US Airways, citing rising fuel costs and falling passenger revenue, yesterday became the first major airline to report a fourth-quarter loss in an industry generally struggling to gain financial altitude.
The Arlington-based airline reported a net loss of $81 million for the fourth quarter, compared to a $104 million profit ($1.18 per share) in the same quarter the year before. Revenue for the quarter was $2.1 billion, slightly higher than in the same period in 1998.
For all of 1999, US Airways reported net income of $197 million ($2.64 per share) on revenue of $8.6 billion, a 63 percent earnings drop from the $538 million ($5.60) recorded in 1998, when revenue totaled $8.7 billion.
Chairman Stephen M. Wolf called the financial performance for the year "well below acceptable levels." Neither Wolf nor US Airways President Rakesh Gangwal was available for comment beyond the earnings statement issued by the airline.
Excluding "nonrecurring and unusual items," including a pretax charge of $64 million for aircraft retirement and the disallowance of $3 million in earlier tax write-offs, US Airways said, the net loss for the quarter was $47 million (68 cents).
The average forecast by analysts surveyed by First Call/Thomson Financial was for a 63 cents-a-share loss for the quarter, although individual earnings estimates varied widely.
Brian Harris, an analyst with Salomon Smith Barney, said US Airways officials expressed some optimism about the future in a teleconference with analysts earlier in the day. "They mentioned that their operations are starting to improve," he said.
American Airlines, Delta Air Lines and other carriers reported lower quarterly earnings this week primarily because of the same sharply rising jet fuel prices that hurt US Airways, whose fuel costs increased 52.1 percent, to 74.21 cents a gallon, in the fourth quarter alone. Carriers also suffered a dropoff in revenue, particularly near the end of the year, as passengers became concerned about possible Y2K problems.
The one exception was United Airlines, which reported a 22 percent increase in fourth-quarter profits. But United said it expected to have fuel price problems during the first quarter of this year.
Harris predicted that "moderately to horrifically higher fuel prices would continue through the first half of the year," but said he thought the industry as a whole would improve by the end of the year.
The problems at US Airways were exacerbated this year by bad weather, a new computer system and labor problems, especially what the company claimed was a slowdown in performing aircraft maintenance and repairs.
After several years of negotiations, US Airways has reached contract agreements with most of its labor unions. But it is still in negotiations with the Association of Flight Attendants, who are threatening a systemwide campaign of flight disruptions if they cannot reach a contract agreement. The two sides are still in negotiations with federal mediators and the union cannot legally strike until the mediators say they can. The union must wait at least 30 days from the date they are released by the mediators before they can take any action.
Because it operates largely over shorter routes concentrated in the Eastern half of the nation, where weather delays are a particular burden, US Airways has some of the highest operating costs in the industry. Unit costs for the fourth quarter were 12.96 cents a mile, an increase of 6.2 percent over the year and nearly double the costs for Southwest Airlines, which is the benchmark for the industry.
* Riggs National Corp. said it earned $7.1 million (25 cents per diluted share) in the fourth quarter, far below consensus estimates of 33 cents a share. Riggs had a loss of $1.25 million (4 cents a share) in the same quarter a year ago, after a $13.8 million call premium paid on the redemption of preferred stock.
The Washington-based bank took a $2.5 million provision for loan losses in the latest quarter but also benefited from $2 million in income from Riggs Capital Partners, its venture capital arm.
Gary Townsend, an analyst for Friedman, Billings, Ramsey Group Inc., said the bank is suffering in part because it is "not assiduous enough about controlling costs."
For the year, Riggs earned $31.6 million ($1.09), compared with $38.2 million ($1.21) in 1998. The bank company had an extraordinary item of $5.1 million.
* F&M National Corp. announced that it met analysts' fourth-quarter earnings estimates on net income of $10.28 million (44 cents), compared with $9.37 million (40 cents) the year before.
For the year, the bank earned $41.3 million ($1.78), up from $36.5 million ($1.56) the year before. The Winchester, Va.-based bank company acquired the State Bank of the Alleghenies on Jan. 3, which increased its total assets to over $3.1 billion.
* Saga Systems Inc. of Reston, the parent company of Saga Software, reported net income of $2.6 million (9 cents) for the fourth quarter, a 72 percent decline from the $9.4 million (29 cents) in the same period in 1998. Revenue for the quarter was $52 million, down $17.9 million from the same quarter the year before.
In a statement, Saga said 1999 was a "difficult" year for sales of its software, which helps customers integrate business functions. Company representatives said many of their customers put major software purchasing decisions on hold while they addressed year 2000 issues. The company also invested heavily in research and development and sales and marketing in the quarter.
Earnings in 1999 totaled $17.1 million (55 cents) on revenue of $213.3 million, compared with 1998 net income of $27.7 million (87 cents) and revenue of $249 million.
CAPTION: US AIRWAYS EARNINGS
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