US Airways ( UAIR) announced a surprising second-quarter profit, but continued to warn employees that the airline's long-term prospects were in doubt unless they cut their pay again.

US Airways managed a second-quarter net profit of $34 million, or 59 cents a share, a big improvement from the year-ago quarter's profit of $26 million, or 25 cents a share. Results are an even bigger improvement over 2003 when a $214 million government reimbursement for security fees is taken out. The two Wall Street analysts covering the company expected it to lose $1.34 per share, on average, in the second quarter.

In reaction to the upside surprise, shares of the carrier rose 17 cents, or 7.1%, to $2.55.

Revenue came in at $1.96 billion, up 10.1% from the $1.78 billion it had a year ago, with demand for flights outpacing supply. The company said traffic, a demand metric measured in revenue passenger miles, rose 11.8%, while it increased capacity, a supply metric measured in available passenger miles, rose 6.2%. As a result, US Airways filled 78.9% of its seats in the second quarter, a quarterly record and a 3.5 percentage-point gain from last year.

But while the formerly bankrupt airline, which is looking for another round of concessions from employees to compete against low-cost carriers, posted a small profit, an increase in sales and filled a record number of seats, management warned that its business is still broken.

"While we reported a small profit, we should have done significantly better in the second quarter, which is traditionally our best. Absent an immediate and dramatic reduction in costs, this nominal profit is insufficient, and we will likely be faced with additional second-half losses," said Bruce Lakefield, US Airways president and CEO. "These results reaffirm what we have told our labor leaders -- that we must change course now."

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