Merged carrier posts its first profit US Airways, acquired by America West last fall, surprised analysts. Pilots called for their fair share. Merged US Airways posts its first profit, better performance

Posted: May 10, 2006

US Airways Group Inc. executives touted profit, increased demand, and better on-time performance in their upbeat first-quarter financial report yesterday.

Seven months after it was acquired by America West Airlines, US Airways reported its first quarterly profit, surprising financial analysts. Meanwhile, labor unions reminded the airline's management of what still needed to be done in merging the two workforces.

Shares of US Airways rose $4.33, or 9.2 percent, yesterday to close at $51.63. The stock has surged 168 percent since the airline emerged from bankruptcy in September.

Across the combined US Airways-America West network, on-time performance has been the best among major airlines for the last six months, the officials said in a conference call for analysts and reporters.

At Philadelphia International Airport, US Airways' performance hasn't been nearly as good. Seventy percent of its flights departed on time last year, the weakest performance of any airline operating here, according to an Inquirer analysis.

W. Douglas Parker, US Airways chairman and chief executive officer, said that the airline still was below the industry average in handling passengers' bags and that most of the problem was due to old, dilapidated equipment at the Philadelphia airport. US Airways has mishandled 7.41 bags for every 1,000 passengers so far this year, the worst performance of the major airlines, according to the U.S. Department of Transportation.

Philadelphia travelers this summer and fall can expect significant improvement in getting bags on the right flights and reuniting them faster with their owners after flights, he said. US Airways has almost two-thirds of the flights and passengers here.

"That issue is not one where we can just throw people at it," Parker said. "It's an infrastructure issue. We think, by the third quarter, it will be much better."

The airline has hired more baggage handlers and replaced most of the old equipment at the airport, said Al Crellin, executive vice president of operations. The airline is working with the Transportation Security Administration to add more explosive-detection machines for screening bags, he said.

Parker said the company expected to make a profit this year, even after accounting for merger-related expenses. The old US Airways last reported an annual profit in 1999.

Parker said that, while high fuel prices continued to plague the airline industry, US Airways had been able to offset some of the increase by combining its operations in ways that save money.

All airlines have benefitted this year from a healthy demand for travel, which has allowed them to raise fares in half a dozen small increments since late 2005. US Airways also has been helped by cutbacks in service on the East Coast by Delta Air Lines and by the closing of Independence Air, a discounter that had been based at Washington Dulles Airport.

One caution on the comparison of the financial condition of US Airways now with the previous year: First-quarter results from 2005 reflect the operations of the much smaller America West.

The Tempe, Ariz., airline said it made $65 million, or 75 cents a share, compared with a loss of $174 million or $6.58 a share, in the 2005 first quarter. Excluding special items, the company made $5 million, or 5 cents a share, compared with a loss of $16 million or $1.09 a share, a year ago.

Per-share results were affected by a change in the number of shares outstanding: about 93.4 million in the recent quarter versus 25.7 million in the 2005 quarter.

US Airways' operating revenue increased to $2.65 billion in the first quarter from $733 million for the same period a year ago. Passenger traffic for the combined airlines more than doubled in the quarter, to 16.39 billion miles flown by paying passengers from 6.37 billion miles the year before.

Parker's profit forecast prompted the Air Line Pilots Association to demand that management recognize the sacrifices that pilots and other employees made over many years at US Airways and America West to keep both airlines in business. Flight operations at the airlines are still separate while negotiations are under way to integrate the workforces.

"Just as US Airways' stockholders and executives are reaping the rewards of the new US Airways, the pilots of this airline expect to receive commensurate returns," said Jack Stephan, chairman of the US Airways union local.

In a related development, two unions battling over who would represent 8,000 active and furloughed baggage handlers from the merged airlines reached an agreement yesterday.

The International Association of Machinists and Aerospace Workers, which represented former US Airways workers and the majority of the baggage handlers, will represent the combined workforces. The Transport Workers Union, which represented America West baggage handlers, will withdraw its application from the National Mediation Board.

The agreement allows the unions to avoid an election conducted by the National Mediation Board. If worker turnout were low, neither union would win, and the workers would not be represented by a union.

On Feb. 8, the contest between the two unions turned violent in Philadelphia when five Transport Workers Union organizers were beaten during an organizational meeting at the Philadelphia Airport Marriott. The transport workers said union officials from the machinists' union in Philadelphia attacked them.

US Airways fired 22 machinists' union members and officials, all longtime employees. The union later filed a lawsuit on their behalf, saying the workers had acted in self-defense.

There have been no arrests in the case.

Contact staff writer Tom Belden

at 215-854-2454 or tbelden@phillynews.com.

Staff writer Jane M. Von Bergen contributed to this article.

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