US Airways yesterday said it earned a second-quarter profit of $305 million, its second straight quarter in the black, and its chief executive officer made more noise about participating in yet another merger.
The twice-bankrupt airline, which merged last fall with America West Airlines, is now on track to record a profit for the third quarter and the full year. If that prediction holds up, it would be US Airways' first full year in the black since 1999.
Once thought to be on the brink of failure, US Airways is now one of the industry's hot performers, its stock is up almost 30 percent this year, even though its shares dropped 6 percent yesterday to $47.99 as the airline beat analysts' expectations but not by that much.
The airline, still Pittsburgh's largest despite cutting hundreds of flights since 9/11, has been able to withstand rising fuel prices by raising its fares, thereby boosting revenue.
Several other carriers have taken advantage of the same trend; American Airlines, Southwest Airlines, Continental Airlines JetBlue Airways, AirTran Holdings and Alaska Air all posted profits for the second quarter despite rising fuel -- a collective performance that may mark the comeback of a beleaguered industry that lost $40 billion in the years following the 9/11 attacks.
Across the industry, there have been six fare increases this year on top of 12 in 2005. Airfares were up an average 10.3 percent in the first quarter of 2006 vs. the comparable year-ago period, according to the U.S. Department of Transportation. Local fares, however, have been dropping at Pittsburgh International Airport thanks to the easing of US Airways' local monopoly and recent incursions by low-fare competitors Southwest and JetBlue.
No airline, it can be argued, is flying higher than US Airways.
A year ago, US Airways and America West lost a combined $46 million. This year, US Airways' second-quarter profit was the second highest in the industry -- Southwest earned $333 million -- and the highest for US Airways since the second quarter of 1998.
The airline's earnings already are beyond the estimates given when the airline merged with America West last year -- one internal model showed $150 million for the full year. US Airways is well past that mark at the year's halfway point.
"No one is seeing anything close to the improvements we have seen," Mr. Parker said in a conference call yesterday with analysts and reporters. The results prove, he said, "what tremendous value can be created through consolidation."
For that reason, Mr. Parker remains interested in a possible combination with another bankrupt carrier; both Delta Air Lines and Northwest Airlines are in that camp.
"It would be negligent for us to ignore the fact that there are two airlines still in bankruptcy that will have to emerge at some point." When that happens, Mr. Parker expects to explore the possibility of a merger if it is part of the emerging carrier's strategy. "We would have to be there or we wouldn't be doing our jobs."
Asked if Mr. Parker was actively engaged in any conversations with rival airlines, the chief executive stumbled a bit and said: "I probably should not comment on that."
In any case, the No. 1 priority for Mr. Parker is to fully integrate the operations of US Airways and America West -- a process that will not be complete until 2007.
The biggest hurdles still remaining are contracts covering all labor groups. The pilots, the flight attendants and mechanics are still without a new contract.
And the airline's solid performance in 2006 has some union leaders hungry for payback of past sacrifices -- employees gave back more than $1 billion in wages and benefits during the last bankruptcy, which ended in 2005. "We have been patient for some time, but with each instance of greater fiscal success, this pilot group expects commensurate returns," said US Airways pilots chairman Jack Stephan.
"We are demanding contractual improvements in all areas of our bankruptcy-era contract which will reflect our investment in this corporation,'' he said.
"We have in no uncertain terms told management that our pilots will only ratify an agreement that recognizes our investment in the airline and rewards pilots for their sacrifices. Bankruptcy-era bargaining tactics need to end."
Copyright 2005 LexisNexis, a division of Reed Elsevier Inc. All rights reserved.
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