ARLINGTON, Va., July 28, 2003—USÊAirways Group, Inc. today reported net income of $13 million for the second quarter 2003. This compares to a net loss of $248 million for the second quarter 2002.
Pre-tax income for the second quarter 2003 was $26 million compared to a pre-tax loss of $259 million in the second quarter of 2002. Results for the current quarter reflect a number of unusual items, described in Note 4 below, including a $214 million cash payment from the Transportation Security Administration (TSA) under the 2003 Emergency Wartime Supplemental Appropriations Act.
Excluding the unusual items described in Note 4, the loss before income taxes was $154 million for the second quarter of 2003, compared to a pre-tax loss of $250 million in the second quarter of last year. This improvement of $96 million year-over-year includes $92 million of non-cash stock-based compensation expenses related to stock granted to employees covered by collective bargaining agreements in connection with the company’s emergence from bankruptcy on March 31, 2003. If excluding this stock charge, year-over-year improvement is $188 million. The relative improvement reflects the cost reductions put in place during the Chapter 11 reorganization, partially offset by lower passenger revenues and higher fuel costs.
“These results echo what virtually every major network carrier experienced in the second quarter through a combination of a weak economy and the impact of the Iraqi War,” said David N. Siegel, USÊAirways president and chief executive officer. “Nevertheless, we have made great strides in executing the key elements of our restructuring plan related to increasing revenue, reducing costs, and improving liquidity, all against the backdrop of a challenging industry environment.”
The second quarter 2003 USÊAirways mainline Revenue per Available Seat Mile (RASM) of 11.08 cents was up 1.1 percent compared to the second quarter of 2002. USÊAirways’ mainline Passenger Revenue per Available Seat Mile (PRASM) of 9.88 cents was up 0.4 percent year-over-year for the quarter, while the rest of the industry* was up 0.1 percent. USÊAirways outpaced the industry* in year-over-year PRASM performance by 0.3 percentage points. This was driven by a 1.9 percentage point superior performance in the domestic market, partially offset by weaker transatlantic routes. While industry revenue performance remains weak, for the quarter, USÊAirways regained a domestic PRASM premium relative to the industry*, adjusted for length of haul, for the first time since the fourth quarter of 1999.
“As the industry began to recover from the impact of the Iraqi War, passenger loads built steadily throughout the quarter and June’s load factor was a record for any month in the history of the company,” said B. Ben Baldanza, USÊAirways senior vice president of marketing and planning. “Our initiatives to strengthen revenue are clearly enhancing our performance relative to the industry, but the industry revenue environment as a whole continues to be weak as the industry ‘buys’ its load factor with lower prices.”
Available Seat Miles (ASMs) declined 11.0 percent, while Revenue Passenger Miles (RPMs) for the quarter declined 10.5 percent, resulting in a passenger load factor of 75.4 percent, a year-over-year increase of 0.3 percentage points. For the second quarter, USÊAirways Inc.‘s mainline operations carried 10.9 million passengers, a decline of 16.4 percent compared to the same period of 2002. Thesecond quarter 2003 yield of 13.10 cents was down 0.1 percent from the same period in 2002.
The mainline Cost per Available Seat Mile (CASM), excluding fuel and unusual items, of 10.75 cents for the quarter decreased 2.2 percent versus the same period of 2002. Mainline CASM includes $92 million or 0.71 cents per ASM of stock-based compensation related to stock grants given to USÊAirways’ organized labor groups. Absent this stock charge, year-over-year CASM, excluding fuel and unusual items, declined 8.6 percent. CASM, excluding fuel and unusual items, provides management and investors the ability to measure and monitor USÊAirways’ performance absent the significant price volatility of fuel and is more indicative of the company’s operating performance.
For the quarter, USÊAirways continued to demonstrate strong operating reliability. The carrier’s mainline departure completion factor for the quarter was 99.6 percent, and its on-time arrival performance averaged 81 percent for the three-month period. Along with a record load factor for the month of June, self-service check-in kiosk usage by customers is now at 54 percent of all eligible electronic ticketed passengers. USÊAirways now has 435 kiosks located in 81 airports systemwide and has implemented curbside boarding pass capabilities at its hubs in Charlotte, Philadelphia, and Pittsburgh, with additional locations to be added soon.
The cost of aviation fuel per gallon, including taxes, for the period was 84.9 cents, up 22.5 percent from the same period in 2002.
USÊAirways Group ended the quarter with total restricted and unrestricted cash of $2.0 billion, including $1.42 billion in unrestricted cash, cash equivalents and short-term investments. This represents a $157 million increase in unrestricted cash during the quarter.
“We are encouraged by the fact that our liquidity position relative to the industry remains superior despite significant debt issuance and asset sales by other airlines in the second quarter,” said Neal S. Cohen, USÊAirways executive vice president of finance and chief financial officer. “The industry outlook, however, continues to remain uncertain and we must remain focused on reducing costs in this revenue environment.”
Highlights from the second quarter include:
* Adjusted for length of haul, USÊAirways achieved PRASM at 100.4 percent of industry* average, its first quarterly premium since 1999. * Through USÊAirways’ marketing alliance with United Airlines, customers now can fly on 2,400 combined codeshare flights to about 120 cities. USÊAirways Dividend Miles members and United Mileage Plus members also can reserve and redeem award travel on either carrier. * USÊAirways signed a Memorandum of Understanding with Lufthansa Airlines, covering the establishment of a long-term strategic alliance, with implementation and codesharing to begin in October 2003.
* USÊAirways was invited to join the Star Alliance, the largest airline alliance in the world. Implementation is scheduled to begin in early 2004, and will bring customers better service with each of the 16 member airlines through check-in, reciprocal frequent flyer benefits and airport lounge access, as well as codesharing relationships with certain of the carriers.
* USÊAirways placed the industry’s largest-ever firm order for regional jet aircraft from Bombardier Aerospace of Canada and Embraer of Brazil. The first aircraft delivery is scheduled for October 2003. USÊAirways’ MidAtlantic Airways division will be the launch customer for the Embraer 170/175 series of aircraft.
In partnership with the city of Philadelphia, USÊAirways opened the most modern international gateway airport in the U.S., and also inaugurated new European service between Philadelphia and both Shannon and Dublin, Ireland.
USÊAirways announced new service this quarter to San Jose, Costa Rica, and Mexico City, both scheduled to start in the fall of 2003. The airline also announced nearly a dozen new routes or additional frequencies to the Caribbean for the upcoming winter travel season. USÊAirways and USÊAirways Express along with the GoCaribbean Network partners now provide access to over 30 destinations in the Caribbean and Latin America.
USÊAirways enhanced usairways.com, with the addition of electronic upgrades, flight check-in, ticket re-issues, and Dividend Miles award redemption.
USÊAirways was the first major U.S. airline to roll out a buy-on-board meal service system wide. The In-flight Café meal service is on 324 domestic flights of 700 miles or more, representing 25.4 percent of all daily mainline departures.