unfortunately, our biggest challenges are ahead." He predicted significant losses for the second half of the year if the airline is unable to win concessions.
He told analysts that the airline is having "productive negotiations" with the unions representing pilots, flight attendants and passenger service employees, but said it is crucial to have all labor groups participate. "I remain concerned that some labor leaders believe these are typical negotiations that can drag out and lead to a series of insufficient compromises," Lakefield said. While it struggles to win concessions, the airline posted a 10.1% jump in second-quarter revenues, largely due to a 24.4% increase in capacity at the Express carriers. Passenger unit revenues grew 3.8% to 11.34 cents as traffic far outpaced the capacity increase.
The airline’s load factor rose 3.9 points to 77.4%, the highest amount for any quarter in company history. System yield was down 1.3% as it tries to fend off low-cost competition with its GoFares, available in 45 Philadelphia and Washington markets.
The airline was able to buy itself a little bit of time with regard to its planned RJ deliveries thanks to new "interim" agreements with GE, Embraer and Bombardier. Last month, it received a tentative green light from the companies to continue taking deliveries of the new RJs following a May credit downgrade. The companies will now provide RJ financing through Sept. 30. Specific to its deal with Bombardier, the airline has converted its order for 23 CRJ-200s, expected after September, to CRJ-701s with an option to buy CRJ-900s if it can change its scope clause. To facilitate the conversion, 19 of the deliveries scheduled for 2004 have been deferred to 2005 and 2006. Last week, pilot leaders at subsidiary PSA Airlines ratified a deal that sets staffing and pay rates for the 70-seat CRJ-701.
The -200 deliveries to PSA will end in September.
Respectfully,
USA320Pilot
Complete Story
East Coast fliers getting great deals
Complete Story
Airline warily reports a profit - US Airways: Survival unclear
Complete Story
US Airways profits, warns of loss - Airline makes $34 million in second quarter
Complete Story
US Airways reported a net income of $34 million Tuesday in its second quarter earnings – Spokesman: "The IAM presented ideas to us earlier in the year and they put a number on it, but (the presentation) doesn’t come close to the number they proposed"
Complete Story
US Airways boosts capacity in Washington, D.C. area - Brings Larger Jet Aircraft to Five Routes
Complete Story
US Airways offers special fares for New York City travel
Complete Story
Lakefield throws down gauntlet
Complete Story
US Airways CWA Philadelphia Local 13301 Update
Complete Story
US Airways CWA MDA J4J information
Complete Story
US Airways Group and Bahamasair receive DOT code share approval
Complete Story
US Airways earns $34 million in quarter, defers RJ deliveries
NEW YORK (ATWOnline.com) - US Airways Group surprised Wall Street by reporting net income of $34 million for the second quarter ended June 30, but airline executives downplayed the result and warned of coming challenges.
"While we reported a small profit, we should have done significantly better in the second quarter, which is traditionally our best. Absent an immediate and dramatic reduction in costs, this nominal profit is insufficient, and we will likely be faced with additional second-half losses," President and CEO Bruce Lakefield said. As if to emphasize the gravity of the situation, the carrier announced it was deferring deliveries of 19 regional jets from 2004 to 2006-07.
US Airways earned $13 million in the year-ago period owing to a $214 million gain associated with federal security reimbursements. Excluding one-time items, the company lost $154 million in the 2003 second quarter. Current-year results also benefited from unusual items, including gains from fuel hedging, the sale of four aircraft previously leased to a third party, the impact of new legislation related to Medicare and a favorable tax audit settlement.
A 24.4% increase in capacity at US Airways Express carriers helped boost operating revenues 10.1% to $1.96 billion while total operating expenses rose 9.6% to $1.87 billion. This resulted in operating income of $83 million, a 23.9% increase over operating income of $67 million last year.
