America West’s losses to continue

Wednesday, June 6, 2001 | 11:04 a.m.

America West Airlines' announcement of a second-quarter charge prompted an analyst to downgrade the stock of the airline -- the second-biggest serving McCarran International Airport and flying gamblers in for Las Vegas casinos.

James Higgins, an airline analyst with Credit Suisse First Boston, downgraded the stock from "buy" to "hold" after America West's parent company announced Tuesday that it would take a $30 million charge, $23 million of it in cash.

Higgins said he already had forecast a loss of 15 cents a share before the announcement of the charge. America West will report its second-quarter earnings in mid-July.

America West, which reported a loss of $12.8 million, 38 cents a share, on record revenues of $587 million in its first quarter, filed a report with the Securities and Exchange Commission Tuesday explaining the charge.

In the report, the airline explained the charge is the result of the early return of two Boeing 737 jets and the non-renewal of five other 737 leases and the reduction of jobs in May, a strategy the company previously announced.

The company is retooling its fleet and will have a net gain of five aircraft, from 142 to 147 from the end of June through December 2002 after acquiring a total of 14 planes from Airbus Industrie.

In addition, the airline reported its second quarter costs are expected to increase 6 percent to 7 percent over last year.

Although not reported in the SEC filing, America West will soon be facing tough contract talks with its pilots, experts say.

A survey of analysts by Thomson/First Call showed five with "hold" recommendations on the stock, three with "buy" ratings and one each with no opinion and a "strong buy" recommendation.

"This is not a fall-off-the-face-of-the-Earth situation for America West, but I don't have a lot of confidence in the upside," Higgins said.

He said he had been considering the downgrade even before the announcement of the charge due to several factors in the airline's operating performance. He said he was concerned about the amount of cash included in the charge.

"They're planning $23 million cash out of $30 million and this is not a company that is swimming in liquidity," Higgins said. "And, if Carl Icahn gets in bed with National Airlines, that can't be good for America West."

Icahn, a billionaire financier with several Las Vegas ties, has made an offer to invest in Las Vegas-based National, which is operating under Chapter 11 bankruptcy protection.

America West, which operates a hub from Las Vegas' McCarran International Airport and has about 79 flights a day from Las Vegas, competes with National on several routes.

This morning, America West's stock price was down 17 cents a share to $10.17 from Tuesday's closing price.