US Airways Group, Inc. today reported a net loss of $248 million for the second quarter of 2002 on operating revenues of $1.9 billion, compared to a net loss of $24 million on operating revenues of $2.5 billion for the same period in 2001. On a diluted per-share basis, the net loss in the second quarter amounted to $3.64 versus a net loss of $0.36 last year.
“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 US Airways President and Chief Executive Officer 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.
“Our employees, nevertheless, are to be commended for their ongoing hard work in delivering a high-quality product to the traveling public. Their efforts, especially in this difficult environment, are praiseworthy and have resulted in our company receiving high marks in consumer satisfaction ratings,” said Siegel.
“The agreements reached to date with the majority of our employee union leaderships, which are symbolic of their commitment to share in the sacrifices necessary to restore our company`s financial health, and the Air Transportation Stabilization Board`s (ATSB) 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 is necessary to complete the restructuring plan. Much hard work remains ahead, and we are committed to reorganizing US Airways so that we can become a strong, vibrant, and competitive airline.”
Operating revenues for the second quarter were $1.9 billion, down 23.7 percent from the second quarter of 2001. Operating expenses were $2.1 billion, down 16.0 percent. Pre-tax loss of $259 million for the 2002 second quarter compared to a pre-tax loss of $30 million last year.
US Airways Group`s cash position on June 30, 2002, was $602 million while the company`s operating cash flow was a negative $1 million per day during the second quarter. Total balance sheet debt outstanding, including capital lease obligations, on June 30, 2002, was $3.8 billion. “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.
As a result of previously announced payment deferrals related to aircraft lessors and lenders targeted by the company to participate in its restructuring plan, the company is currently in default on certain public and private debt obligations. The company continues to negotiate with these stakeholders in pursuit of its preferred approach of a consensual accord to satisfy the conditions of the government-guaranteed loan. These defaults, which could eventually lead to cross defaults with other lessors, vendors and creditors, if not rescinded, and, potentially, acceleration of those obligations, could result in the company seeking to implement its restructuring plan through a filing for Chapter 11 reorganization of the U.S. Bankruptcy Code.
US Airways has shown significant improvement in nearly all operations quality measurements. Year-to-date, the company`s completion factor was up 1.2 percentage points year over year. Departure and arrival performances have improved in four of the six months of 2002, while the completion factor has improved in each of the six months.
Second quarter available seat miles for US Airways, Inc. declined 20.0 percent year over year, reflecting US Airways` capacity reductions following the events of September 11 and the current economic climate. US Airways carried 13.0 million passengers during the 2002 second quarter, a decline of 21.7 percent compared to the 16.6 million passengers carried during the same period the previous year. Revenue passenger miles declined 18.6 percent compared to the second quarter 2001, while the passenger load factor increased by 1.3 percentage points to 75.1 percent. Passenger revenue per available seat mile was 9.84 cents for the second quarter 2002, a decrease of 10.4 percent compared to the same period in 2001, while the cost per available seat mile was 12.25 cents, an increase of 1.0 percent year-over-year (5.1 percent excluding fuel).
Operating revenues for the first half of the year 2002 were $3.6 billion, down 23.7 percent over the first six months of 2001, while operating expenses of $4.2 billion were down by 15.9 percent. The operating loss for the first half of the year was $545 million, compared to an operating loss of $208 million for the first six months of 2001. On a diluted per-share basis, the net loss for the first six months of 2002 of $7.60 compares to a net loss of $2.90 in 2001. Results for 2002 include a $17 million credit related to a change in accounting policy for engine maintenance at one of the company`s Express subsidiaries. Results for 2001 included a $22 million ($14 million after-tax) impairment charge related to the early retirement of certain Boeing 737-200 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.
For the first half of the year 2002, US Airways, Inc. carried 24.8 million passengers, a decline of 19.4 percent from the first six months of 2001. Revenue passenger miles for the period declined 17.4 percent while available seat miles declined 19.5 percent, resulting in a passenger load factor of 71.9 percent, a year-over-year increase of 1.8 percentage points. The yield of 13.36 cents for the first half of 2002 was down 12.9 percent from the same period in 2001, while passenger revenue per available seat mile of 9.60 cents was down 10.7 percent. Cost per available seat mile of 12.57 cents for the first half of the year increased 1.0 percent versus the same period of 2001. The cost of aviation fuel per gallon for the period was 68.80 cents, down 24.3 percent from 2001.
In light of the ongoing restructuring efforts, US Airways will not hold a second quarter 2002 conference call or Web cast.
Certain of the information discussed above or enclosed herewith should be considered “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. A number of risks and uncertainties exist, which could cause the actual results to differ materially from the results projected in such forward-looking statements. Additional information concerning the factors, which could cause actual results to differ materially from the forward-looking statements, are contained in US Airways` periodic filings with the Securities and Exchange Commission. US Airways assumes no obligation to update such estimates to reflect actual results, changes in assumptions or changes in other factors affecting such estimates.