Mainline yield fell 1.8% to 12.87 cents on an 8.7% increase in traffic, while mainline RASM increased 4% to 11.52 cents on a 3.5-point jump in load factor. Mainline CASM climbed 3.2% to 11.18 cents. Excluding fuel expense and unusual items, mainline CASM declined 12.6% to 9.4 cents.
For the six months ended June 30, the company reported a net loss of $143 million. ATWOnline calculated that on a pro forma basis, US Airways had a net profit of $1.64 billion in the first half of 2003, which included $1.92 billion in gains associated with its emergence from Chapter 11 bankruptcy and adoption of "fresh start" accounting effective March 31, 2003. First-half operating revenues rose 10.5% to $3.66 billion while operating expenses grew 7.7% to $3.72 billion, resulting in an operating loss of $59 million versus an operating loss of $140 million in the first six months of 2003.
Also yesterday, US Airways said it reached agreements with GECAS, Bombardier and Embraer to continue providing the company with RJ financing through the end of the third quarter. The new agreements became necessary after the company's credit rating was downgraded, CFO Dave Davis said.
As part of the agreement reached with Bombardier, the company will convert 23 CRJ200 deliveries to CRJ701s and CRJ900s. In addition to deferrals of 19 aircraft, Davis said continued financing support for the carrier's RJ program beyond Sept. 30 is dependent upon the successful implementation of the airline's transformation plan.
Upgrades in DC
ARLINGTON (theHub.com) - US Airways will increase its capacity by up to 90 percent to five destinations from Ronald Reagan Washington National Airport this fall with the resumption of mainline roundtrip service to Buffalo, Syracuse, Indianapolis, and Manchester, as well as first-time mainline service between Reagan National and Columbus, all beginning Sept. 8, 2004. US Airways operates nearly 180 daily departures to 46 nonstop destinations at Ronald Reagan Washington National Airport.
"We take yet another step forward with the implementation of US Airways’ Transformation Plan by upgrading these important markets with dual-class mainline aircraft," said Andrew Nocella, vice president of network and revenue management. "Lower fares are stimulating our business to the point that the smaller aircraft are no longer the optimal choice in these markets."
US Airways will upgrade one of its five daily Washington-Columbus roundtrip flights from 50-seat regional jet service to 737 service, adding 30 percent more seats and bringing mainline service to Columbus for the first time. All three daily Washington-Buffalo flights will be upgraded from 50- and 72-seat RJ service to mainline service, flown using 120-seat Airbus A319 and 126-seat Boeing 737-300 aircraft, and representing a 90 percent capacity increase in the market. Between Washington and Syracuse, US Airways currently operates one 72-seat RJ and four 37-seat Dash-8 turboprop aircraft. Beginning in August, two turboprop flights will upgrade to 50-seat RJ service, and in September, one of the new RJ flights will be upgraded to 737 service, a 38 percent increase in seat availability from today’s schedule.
Washington-Indianapolis service will shift from five daily 50-seat RJ flights to four-times daily service, with three 737s and one 50-seat RJ. The new schedule will offer customers 71 percent more seating capacity than previously had been available.
One daily outbound Washington-Manchester flight will be added to the three existing roundtrip flights, and will be operated using a 72-seat RJ. The current service is operated using 50-seat RJs, and one flight will be upgraded to 737 service, resulting in an overall seat capacity increase of 75 percent.
Plan Recap
ARLINGTON (theHub.com) - A story in today’s New York Times summarizesUS Airways’ plans to change the way it operates aircraft, shifting away from the hub-and-spoke route system and emphasizing direct flights to and from Boston, New York, Washington and Philadelphia as part of the company’s strategy to compete with low-cost competition.
The article addresses US Airways’ plans to concentrate on direct flights to and from major East Coast airports, and increase flying in the New York-Florida market, beginning this fall.
The topic was discussed on yesterday’s quarterly results conference call with President and CEO Bruce Lakefield and other senior officers. Lakefield stressed that the plan is contingent on US Airways achieving a competitive cost structure as the company works to defend its valuable East Coast market share.
