Submit Press release  Ě eTN Team ·  Advertising  ·  eTN Awards  - Worldtourism Events    

High fuel costs sap US Airways

Airline loses $567M in 2nd quarter, will continue cutting seats

Jul 23, 2008

Tempe-based US Airways took in more revenue during the quarter that ended June 30 than in the same quarter a year ago, but the company lost a whopping $567 million because of soaring jet fuel costs.

That's compared with a profit of $263 million in the second quarter of 2007.

Revenue of $3.26 billion was up more than 3 percent from a year earlier.

So are passengers and future bookings, said Scott Kirby, US Airways president.

But the price of oil, which more than doubled from a year ago, has eaten up the profits and then some.

The hometown carrier increased its plans to cut flights and jobs to stem the bottom-line bleed for the rest of the year and 2009.

The company previously announced plans to cut "available seats" in fall either by grounding flights or flying smaller planes.

On Tuesday, Kirby boosted the estimate of "available seats" to be slashed on domestic flights to as much as 10 percent.

A chunk of that will happen at the hometown hub. About 10 percent of US Airways capacity at Phoenix Sky Harbor International Airport will get chopped after the busy summer travel season, Kirby said.

Along with the additional flights to be dumped, more jobs will get slashed. As many as 2,000 positions will be scrapped, up from the 1,700 originally estimated, Kirby said.

About 600 management jobs were already dumped, the majority of them in Tempe, and at least half of those through attrition and buyouts, he said.

The rest of the job cuts will happen in fall when the flights are dropped, said Robert Isom, chief operating officer.

With capacity cuts announced by US Airways and other airlines and the new business model that charges fees for previously free services, which nearly all airlines have adapted, could cause the industry to turn a profit in 2009, Parker said.

A la carte pricing has been so successful in raising US Airways revenue, that the company is increasing its expected annual take from charging for checked bags and soft drinks by $100 million to $500 million, Parker said.

The combo of top management's optimism and tumbling oil prices apparently sat well with investors, who boosted US Airways shares to $4.27, a 59 percent single-day jump, despite the quarterly loss.

Excluding one-time charges, US Airways still would have lost $101 million last quarter because of fuel expenses, Parker said.

Airline loses $567M in 2nd quarter, will continue cutting seats

Premium Partners