Lower fares give USAir surprise boost

USAir, the Virginia-based airline in which British Airways owns a 24 per cent stake, surprised the market yesterday with better-than- expected operating results for its second quarter.

However, analysts cautioned that the results do not alter the long-term problems at USAir, and do little to change the picture for British Airways, which is considering making a write-down on its dollars 400m investment in the carrier.

'It was a good quarter, and a little unexpected, but one quarter doesn't make a year, and the basic cost structure problem is still there,' Ray Niedl, analyst at the Wall Street brokerage Furman Selz, said.

USAir had an operating income of dollars 78.1m for the quarter, up from dollars 66.2m in 1993 on total revenues of dollars 1.88bn, up from dollars 1.82bn. Net income was dollars 13.8m (dollars 5.8m). After paying a dividend on preferred stock there was a net loss to common stockholders of dollars 5.5m (loss dollars 12.6m).

USAir is the fifth-largest airline in the US, but has some of the highest operating costs. It has been under assault for some time from Dallas-based Southwest Airlines, and other low-cost carriers, which have taken market share on many of its busy routes.

USAir's chairman, Seth Schofield, said: 'We still have the underlying requirement for a permanent and substantial reduction in our operating costs.'

During the second quarter USAir hit back at its low-cost rivals with discount fare promotions, and passenger demand more than made up for the lower yields on seat sales. The company said that as a result of the low fares, passenger bookings were strong until the end of autumn.