USAir Group Inc. said yesterday that its third-quarter earnings jumped 57 percent as rising traffic, particularly in the international arena, offset the impact of higher fuel costs.
The company's net income rose to $67.7 million, or 69 cents a share, from $43.1 million, or 35 cents, after payment of employee profit-sharing obligations. Revenues increased from $1.9 billion in 1995 to $2.1 billion, setting a record for the best third quarter in the company's history.
The upbeat financial news reflects a continued strong rebound in the nation's airline industry as it reduces the number of planes it operates while increasing the number of passengers. American Airlines last week reported a 21 percent rise in earnings, and other carriers are expected to release improved results shortly.
"While the industry generally continues to benefit from positive economic conditions, our employees also have done much to begin across-the-board improvements in product quality," USAir Chairman Stephen M. Wolf said in a statement released yesterday.
After losing $2 billion between 1989 and 1995, the Arlington, Va.-based carrier, the largest at BWI, has been profitable five out of the last six quarters. But Wolf reiterated the need to tackle "long-term challenges facing the company."
USAir, which has the highest costs in the industry, faces serious competition from low-cost, discount carriers, such as Southwest. USAir is seeking cuts from its labor unions to permit the carrier to launch a low-cost express service.
Despite the latest quarterly results, analysts remained cautious about USAir, saying the talks with labor have produced no concrete results.
"They can continue to make a profit, but obviously it's not being maximized with their cost structure staying so heavy," Alex C. Hart, an airline analyst for Ferris, Baker Watts Inc. in Baltimore, said yesterday.
Hart also warned about being overly optimistic about the airline industry. "Overall, the industry is out of the woods for the time being, but it doesn't take much to bring problems back," he said. "A consumer-led recession would not be good news for the airlines."
The airline said yesterday that traffic was up 6.3 percent overall for the quarter, with a 56.6 percent increase in international passengers sparked by new service between Philadelphia and Munich, and Rome and Madrid.
Like other airlines, however, USAir experienced a significant jump in fuel costs, up 19.6 percent in the third quarter, with the average weekly price rising from 52.84 cents per gallon in third quarter of 1995 to 63.21 cents in the third quarter of 1996. Fuel is one of the airline's three major costs.
The results yesterday included a $41.1 million payment to workers covering an agreement the company made when workers took pay cuts in 1992 and 1993 in exchange for shares of the profit once the company started making money.
The airline said it expects to pay roughly $122 million in profit-sharing obligations by the end of 1996, completing its obligations under the employee arrangement.
The quarterly results were affected negatively by a $9.8 million payment to settle a suit filed by travel agents in connection with a cap on commissions imposed by most major airlines last year.
USAir stock closed yesterday at $16.625, up 25 cents, on the New York Stock Exchange.
Pub Date: 10/22/96