USAir posts a loss for 3rd quarter Low-cost rivals, effects of layoffs are blamed


NEW YORK -- USAir said yesterday that it lost $177.6 million in the July-September quarter, a result of layoffs and sharp competition from lower-cost airlines.

The Arlington, Va.-based airline, which employs 2,400 at Baltimore-Washington International and accounts for nearly 60 percent of the airport's 27,000 daily passengers, said its revenue rose 2.8 percent, to $1.75 billion, from $1.70 billion a year earlier.

The loss included a one-time charge of $67.2 million to pay for 2,500 layoffs that go into effect Nov. 1. Without the one-time items, USAir's loss would have narrowed to $43.3 million, from $60.8 million a year ago.

"While revenues and yields have improved from last year, our results are disappointing, especially in light of more positive results reported for the first two quarters of this year," said Seth E. Schofield, chairman and chief executive officer of USAir Group Inc.

Analysts agreed that the results were gloomy -- especially because the spring and summer are typically the best time of year for airlines -- and predicted that among the nation's largest airlines, USAir would be the lone money-loser in the third quarter. But because the company had previously broken the news to Wall Street, the stock market was unfazed, and the company's stock closed yesterday unchanged at $13.75.

USAir earlier this month announced the layoffs, which it said will save it $200 million annually. Other indications of trouble include a filing last month with the Securities and Exchange Commission that said low revenue had put the company in danger of defaulting on a $600 million bank credit agreement.

Although the airline industry has been in a tailspin for several years, most industry analysts agree that USAir's troubles are especially severe. Andrew Leinoff, an analyst with Duff & Phelps in Alexandria, said the company has been unable to cut costs.

"Personnel costs are high, commissions to travel agents are high, aircraft maintenance is high," Mr. Leinoff said. "All in all, expenses are just too high."

Personnel, for example, consumed 39.5 percent of USAir's revenue, Mr. Leinoff said, compared with 28 percent for its new competitor at BWI, Southwest Airlines. "That's a huge difference," he said.

After Southwest's entry into BWI, USAir and other carriers had to cut fares to compete with the Texas-based airline, which is expected to make inroads into USAir's market.

USAir's layoffs, which are intended to reverse this cost disadvantage, will fall heavily on hubs like BWI, officials have said.

The layoffs will be spread among mechanics, flight attendants, customer-service representatives and office workers, but USAir has not said which hubs will be hit the hardest.

Bolstered by its recent successes at BWI, Southwest announced that its net income for the third quarter rose 63.4 percent, to $43.9 million, while revenue increased 23.9 percent, to $554.4 million.

And yesterday, AMR Corp., the parent of American Airlines, reported that it earned $118 million in the third quarter, compared with a $100 million loss last year.

By dialing Sunfax at (410) 332-6123 and entering the code 5656, readers can receive, by fax, a free copy of the USAir earnings report.

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