The company, in which British Airways holds a 24.6 per cent stake, is cutting back on routes and aircraft in a move that will mean job losses for members of the powerful pilots' union.
BA defends its £258m investment in USAir by saying it produces £70m a year in revenue from cross-feed passenger traffic, but it could see this figure reduced if retrenchment is severe.
Seth Schofield, USAir chairman and chief executive, said he was disappointed that after 10 months' negotiations there was no agreement with unions.
But he said the company would press on without union consent. "We will take additional steps immediately to cut operating costs sharply, including a downsizing of the airline's operations. This will result in a USAir with fewer planes and fewer people.''
USAir's losses, which compare with $393m last time, were slightly higher than expected because of a $186m charge for writing down the value of the aircraft fleet and other assets.
The company had implemented $400m in savings, but was looking for around $1bn in cuts from a restructuring agreement with the unions.
BA said the results were disappointing, but not unexpected. A BA spokesman said he did not expect that USAir's plans to cut routes, as yet unspecified, would affect the UK company.
However, analysts said BA would be hit. "The point is, we just do not yet know by how much." one said. "But, obviously, USAir is not going to cut its profitable routes.''
BA's share price has see-sawed in the past 48 hours as speculation grew that a deal had been struck. BA shares closed up 5.5p to 373p.Reuse content