America West, United post huge losses

Friday, April 19, 2002 | 10:56 a.m.

SUN WIRE REPORTS

America West Holdings Corp., the parent of America West Airlines, today said its first-quarter loss widened as the carrier flew fewer passengers at lower fares and had expenses for restructuring and an accounting change. United Airlines also posted a huge loss while Alaska Airlines said it also lost money in the quarter.

America West's loss expanded to $358.3 million, or $10.62 a share, from $12.8 million, or 38 cents, in the year-earlier quarter. Excluding the expenses, the loss would have been $47.6 million, or $1.41, the eighth-largest U.S. carrier said in a statement.

America West operates a hub in Las Vegas and is the No. 2 carrier serving the gambling, tourism and convention capital.

America West, the only U.S. airline to seek and receive a federal loan guarantee, said sales fell 22 percent to $460.3 million. The carrier's passenger traffic dropped 13 percent and yield, or average fare per mile, slid 9.5 percent. Most U.S. airlines cut flights, fares and jobs after the Sept. 11 terrorist attacks worsened a decline in travel during the recession.

"America West's first-quarter results reflect the severe economic downturn facing the airline industry," Chief Executive Officer W. Douglas Parker said.

The airline had expenses of $272 million because of a change in accounting rules for intangible assets and pretax costs of $60 million for the restructuring, writing down the value of aircraft, losses on the sale of planes and reducing the value of an electronic-commerce investment.

Excluding the expenses, America West was forecast to lose $1.50, the average estimate of analysts polled by Thomson Financial/First Call.

The Phoenix-based company's shares rose 4 cents to $5.30 in early trading today. The stock has gained 51 percent this year.

The airline, which said it would have been forced to file for Chapter 11 bankruptcy protection without the government loan, ended the quarter with $421 million in cash. America West received a $429 million loan in January after getting a $380 million federal guarantee.

Costs per seat for each mile declined 0.8 percent, primarily because of a 43 percent drop in spending for jet fuel. The per- gallon fuel price dropped 32 percent and usage declined 16 percent. Commissions paid to travel agents fell 39 percent and labor costs, the airline's largest expense, dropped 4.3 percent.

America West Holdings also owns Leisure Co., a travel and hotel booking business.

Separately, United Airlines parent UAL Corp. of Chicago today reported a $510 million first-quarter loss, its second-biggest setback ever, reflecting its continued struggles to lure back business travelers in a skittish economy.

The quarterly loss was the seventh in a row for the nation's second-biggest carrier, exceeded only by the $1.16 billion loss in last year's third quarter, when the terrorist attacks threw the airline industry into crisis. Passenger revenues tumbled 28 percent, largely due to schedule cutbacks made last fall.

But results showed some signs of improvement. The operating loss was significantly smaller than expected, more seats were filled than in the fourth quarter and the airline burned through cash at about $5 million a day -- about half its rate in the previous quarter.

The net loss amounted to $9.22 a share, compared with a loss a year earlier of $313 million, or $5.97 a share.

Excluding special items, United said the operating loss was $487 million or $8.81 per share, beating the $10.24 consensus estimate by analysts surveyed by Thomson Financial/First Call.

UAL shares rose 21 cents to $15.05 in morning trading on the New York Stock Exchange, though they retain only half their value from before the Sept. 11 attacks.

Operating revenues were $3.3 billion, down 26 percent from $4.4 billion a year ago.

Chief Executive Officer Jack Creighton said the Elk Grove Village, Ill.-based airline was making progress in its recovery, although he acknowledged that complications with labor contract negotiations have blocked efforts to cut salary and further reduce high operating costs.

The loss was exceeded only by the $575 million lost by AMR Corp., parent of industry leader American Airlines. All major carriers but Southwest Airlines finished in the red for the quarter.

"We certainly are seeing signs that our industry's situation is beginning to improve, but there still is a long way to go," Creighton said.

After posting its five biggest losses ever in the last five quarters, the company said it expects to report a "significant" second-quarter loss in addition to a loss for the full year.

Creighton has scheduled a meeting with the airline's union leaders next week to address the labor situation, chief financial officer Jake Brace said on a conference call.

UAL hasn't decided whether to file for a government loan, Brace said. The deadline for applying is at the end of June.

Special items for the quarter totaled $23 million. A $52 million charge for the closing of business-jet unit Avolar was partly offset by a gain of $29 million related to the sale of Cendant shares.

United has gone into steep descent for a number of reasons since last turning a profit in the second quarter of 2000: its failed merger with U.S. Airways, labor turmoil, high costs, the sinking economy and the attacks, all of which drove off the high-paying business travelers it depends on more than other carriers.

The company lost an industry-record $2.1 billion last year. Analysts expect another whopping loss this year, albeit a smaller one; they are forecasting an operating loss of $20.44 a share, compared with last year's $33.23.

And Alaska Air Group Inc. of Seattle, the parent of Alaska Airlines, had a wider first-quarter loss because ticket prices declined after the Sept. 11 terrorist hijackings.

The loss widened to $34.4 million, or $1.30 a share, from $33.1 million, or $1.25, in the year-earlier period, the company said in a statement. Sales fell 3.7 percent to $496.9 million from $516 million.

Alaska Airlines, the ninth-biggest U.S. carrier, and larger rivals have spurred a gradual recovery in passenger traffic with discounted fares. The lower prices and reduced demand contributed to losses at most major airlines. U.S. carriers may have lost $2.5 billion in the quarter, Deutsche Bank Securities estimated.

Passenger traffic at Alaska Airlines rose 2.8 percent during the quarter, which Chief Executive Officer John Kelly said in the statement was "nothing short of remarkable, although yield (a measure of average fares) continues to suffer."

The company was expected to have a loss of $1.53 a share, the average forecast in a Thomson Financial/First Call survey of analysts.

Alaska Air shares rose 41 cents to $31.31 in early trading today. The stock has risen 12 percent in the past 12 months.

The Associated Press and Bloomberg News contributed to this report.