US Airways Will Report Loss, Cut Capacity

Jan. 8 — US Airways said yesterday that it would report a loss for 2008 and cut more capacity — flights and seats — this year to deal with weaker travel demand in a depressed economy.

Philadelphia's largest airline, which shuttles two-thirds of passengers at Philadelphia International Airport, did not say how big the loss would be. The carrier, based in Tempe, Ariz., is expected to report full-year and fourth-quarter earnings results Jan. 29.

Wall Street analysts expect a loss of $1.77 billion, according to Thomson Reuters, due largely to fuel-related losses last year in the second and third quarters.

Airlines were hit with skyrocketing fuel prices in the first half of 2008 and, to compensate, reduced the number of seats and flights in the second half of the year. The downsizing helped keep planes full during the holidays.

US Airways Group Inc., like other major airlines, was hurt by hedging some of its jet-fuel purchases last year. Then when fuel prices fell, the airline was locked in by fuel prices it hedged in advance. US Airways said it hedged 60 percent of jet fuel used on mainline flights in the fourth quarter and lost 77 cents a gallon on those hedges, for a hedging loss of $122 million.

In a filing with the U.S. Securities and Exchange Commission, the airline said it would cut domestic mainline capacity 8 percent to 10 percent this year and reduce total mainline capacity, including international travel, 4 percent to 6 percent in 2009.

Although it is too soon to know how the capacity cuts will affect Philadelphia, US Airways spokesman Morgan Durrant said: "We don't have any plans to shrink internationally. Everything that we've had on the books thus far is still there and is still selling."

As a result of the "deteriorating macroeconomic environment," the company said it had reduced its estimate of cargo and other revenue, but continued to expect that fees added during the last year for checked bags, soft drinks, choice seats and ticket changes would generate $400 million to $500 million annually.

In a separate SEC filing, US Airways said its mainline traffic declined 1.1 percent in December to 4.7 billion revenue passenger miles, while capacity fell 6.4 percent, compared with the same month a year ago.

The airline flew 4.66 billion revenue passenger miles last month, down from 4.71 billion in December 2007.

US Airways said its planes were 80.3 percent full, compared with 75.9 percent in December 2007.

"Looking forward," US Airways President Scott Kirby said, "we continue to be cautiously optimistic about the demand environment."

Shares closed up 2 cents, or 0.22 percent, at $9.08 on the New York Stock Exchange.