USAir plans cost-cutting campaign after losses

USAIR, the American carrier in which British Airways has a 25 per cent stake, has announced a net operating loss of dollars 196.7m ( pounds 133m) for the first quarter and says it intends to cut its annual costs by dollars 800m over the next two to three years. BA, which has invested dollars 400m in USAir, saw its shares fall 10p to 406p, writes David Bowen.

Analysts said the results were in line with expectations and the airline's chief problem was that business was now too good following the introduction of its high-risk 'Project High Ground'.

Fares were slashed to compete with low-cost carriers and last week the airline said it was hiring 1,000 staff to cope with demand.

Ian Wild, analyst with BZW, said this strategy would work only if USAir could cut its costs fast enough to make sure it was earning profits at these low fares.

'If it has not achieved considerable cuts by the fourth quarter, Chapter 11 bankruptcy awaits,' he added.

He said the 1,000 new staff were low-waged sales staff while better- paid flight crew faced redundancy or salary cuts. 'The most likely solution will be to copy United, where employees are buying a half share in the company by agreeing to wage concessions,' he said.