US Airways Sees Through the Fog - TheStreet

US Airways Sees Through the Fog

US Airways, the last major airline to report second-quarter earnings, offered a more optimistic outlook than any of the other four network carriers.
Publish date:

CHARLOTTE, N.C. -- A contrarian

US Airways


said it sees improving trends in business travel and vehemently dismissed the bankruptcy chatter that seems to have enveloped it.

The carrier also said it is considering a move to eliminate the 25 Embraer-190s in its fleet in an effort to reduce capacity by 2.5%, as the industry struggles with a downturn in travel. CEO Doug Parker said no decision has been made. Besides reducing capacity, the carrier could reduce costs by eliminating a fleet type.

The last major airline to report second-quarter earnings, US Airways offered a more optimistic outlook than any of the other four network carriers. The airline is seeing "real strength in bookings," including business bookings, said President Scott Kirby on an earnings conference call. For instance, revenue per available seat mile on the Shuttle, US Airways' best example of a "pure" business market, was down 23% in May, 21% in June and 15% in July.

Meanwhile, corporate travel was down 30% to 35% in May and June, but down only 22% in July. And overall passenger revenue per available seat mile also improved during the quarter, down 20% in June and down 16% to 17% in July. "August is similar to July at a similar point in time," said Kirby, who acknowledged "our view may be slightly more bullish" and said the carrier is "able to push up yields with modest fare increases."

On the liquidity front, CEO Doug Parker seemed eager to discuss the topic as soon as an analyst raised the question. "This comes up a lot," Parker says. "We have trouble getting to the same conclusion that some have that there is a need to raise capital."

US Airways has total cash and investments of $2.3 billion. Parker said cash as a percentage of revenue is better than at any network carriers except for


(CAL) - Get Report

and the profit margin is among the highest in the group.

"It's hard to accept the view that we get in trouble before the others," he said, adding that "the problem with these doomsday scenarios is they assume we sit here and let it happen. ... We will not sit idly by and let scenarios, that some seem to want to suggest, play out."

Regarding the E190s, a popular airplane with passengers because it is far roomier than comparable regional jets, Kirby said the aircraft is "in demand around the world" so that a sale would be "a transaction we can effectively implement from a financial perspective."

Questioned about the potential impact on employment, Parker said no decision has been made. "We may be able to reduce (there) if we need to reduce flying further," he said. "That is nothing close to a decision that we've made thus far." US Airways uses mainline crews to fly its E190s.

For the second quarter, excluding items, the carrier reported a net loss of $95 million or 77 cents a share. Analysts surveyed by Thomson Reuters had estimated a loss of 84 cents a share. Revenue fell 18.4% to $2.3 billion. Analysts had estimated $2.7 billion. Without fuel hedging losses, US Airways had a net profit of $40 million.

Late Thursday afternoon, US Airways shares were trading up 11% at $2.28 a share.