Last Friday US Airways posted disappointing second quarter results when it announced a $62 million net loss for what is typically its strongest quarter of the year. According to Air Transport World "Although it has shed billions in costs during its second restructuring, US Airways’ net loss for the second quarter ended June 30, which included $26 million in one-time charges consisting of $19 million in professional fees, $6 million in damage and deficiency claims on rejected aircraft and $4 million of severance that was offset slightly by $3 million in interest on accumulated cash. This compares to a net income of $34 million in the year-ago period. Excluding one-time items, net loss for the 2005 second quarter totaled $36 million."
Some interesting points include:
-- The company had an operating profit of $41 million.
-- Labor costs fell $225 million or a 36 percent drop.
-- Average jet-fuel costs soared 57 percent to $1.68 a gallon and the company paid $182 million more for fuel year-over-year.
-- Fuel aside, overall costs per seat mile fell 16.7 percent to 7.83 cents, primarily due to $1.1 billion in worker concessions.
-- The $26 million in charges for various reorganization items, which tend to cloud the carrier's performance. Without these expenses the company would have shown a $36 million net loss.
According to new reports, in his weekly recorded message, US Airways’ CEO Bruce Lakefield said costs had "declined substantially" and that more operating savings would come from "synergies" of the merger. For instance, the corporate headquarters will be relocated from Arlington to Tempe starting in October and the move should be completed by the end of the first quarter resulting in about a $30 million annual savings. Last Friday, the airline closed its Pittsburgh reservations center, leaving Winston-Salem as the company's only in-house call center. Of about 800 workers based in Pittsburgh, only 47 are moving to Winston-Salem and most of the rest took buyouts or retired.
Looking forward, US Airways said it expects system capacity growth to slow from just under 5% in May and June to less than 1% in the third quarter. It also said it is seeing positive yield trends and as a consequence expects positive system passenger RASM performance year-over-year in the third quarter.
The only major airline that posts monthly RASM figures is Continental. According to Lehman Brothers, they expect the following July results:
-- Continental’s July RASM should increase 4 to 6%, thus there should be strong revenue gains.
-- The brokerage firm said, "We continue to expect very strong revenue comparisons during the summer months as we expect current revenue trends to continue against easy comparisons in the prior year period (especially August and September).
-- "We believe the ATA composite will see double digit RASM gains for the quarter," airline analyst Gary Chase said.
The Continental and ATA revenue projections seem to echo comments made by US Airways in its earnings press release and should provide additional revenue with crude oil prices trading at about $62 per barrel.
Meanwhile, in an interview with the Charlotte Observer published yesterday, America West’s executive vice president of sales and marketing and merger integration team leader Scott Kirby was asked a series of questions. In regard to merger economics I believe there were two questions and answers of paticular interest:
Q. Where do you see the industry heading in the next few years?
A. If oil stays high, there's going to continue to be a lot of stress on the industry. If fuel prices stay high, you will see less capacity in the domestic industry one way or another, which will help raise revenues. That can happen one of three ways: bankruptcies, consolidation or a number of airlines shrinking. I really don't know how that will happen.
Q. If all these other airlines are getting their costs down through bankruptcies and labor negotiations, how do you stay ahead of the pack?
A. US Airways will now have labor costs that are below certainly all of the legacy carriers still, and below even where they're targeting, frankly. In addition, America West historically has had nonlabor, nonfuel expenses that are well below the rest of the industry, and we expect that to continue.
Other airlines that have already been through a restructuring, like American and United, still have costs that are significantly higher than America West. Our cost advantage may not be quite as large if other carriers restructure, but we still expect to maintain a significant cost advantage vs. the legacy carriers.
Regards,
USA320Pilot
Some interesting points include:
-- The company had an operating profit of $41 million.
-- Labor costs fell $225 million or a 36 percent drop.
-- Average jet-fuel costs soared 57 percent to $1.68 a gallon and the company paid $182 million more for fuel year-over-year.
-- Fuel aside, overall costs per seat mile fell 16.7 percent to 7.83 cents, primarily due to $1.1 billion in worker concessions.
-- The $26 million in charges for various reorganization items, which tend to cloud the carrier's performance. Without these expenses the company would have shown a $36 million net loss.
According to new reports, in his weekly recorded message, US Airways’ CEO Bruce Lakefield said costs had "declined substantially" and that more operating savings would come from "synergies" of the merger. For instance, the corporate headquarters will be relocated from Arlington to Tempe starting in October and the move should be completed by the end of the first quarter resulting in about a $30 million annual savings. Last Friday, the airline closed its Pittsburgh reservations center, leaving Winston-Salem as the company's only in-house call center. Of about 800 workers based in Pittsburgh, only 47 are moving to Winston-Salem and most of the rest took buyouts or retired.
Looking forward, US Airways said it expects system capacity growth to slow from just under 5% in May and June to less than 1% in the third quarter. It also said it is seeing positive yield trends and as a consequence expects positive system passenger RASM performance year-over-year in the third quarter.
The only major airline that posts monthly RASM figures is Continental. According to Lehman Brothers, they expect the following July results:
-- Continental’s July RASM should increase 4 to 6%, thus there should be strong revenue gains.
-- The brokerage firm said, "We continue to expect very strong revenue comparisons during the summer months as we expect current revenue trends to continue against easy comparisons in the prior year period (especially August and September).
-- "We believe the ATA composite will see double digit RASM gains for the quarter," airline analyst Gary Chase said.
The Continental and ATA revenue projections seem to echo comments made by US Airways in its earnings press release and should provide additional revenue with crude oil prices trading at about $62 per barrel.
Meanwhile, in an interview with the Charlotte Observer published yesterday, America West’s executive vice president of sales and marketing and merger integration team leader Scott Kirby was asked a series of questions. In regard to merger economics I believe there were two questions and answers of paticular interest:
Q. Where do you see the industry heading in the next few years?
A. If oil stays high, there's going to continue to be a lot of stress on the industry. If fuel prices stay high, you will see less capacity in the domestic industry one way or another, which will help raise revenues. That can happen one of three ways: bankruptcies, consolidation or a number of airlines shrinking. I really don't know how that will happen.
Q. If all these other airlines are getting their costs down through bankruptcies and labor negotiations, how do you stay ahead of the pack?
A. US Airways will now have labor costs that are below certainly all of the legacy carriers still, and below even where they're targeting, frankly. In addition, America West historically has had nonlabor, nonfuel expenses that are well below the rest of the industry, and we expect that to continue.
Other airlines that have already been through a restructuring, like American and United, still have costs that are significantly higher than America West. Our cost advantage may not be quite as large if other carriers restructure, but we still expect to maintain a significant cost advantage vs. the legacy carriers.
Regards,
USA320Pilot
