ARLINGTON, Va., April 18, 2002—US Airways Group today reported a net loss of $269 million for the first quarter of 2002 on revenues of $1.7 billion, compared to a net loss of $171 million on revenues of $2.2 billion for the same period in 2001. On a diluted per-share basis, the net loss in the first quarter amounted to $3.97 versus $2.55 last year.
Excluding accounting changes in both years and an unusual item in 2001, the loss for the first quarter was $286 million, or $4.22 per diluted share, compared to $164 million, or $2.45 per diluted share, for the first quarter of 2001.
“While the industry finds itself in extraordinary times, there is significant long-term potential at US Airways, with its strong East Coast franchise, superior product and dedicated employees who produce an outstanding operation. However, the results we are announcing today are not only extremely disappointing, they are unacceptable,” said US Airways President and CEO David Siegel.
“Our losses reflect a weak economic environment, the drop in travel, especially by business customers, following the events of last September, and increased competition by low-cost carriers and regional jet operators. To be successful, US Airways must restructure to lower its unit costs, optimize the revenue potential of its East Coast presence and improve its overall balance sheet position,” Siegel said.
“To implement our restructuring plan, it is likely US Airways will file an application with the federal Air Transportation Stabilization Board for a government-guaranteed loan,” Siegel said. The company understands that if such an application is made, it must be formally filed with the ATSB on or before June 28.
“Recognizing the significant challenges US Airways faces, the company will be asking all key stakeholders to participate in this restructuring process,” he said.
Operating revenues for the quarter were $1.7 billion, down 23.7 percent from the first quarter of 2001. Operating expenses were $2.1 billion, down 15.0 percent, excluding the unusual item described below. Pre-tax loss of $435 million for the 2002 first quarter compared to a pre-tax loss of $248 million last year excluding the unusual item.
Results for the first quarter include a tax benefit of $149 million. Although US Airways had recorded a full valuation allowance in 2001, as a result of recent legislation, the company has now realized additional tax benefits. The first quarter 2002 results also include a $17 million credit related to a change in accounting policy for engine maintenance at one of the Company’s Express subsidiaries. The first quarter of 2001 included a $22 million ($14 million after-tax) impairment charge related to the early retirement of certain B737-200 aircraft and a $7 million after-tax credit resulting from US Airways’ accounting change to adopt SFAS 133 - Accounting for Derivative Instruments and Hedging Activities.
Total available seat miles declined 18.9 percent year over year, reflecting US Airways’ capacity reductions following the events of last September. US Airways carried 11.8 million passengers in the 2002 first quarter, a decline of 16.7 percent compared to the 14.2 million carried the previous year. Revenue passenger miles declined 16.0 percent year over year, while the passenger load factor increased by 2.3 percentage points to 68.5 percent versus 66.2 percent last year. Passenger revenue per available seat mile was 9.35 cents, a decrease of 11.0 percent compared to 2001, while the cost per available seat mile was 12.91 cents, an increase of 1.0 percent over last year. Aviation fuel cost was 68.31 cents per gallon, a decrease of 27.3 percent compared to 2001.
US Airways Group’s cash position as of March 31, 2002, was $561 million. “We view the company’s cash position as stable,” said Neal Cohen, US Airways executive vice president and chief financial officer. “We are entering a period of the year when we expect cash to accumulate, including the one-time benefit of a tax refund.”
Recognition by the Airline Quality Rating, a national study conducted by two mid-western universities, as the top-ranked network carrier in 2001 and second overall on the key performance measurements of on-time arrivals, baggage handling, customer complaints and denied boardings - Significant improvements in US Airways’ operating performance in the 2002 first quarter when compared to the previous year. Specifically, on-time arrivals and completion factor were up, while cancellations were down significantly - A new senior management team in the key areas of finance, marketing and planning, labor and the general counsel’s office, led by new President and CEO David Siegel - Enhancements in customer service, including more security checkpoint lanes and electronic check-in kiosks at key airports, and a new regional aircraft terminal at the Charlotte hub - Significant structural changes to the network since late last year. The MetroJet brand was eliminated, as was most other non-hub flying. Most fleet decisions made then have been implemented with the retirement of the older, less fuel-efficient DC-9, MD-80, F-100 and Boeing 737-200 fleets and the subsequent sale of 97 of these surplus aircraft - Restoration of service at Ronald Reagan Washington National Airport to 76 percent of its pre-September 11 level by the end of the first quarter and to 83 percent in June - Resumption of most transatlantic service, where US Airways had the largest year-over-year increase in load factor among U.S. flag carriers in the first quarter, up 7.2 percentage points to 74.5 percent.
US Airways will conduct its first quarter 2002 conference call this afternoon at 1 p.m., Eastern time. Interested parties are invited to listen as senior officers of the company discuss the earnings results with analysts from the investment community.