Battening down in the face of continuing hard times, USAir Group Inc. said yesterday that it is suspending indefinitely its 12-cents-a-year common stock dividend and postponing acquisition of 16 new aircraft.
The airline went from a $258.3 million operating profit in the first six months of 1989 to a $100.8 million loss for the same period in 1990 and is facing losses that may be as high as $350 million for the year, according to industry analysts.
With a sluggish economy dampening travel and fuel prices increasing far more quickly than the airlines can recover them through fare increases, the whole airline industry is taking a beating this year.
The industry is "between a rock and a hard place," said Dillon Read & Co. analyst Raymond E. Neidl, who said the dividend suspension was a prudent way of preserving working capital.
USAir Chairman and President Edwin I. Colodny said that the board voted to suspend the stock dividend "in light of the company's recent financial performance and the poor outlook for the nation's economy and its effect on air travel."
Suspending the common stock dividend will save USAir $5.3 million a year.
However, the airline remains obligated to make $33 million a year in dividend payments to Berkshire Hathaway Inc., which is run by Omaha investor Warren Buffett and which invested $358 million in USAir in exchange for specially issued preferred stock paying a 9.25 percent dividend.
The company also rescheduled delivery of 16 new Boeing aircraft from 1991 and 1992 to 1993 and 1994.
Earlier this year, USAir delayed taking delivery on 12 Boeing 737 aircraft from 1991 and 1992 to 1995. The airline threw in a sweetener for Boeing in exchange for being allowed to postpone delivery, agreeing to convert 10 existing options for 737s to firm orders, with delivery scheduled for 1994.