In September, US Airways must comply with financial covenants in its loan agreements with the Air Transportation Stabilization Board, and will face the expiration of aircraft financing agreements with General Electric, Bombardier and Embraer.
On the call with industry analysts, CFO Dave Davis explained that if US Airways has too little cash to comply with the terms of its loan guarantees, it will have to renegotiate the aircraft financing deals on less favorable terms.
Lakefield said that without a competitive cost structure, US Airways could be in danger of a second bankruptcy filing. He again stressed the importance of completing labor negotiations swiftly, to avoid these negative consequences. Lakefield reemphasized his message in a special employee recording yesterday.
The Times article concluded with a comment from industry analyst William Warlick, of Fitch Investors Service, who noted that the competition will "fight back hard" and that they are "well prepared and ready to get into a market share game." Perhaps most telling was a quote from David Ulmer, vice president for planning at JetBlue, who noted that the lowest-cost producer will always have the advantage, and JetBlue’s costs are still well below those of US Airways.
US Air Warns of Second Chapter 11 if Labor Resists Concessions
ARLINGTON (Aviation Daily) - US Airways warned yesterday that it is considering filing for Chapter 11 protection for the second time in as many years if it is unable to win concessions from its labor group by Sept. 30, as the airline is at grave risk of defaulting on its covenants of government loan guarantee and regional jet financing deals. In a message to employees on the same day as reporting a modest $34 million second-quarter profit, CEO Bruce Lakefield sent a clear and stern message to unions that the clock is ticking and they need to start negotiating some concessions or there will be grave consequences.
"Stop dragging your feet or hoping that Chapter 11 will help you," he said. "It certainly will not." If the airline fails to win ratified concession deals well before Sept. 30, the company faces a "series of consequences" with the Air Transportation Stabilization Board and its other financial partners. "Rather than risk those consequences," which could destabilize the airline’s finances and hurt employees, the company may have to make another trip to bankruptcy court. The airline’s profit easily beat analysts’ estimates, most of which predicted a loss. US Airways’ management team stressed to employees and analysts yesterday that the positive earnings were no indication the airline has turned toward recovery. "These results should not fool anyone that our problems are behind us," Lakefield said. "Unfortunately, our biggest challenges are ahead." He predicted significant losses for the second half of the year if the airline is unable to win concessions.
He told analysts that the airline is having "productive negotiations" with the unions representing pilots, flight attendants and passenger service employees, but said it is crucial to have all labor groups participate. "I remain concerned that some labor leaders believe these are typical negotiations that can drag out and lead to a series of insufficient compromises," Lakefield said. While it struggles to win concessions, the airline posted a 10.1% jump in second-quarter revenues, largely due to a 24.4% increase in capacity at the Express carriers. Passenger unit revenues grew 3.8% to 11.34 cents as traffic far outpaced the capacity increase.
The airline’s load factor rose 3.9 points to 77.4%, the highest amount for any quarter in company history. System yield was down 1.3% as it tries to fend off low-cost competition with its GoFares, available in 45 Philadelphia and Washington markets.
The airline was able to buy itself a little bit of time with regard to its planned RJ deliveries thanks to new "interim" agreements with GE, Embraer and Bombardier. Last month, it received a tentative green light from the companies to continue taking deliveries of the new RJs following a May credit downgrade. The companies will now provide RJ financing through Sept. 30. Specific to its deal with Bombardier, the airline has converted its order for 23 CRJ-200s, expected after September, to CRJ-701s with an option to buy CRJ-900s if it can change its scope clause. To facilitate the conversion, 19 of the deliveries scheduled for 2004 have been deferred to 2005 and 2006. Last week, pilot leaders at subsidiary PSA Airlines ratified a deal that sets staffing and pay rates for the 70-seat CRJ-701.
The -200 deliveries to PSA will end in September.
Respectfully,
USA320Pilot
