USA320Pilot said:
Today's quarterly financial report is encouraging with the company the only major airline to have first quarter break even cash flows. Much of Siegel's business plan is working: improved liquidity, lower unit costs, and increased revenues.
The quarterly financial report is
very encouraging but it's also untrue that US Airways was the only "major airline" to have first quarter break-even cash flow. First of all, the cash flow was only break-even after excluding the ATSB loan repayment. Southwest is a member of the major airlines as defined by USDOT and showed positive cash flow before a stock repurchase (and they spent $360 million in the quarter for property & equipment, primarily aircraft-related). Even if we narrow focus to the major
network carriers, CAL showed operating cash flow of over $80 million and would have been cash positive had they not paid down $90 million in long-term debt (comparable to the ATSB loan). AMR's cash and short term investments increased by roughly $600 million, though this was largely due to financing transactions. NWAC improved unrestricted cash and short-term investments by about $180 million in the quarter.
All that said, the improvement in cash position in March after the prepayment of $250 million of the ATSB-guaranteed loans was extremely positive, and you could tell on the conference call that the analysts were surprised. Some of the questions seemed to be aimed at finding out exactly how the company managed to improve its cash position. Forward ticket sales were brought up (as alluded to by funguy2 & BoeingBoy), though the company stated that reserve requirements (by the credit card issuers?) probably don't allow those to be counted as unrestricted funds (someone please correct me there if I'm wrong!). It was mentioned that refunds of aircraft predelivery deposits (for CRJ's/Embraers I assume) helped the cash position, since those aircraft are debt/lease-financed. I'd also venture a guess that the sale of the company's second quarter hedge position might have been done in the first quarter (entirely a guess, I have no knowledge of the actual timing!); that also would have helped the cash position, even though the accounting gain will only apply to the second quarter.
The news that the company is engaged in some hedging was excellent. Improvements in RASM were heartening especially given the increase in average stage length; increased load factors more than made up for a marginal decline in yield. The drop in non-fuel CASM of 3.4% was a definite positive, though that number is still too high. Management's bullish outlook for the second quarter impressed the analysts (either that or they were skeptical and being diplomatic). I realize that though WN is coming to PHL in 12 days, they probably will have less impact in the second quarter with the first set of routes added than they will in July; all of their new PHL routes (excluding PVD, and FL flies PHL-BOS already) already have service from other low-cost carriers.
I believe US Airways is in good shape through the third quarter; there was mention of a $100 million payment into one of the pension plans being due in September and that will cut into cash. But seasonally strong traffic for the summer should (hopefully!) mean positive operating cash flow. And ideally, the airline's cost and revenue picture can be revamped by then.