USAir forecasts return to profit
Wednesday 06 September 1995
USAir, the American airline that is 24.6 per cent owned by British Airways, surprised analysts with a forecast that it would return to profit in the full year. The news will come as relief to BA, which was forced to write down the value of its stake earlier this year.
Seth Schofield, USAir's chairman and chief executive, said better-than- expected passenger figures and tighter cost control were behind the improvement.
USAir expected to report a pre-tax profit for the third quarter and, "barring any unforeseen events" for the full year as well, Mr Schofield said.
"The revenue trends that began earlier this year has continued through the summer. We are also seeing the benefits of our cost reductions reflected in lower-than-expected unit cost increases despite the fact that we reduced our capacity in the latter part of 1995."
A BA spokesman said: "We are pleased that they are showing further improvement from their recovery programme."
In May BA cut the value of its USAir stake by half to about pounds 125m. BA has been dogged by analysts' concerns about the investment. While USAir still has big problems, yesterday's announcement shows the worst may be over.
Brian Harris, Wall Street analyst at SG Warburg, said he was changing his rating on USAir from a hold to a buy. "This is the first tangible evidence that the route restructuring effort is coming along very nicely at the carrier. It is even better than we expected."
The USAir announcement contributed to a rise of 5.5p in BA shares to 441p. BA was also helped by news its passenger traffic in August rose by 8 per cent while capacity rose by 5.5 per cent, giving an overall load factor of 80.5 per cent - up 1.8 percentage points on last year.
Meanwhile, the German government has refused to approve a new round-the- world air fare that BA and Australia's Qantas plan to offer jointly in Germany. The government objected to the price and the flexibility of the "Global Explorer" ticket, which has already been launched in Britain and Australia.
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