US Airways 1Q Profit Up 2 Percent

April 27, 2007
Earnings totaled $66 million, or 70 cents per share, for the January-March period compared with $65 million, or 76 cents per share, in the first quarter of 2006.

PHOENIX -- US Airways Group Inc. on Thursday said profit edged up 2 percent in the first quarter on modest revenue growth, and the airline company backed its forecast for a profitable year.

But Chief Executive Doug Parker told analysts on a conference call that revenue growth for the Tempe, Ariz.-based company would be flat and competition was keeping airlines from passing on higher fuel prices to passengers.

"You're no longer able to see what you've seen in the last couple years - increases in revenues. And this comes at a time when fuels costs are increasing," Parker said. "What you're seeing is that it is flattening, making it more difficult to raise prices as costs go up."

US Airways shares fell $3.32, or 7.8 percent, to close at $39.33 on the New York Stock Exchange.

The airline also announced Thursday that it has begun hiring 1,000 new workers that it plans to have in place by summer to boost its customer service.

Some will be used to create new customer service centers in major East Coast airports, including Philadelphia, Charlotte, Boston and Reagan National Airport in Washington. They will rebook passengers whose flights have been delayed so new arrangements are ready when they land at a hub airport.

Others will fill open slots. Parker declined to say how many of the jobs were actually new.

Other aspects of the customer service initiative include revamping cabins on planes used for international flights, cutting some rebooking fees for frequent fliers, and replacing 600 self-service kiosks in East Coast airports with more modern terminals that work better with the new reservation system.

Earnings totaled $66 million, or 70 cents per share, for the January-March period compared with $65 million, or 76 cents per share, in the first quarter of 2006. Excluding one-time credits and other items, earnings per share would have totaled 37 cents versus 5 cents a year ago.

Revenue grew 4 percent to $2.73 billion from $2.63 billion a year earlier.

Analysts polled by Thomson Financial, on average, forecast earnings of 12 cents per share and revenue of $2.74 billion. Those estimates typically exclude one-time items.

Parker called the quarter "extremely difficult," citing bad weather which closed the airline's Philadelphia hub temporarily and disrupted operations across the Northeast and a switch to a single reservation system which disrupted service.

He said fuel costs are expected to exceed the company's budget by $300 million in 2007. But he still expects a profitable second quarter and full year.

"In today's supply and demand climate, we can't pass those prices on ... so those costs fall to the bottom line," Parker said.

US Airways Group, formed by the September 2005 combination of bankrupt US Airways and America West Airlines, made an unsuccessful takeover bid for Delta Air Lines Inc. earlier this year but dropped the offer amid resistance from Delta and its creditors.


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