US Air suffers heavy losses; Operation problems, fuel costs, hurricane spur $85 million drop; Airlines


US Airways Group Inc. reported a third-quarter loss of $85 million yesterday, worse than analysts expected from the troubled airline.

The Arlington, Va.-based carrier had warned investors of a "significant loss" for the three months ending Sept. 30 because of operational difficulties and scheduling delays, but the problems were amplified by rising fuel costs and Hurricane Floyd.

The net loss of $1.19 per share compares with a profit of $1.51 per share in the third quarter of 1998, when the company earned $142 million. Operating revenue was $2.1 billion in the quarter, down from $2.2 billion last year, while quarterly expenses rose from $1.9 billion to $2.2 billion.

"These results are clearly unacceptable," said Rakesh Gangwal, US Airways' president and chief executive officer.

Said Chairman Stephen M. Wolf: "The third-quarter loss is an immense disappointment to all of us."

Investors also were disappointed, dropping the price of US Airways' shares $1.8125, or 6.5 percent, yesterday to a closing price of $26.3125 on the New York Stock Exchange.

While company officials have suggested that US Airways' troubles might persist into the fourth quarter, they say most of the carrier's profit-draining problems have been resolved.

The airline reached agreement last month with the union representing its mechanics, ending negotiations that the company said contributed to flight delays and cancellations.

Contract talks with the airline's flight attendants are continuing.

US Airways also has struggled to integrate a new computer system and expand its subsidiary airline, MetroJet.

But US Airways officials said most of the company's third-quarter loss was caused by flight cancellations, eating into revenue without offering any proportionate drop in expenses.

The company said four factors contributed to the grounding of aircraft:

Hurricane Floyd, which forced the airline to cancel about 1,500 flights in September.

An "inordinate amount" of air traffic control delays and cancellations.

Crew shortages caused by falling behind in its pilot training program.

Aircraft shortages resulting from delays in aircraft returning from regularly scheduled maintenance.

Also, fuel prices have risen as much as 50 percent in the past several months, eroding profits for all of the country's air carriers.

Analysts expect US Airways' performance to improve before the end of the year, but most do not expect it to be profitable before next year.

"We had one of the most pessimistic numbers on the street, and they came in even under that," said Helane Becker, an analyst for Buckingham Research Group who predicted that the company would lose 50 cents a share in the third quarter.

"It's disappointing," she said of the report released yesterday. "I don't think they have everything straightened out yet."

US Airways is the second-largest airline at Baltimore-Washington International Airport, behind Dallas-based Southwest Airlines.

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