PROFITS HAVE continued to roll in from the US airline industry, with USAir delivering on its promises of a dramatic turnaround, producing its first annual profit since 1988.
USAir ended the year showing net profits of $120 million, against a loss of $685 million a year ago. The result largely came from a spectacular 13% rise in yields and an overall fall in costs.
Despite the turnaround, British Airways has confirmed that it will not take up its options to invest another $450 million in its US partner. BA let the options lapse on 21 January, saying that there was no indication from the US Department of Transportation (DoT) that it would have allowed the UK airline to increase its boardroom influence in USAir, in line with the increased investment. The DoT later confirmed the view.
BA will continue to maintain the existing 24.6% stake for which it paid $400 million in 1993. The UK airline has also given an enthusiastic welcome to the appointment of former United chief Stephen Wolf as USAir's new executive chairman, and says that discussions are expected to begin soon on how to "enhance the benefits" of the strategic alliance.
Wolf has yet to map out his plans for the carrier, but board changes are likely, speeded by the announcement from USAir president Frank Salizzoni that he is to retire.
The better profit figures complicate Wolf's task of winning extra concessions on wages and productivity. USAir warns that, despite the recovery, it still needs savings of $2.5 billion over the next five years. The plan is to re-open discussions during pending contract renegotiations with the major unions.
"Our full potential, however, cannot be realised, nor our existence assured, if we do not achieve a competitive cost structure," says John Harper, USAir's chief financial officer. He says that the airline's labour and unit costs are still the highest in the industry.
Source: Flight International
