US Airways Reports Q1 Profit
US Airways seems well on
its way to fulfilling a promise made by CEO Doug Parker earlier
this year, that his airline would be profitable for 2006. After a
loss last quarter of $261 million, US Airways Group -- formed by
the merger of US Airways and America West last September --
rebounded for the first quarter of 2006 with a profit of $5
million.
That's not a lot by ExxonMobil standards... but it is a big
chunk of change for domestic airlines right now, and it certainly
beats the $16 million loss posted by stand-alone carrier America
West for the same period in 2005.
Fare increases and capacity reductions -- leading to fuller
planes, with passengers paying more per seat -- are credited with
the reversal in fortunes for US Airways, as are cost reductions
associated with the merger.
The reported profit excludes so-called "special items", which
represent both money makers and losers for the carrier.
For example, the reports don't take into account a $90 million
gain that came after Airbus forgave a company loan (associated with
the carrier's agreement to purchase 20 A350s). A $26 million
unrealized gain related to the airline's fuel hedges is also not
included in the tally -- because the carrier says those gains were
offset by $46 million in merger-related expenses, and another $11
million spent paying down existing debt.
Even taking into account rising fuel prices -- US Airways
expects average fuel prices between $2.16 and $2.21 per gallon for
the full year -- Parker said Tuesday US Airways should continue to,
believe it or not, make money.
"Looking forward, we anticipate a very strong spring and summer
and now expect to be profitable for the full year 2006, even after
accounting for merger-related expenses and with continued high fuel
costs," Parker said.
One analyst agreed... while also given credit to those now
managing the merged airline.
"There is a strong macro trend in RASM (revenue per available
seat mile) and yield increases for the industry as domestic
capacity is being cut back," said Calyon Securities analyst Ray
Neidl in a research note. "However, the old America West management
that is now running the combined companies is doing a commendable
job in controlling costs but, even more importantly, raising yields
in the old US Airways system."