Back In The Black In The Wild Blue

Well, somebody's making money in aviation. US Airways Group, Inc. Monday reported net income of $13 million for the second quarter 2003. This compares to a net loss of $248 million for the second quarter 2002.

Pre-tax income for the second quarter 2003 was $26 million compared to a pre-tax loss of $259 million in the second quarter of 2002. Results for the current quarter reflect a number of unusual items, described in Note 4 below, including a $214 million cash payment from the Transportation Security Administration (TSA) under the 2003 Emergency Wartime Supplemental Appropriations Act.

The loss before income taxes was $154 million for the second quarter of 2003, compared to a pre-tax loss of $250 million in the second quarter of last year. This improvement of $96 million year-over-year includes $92 million of non-cash stock-based compensation expenses related to stock granted to employees covered by collective bargaining agreements in connection with the company's emergence from bankruptcy on March 31, 2003. The relative improvement reflects the cost reductions put in place during the Chapter 11 reorganization, partially offset by lower passenger revenues and higher fuel costs.

Profits In Spite Of Roadblocks

"These results echo what virtually every major network carrier experienced in the second quarter through a combination of a weak economy and the impact of the Iraqi War," said David N. Siegel, US Airways president and chief executive officer. "Nevertheless, we have made great strides in executing the key elements of our restructuring plan related to increasing revenue, reducing costs, and improving liquidity, all against the backdrop of a challenging industry environment."

The second quarter 2003 US Airways mainline Revenue per Available Seat Mile (RASM) of 11.08 cents was up 1.1 percent compared to the second quarter of 2002. US Airways' mainline Passenger Revenue per Available Seat Mile (PRASM) of 9.88 cents was up 0.4 percent year-over-year for the quarter, while the rest of the industry was up 0.1 percent. US Airways outpaced the industry in year-over-year PRASM performance by 0.3 percentage points. This was driven by a 1.9 percentage point superior performance in the domestic market, partially offset by weaker transatlantic routes. While industry revenue performance remains weak, for the quarter, US Airways regained a domestic PRASM premium relative to the industry, adjusted for length of haul, for the first time since the fourth quarter of 1999.

US Airways: Fragile Industry Still Recovering from 9/11, Iraq War

 "As the industry began to recover from the impact of the Iraqi War, passenger loads built steadily throughout the quarter and June's load factor was a record for any month in the history of the company," said B. Ben Baldanza, US Airways senior vice president of marketing and planning.

"Our initiatives to strengthen revenue are clearly enhancing our performance relative to the industry, but the industry revenue environment as a whole continues to be weak as the industry 'buys' its load factor with lower prices."

Available Seat Miles (ASMs) declined 11.0 percent, while Revenue Passenger Miles (RPMs) for the quarter declined 10.5 percent, resulting in a passenger load factor of 75.4 percent, a year-over-year increase of 0.3 percentage points. For the second quarter, US Airways Inc.'s mainline operations carried 10.9 million passengers, a decline of 16.4 percent compared to the same period of 2002. The second quarter 2003 yield of 13.10 cents was down 0.1 percent from the same period in 2002.

The mainline Cost per Available Seat Mile (CASM), excluding fuel and unusual items, of 10.75 cents for the quarter decreased 2.2 percent versus the same period of 2002. Mainline CASM includes $92 million or 0.71 cents per ASM of stock-based compensation related to stock grants given to US Airways' organized labor groups. Absent this stock charge, year-over-year CASM, excluding fuel and unusual items, declined 8.6 percent. CASM, excluding fuel and unusual items, provides management and investors the ability to measure and monitor US Airways' performance absent the significant price volatility of fuel and is more indicative of the company's operating performance.

FMI: www.usairways.com