US Airways Group
reported a mammoth second-quarter loss late Tuesday that raised questions about its appeal for federal-loan assistance and whether the loan's enough to save it.
The nation's No. 7 airline -- and largest to tap the $10 billion in loan guarantees set aside by Congress in the wake of Sept. 11, said its net loss was $248 million, or $3.64 a share, for the quarter ended June 30.
That compares with a net loss of $24 million, or 36 cents a share a year earlier.
Wall Street analysts were predicting a loss ranging from $2.63 to $4.38 a share, according to Thomson Financial/First Call. Operating revenue in the second quarter fell to $1.9 billion from $2.5 billion a year earlier.
In light of the company's difficulties, it canceled its second-quarter conference call.
"US Airways' continuing losses are an enormous disappointment to all of us, and it is imperative that we move quickly to reverse this trend," said President and CEO Dave Siegel. "Our existing cost structure cannot support the continuing weak economic conditions, intense competition from low-cost, low-fare carriers in the Northeast, and significant drop in business travel, where we still find some corporate customers resorting to other means of transportation or not traveling at all."
Siegel's comments were intended to underscore the urgency of securing federal loan assistance. But the company's condition is so weak that the government may decide that US Airways can't be saved, even with government help.
US Airways applied in June with the Air Transportation Stabilization Board for a $900 million loan guarantee. The program was set up to help carriers that were devastated after the Sept. 11 attacks. The company wants the guarantee to back a $1 billion loan that it will use for restructuring.
Earlier this month, the board gave preliminary but unanimous approval, citing the "disciplined and comprehensive approach that US Airways brought to its restructuring, as reflected in its business plan."
"The Air Transportation Stabilization Board's conditional approval for a federal loan guarantee are key elements of our restructuring plan," Siegel said. "However, the successful negotiation of concessions from our remaining unions, and our lessors, lenders and vendors."
The airline has a preliminary commitment for $465 million a year in wage concessions from its pilots and $77 million annually from its flight attendants.
US Air's situation is clearly dire, as its bleeds $1 million in cash each day it flies. As of June 30, its cash stood at $602 million. Its total debt outstanding, including capital lease obligations, was $3.8 billion. US Airways is in default on several debt obligations, which could force it to file for bankruptcy reorganization.
"As we enter the seasonally weaker second half of the year, the expected pressure on our cash position highlights the need to finalize our restructuring efforts and secure the ATSB loan," said Neal Cohen, US Airways executive vice president and chief financial officer.
Still, the ATSB has been extremely tough on airlines seeking loan guarantees. On June 3, Frontier Flying Service's request for a $7.2 million loan was rejected when the ATSB determined the company would not be able to repay the loan. Three days earlier, Vanguard Airlines' application for a $15 million loan guarantee was rejected for similar reasons.
Only one airline,
-- has received a loan guarantee from the federal government, and even that wasn't a slam dunk. In a 2-to-1 vote, the ATSB approved the company's $380 million loan guarantee, but imposed harsh restrictions, including the option to purchase up to one-third of the carrier.