US Air CEO Hints at Merger Interest

As for its earnings, both of US Airways' former individual components had impressive turnarounds from a year ago. America West had a loss of $3 million, or 20 cents a share, in the second quarter of 2005. This year, on a stand-alone basis, America West reported a profit of $68 million. Meanwhile, the former US Airways had a second-quarter profit of $246 million, compared with a year-earlier loss of $44 million.

Revenue per available seat mile at the former America West network increased 18.6%, driven primarily by a 16.4% improvement in mainline yields. For the old US Airways network, RASM grew 28.8% to 15.23 cents, because of a 16.9% increase in mainline yields and a 4.6% improvement in mainline load factor.

Scott Kirby, the airline's executive vice president, said that besides the industry trends of improved pricing and reduced capacity, the RASM improvement reflected merger synergies. In future quarters, RASM gains will fall into the high teens, Kirby said, because comparisons with prior quarters will be more difficult. The airline projected a profitable third quarter and full year.

Excluding fuel and special items, America West's mainline cost per available seat mile rose 7.4% to 6.92 cents on a 2.3% decrease in capacity. For the former US Airways' stand-alone network, CASM excluding fuel and special items rose 7.9% to 8.08 cents on a 12.8% capacity decrease.

The CASM increases came largely from an accrual for the company's employee profit-sharing plan and a $31 million credit associated with US Airways' post-retirement benefits in 2005. Parker noted that the airline still expects another $100 million in cost savings from the merger, as part of a total $600 million in projected savings.

Special items included $35 million in merger-related expenses, partially offset by a $7 million gain from interest income on a prior-year tax refund and an $18 million unrealized gain on fuel hedges.

As of June 30, US Airways had $3.2 billion in cash and investments, of which $2.2 billion was unrestricted. Parker said the airline, unlike any of its major competitors, has no material debt amortizations until 2011 and has rejected solicitations for public offerings. However, he said debt reduction is a high priority.

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