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US Airways Group (LCC)

Q2 2012 Earnings Call

July 25, 2012 12:30 pm ET


Daniel Cravens

William Douglas Parker - Executive Chairman, Chief Executive Officer, Chairman of Labor Committee, Chairman of US Airways and Director of AWA

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» US Airways Group, Inc. - Shareholder/Analyst Call
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Derek J. Kerr - Chief Financial officer, Chief Financial officer of America West Airlines Inc, Executive Vice President and Principal Accounting officer

J. Scott Kirby - President

Robert D. Isom - Chief Operating Officer and Executive Vice President

Stephen L. Johnson - Executive Vice President of Corporate & Government Affairs


Michael Linenberg - Deutsche Bank AG, Research Division

Jamie N. Baker - JP Morgan Chase & Co, Research Division

Glenn D. Engel - BofA Merrill Lynch, Research Division

Hunter K. Keay - Stifel, Nicolaus & Co., Inc., Research Division

Hunter K. Keay - Wolfe Trahan & Co.

Daniel McKenzie - Rodman & Renshaw, LLC, Research Division

Basili Alukos - Morningstar Inc., Research Division

Savanthi Syth - Raymond James & Associates, Inc., Research Division

John D. Godyn - Morgan Stanley, Research Division

Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division

Kevin Crissey - UBS Investment Bank, Research Division

Helane R. Becker - Dahlman Rose & Company, LLC, Research Division

Raymond Neidl - Maxim Group LLC, Research Division

David E. Fintzen - Barclays Capital, Research Division



Good day, ladies and gentlemen, and welcome to US Airways Second Quarter Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] And now I'd like to turn the conference over to your moderator, Director of Investor Relations, Mr. Daniel Cravens. You may begin, sir.

Daniel Cravens

Thank you, Keith, and welcome, everybody to the US Airways Second Quarter 2012 Earnings Conference Call. Joining us in the room today are Doug Parker, our Chairman and CEO; Derek Kerr, our Chief Financial Officer; and Steve Johnson, our EVP of Corporate. Also dialed in on the call remotely are Scott Kirby, our President; and Robert Isom, our Chief Operating Officer. Like we typically do, we're going to start with Doug. He'll provide an overview of our second quarter financial results. Derek will then walk us through the details on the quarter, including our costs, liquidity and provide some color on our updated guidance. Scott will then follow with commentary on the revenue environment and our operational performance. Then, after we hear from those comments, we will open the call for analysts Q&A and lastly, questions from the media.

Before we begin, we must state that today's call does contain forward-looking statements, including statements concerning future revenues and fuel prices. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties could cause actual results to differ materially from those projected. Information about some of these risks and uncertainties can be found in our earnings press release issued this morning, our Form 10-Q for the quarter ended June 30, also issued this morning, and our 2011 Form 10-K.

In addition, we will be discussing certain non-GAAP financial measures this morning, such as net loss and CASM, excluding unusual items. A reconciliation to these -- those numbers to the GAAP financial measures is also included in the earnings release and that can be found on our website at

A webcast of this call is also available on our website and will be archived for approximately 1 month. The information that we're giving you on the call today is as of today's date, and we undertake no obligation to update the information subsequently. Thanks again for joining us. And at this point, we'll turn the call over to our Chairman and CEO, Doug Parker.

William Douglas Parker

Thanks, Dan, and thanks, everybody, for being on -- it is a great day for us. We are certainly pleased to report the highest quarterly profit in US Airways history. As you saw on the release, our earnings excluding special items was $321 million, that's over 3x last year's profit of $106 million. These results aren't just great compared to US Airways' past history, but they're also great versus our competitors in the industry. Our pretax profit margin of 8.6% is well above any other network airline that has reported, and second only to Southwest, amongst those airlines who reported, and they were just slightly higher than US Airways at 9.6%. So these are not just great for us versus our past but versus other network airlines. The best by far and the industry-leading within the industry. We couldn't be happier. We couldn't be more proud of the team. The credit, of course, goes to the team. 32,000 hard-working employees made this happen. And you see that not just in the financial results but also in the operating reliability results. We produced records in the -- we produced records so far this year in on-time arrivals, baggage handling, completion factor. And for US Airways to produce records, that's really saying something, because we have been the industry leader amongst the network carriers in metrics like on-time performance and U.S. baggage mishandling for the last 5 years. So for us to be doing even better than we've ever done, is true testament to the great work that our team is doing and we can't thank them enough. So with that said, I'm going to turn it over to Derek who'll give you more details on the number -- I'm sorry -- yes, Derek will give more details around the numbers, followed by Scott, who will give you some more revenue guidance and outlook. And then we'll come back to me and we would get some questions. Derek?

Derek J. Kerr

Thanks, Doug. We just filed our second quarter 10-Q this morning. And as Doug said, in that quarter we reported our highest quarterly profit in company history, a net profit of $306 million or $1.54 per share. This compares to a net profit of $92 million or $0.49 per share a year ago. When you exclude special items, the company's net profit for the second quarter was a record $321 million or $1.61 per diluted share versus a net profit, excluding special items of $106 million or $0.50 per share in the second quarter last year.

We are pleased to have accrued $33 million during the quarter for our annual employee profit-sharing program driven by these record results. The company did recognize $15 million in net special charges in the second quarter of 2012. This included $9 million in net operating expenses, expense primarily related to corporate transaction and auction rate security arbitration costs and a gain on a vendor settlement and a $3 million charge associated with the ratification of a new fleet and passenger service contract at Piedmont, a wholly-owned Express subsidiary.

In addition, the company recorded $3 million in nonoperating expenses related to debt prepayment penalties and noncash write-offs of certain debt issuance costs as part of our W.D.C. we completed during the quarter. For the remainder of my comments, I will exclude special items.

For the quarter total capacity, mainline and Express was 23 billion ASMs, up approximately 1% from 2011, primarily due to a 1.4 point year-over-year improvement in our departure completion factor. Our mainline capacity for the quarter was 19.4 billion ASMs, up 1.4% from a year ago. Express capacity was 3.65 billion ASMs, down 1.1% from 2011, again, mostly due to the installation of our Express first product, which has proven to be very successful for our customers.

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