Costs Crunch US Airways

The airline continues to struggle with hefty fuel costs.
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US Airways

(UAIRQ.OB)

reported a wider first-quarter loss, as surging fuel prices and bare-knuckle price competition overwhelmed the company's cost-cutting progress.

The Arlington, Va., airline lost $191 million in the first quarter, 7.9% more its $177 million loss a year ago. Losses per share totaled $3.48, up from $3.28 in the first quarter of 2004.

Revenue fell 4.3% to $1.63 billion from $1.70 billion. Price competition pressured unit revenue lower even as the airline flew more passengers.

Shares fell 1 cent to 73 cents.

"We continue to operate under extremely challenging conditions, most notably high fuel prices and aggressive pricing actions by our competitors," said Bruce R. Lakefield, the company's CEO. "The cost reductions and operational efficiencies we have implemented have minimized the impact of the fuel and revenue environment, but we find ourselves in the same situation as most of the industry, where fuel costs cannot be fully recovered through traffic growth and incremental fare increases."

Across US Airways' system, passenger traffic jumped 9.6%, while the airline increased capacity by 5.1%. That allowed it to fill more seats on its planes on average, and its load factor increased by 3.0 percentage points to 71.2%.

But the tough pricing environment -- particularly on the East Coast -- caused unit revenue, measured in revenue per available seat mile, or RASM, to plummet 9%.

Meanwhile, aviation fuel expenses increased 57.9% as crude oil rallied to record levels during the quarter.

US Airways said unit costs, excluding fuel and one-time items, fell 15.6% year over year. The company has used its two trips through Chapter 11 since the Sept. 11 terrorist attacks to slash employee pay and benefits and continues to seek additional financing to exit bankruptcy protection. Last week, it confirmed it has held advanced merger talks with

America West

(AWA)

.

The airline ended the quarter with total cash of $1.28 billion, including $766 million of restricted cash.