FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported)
April 21, 1999
US AIRWAYS GROUP, INC.
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 872-5306
(Registrant's telephone number, including area code)
(Commission file number: 1-8444)
(I.R.S. Employer Identification No: 54-1194634)
US AIRWAYS, INC.
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 872-7000
(Registrant's telephone number, including area code)
(Commission file number: 1-8442)
(I.R.S. Employer Identification No: 53-0218143)
Item 5. Other Events
On April 21, 1999, US Airways Group, Inc. (US Airways Group
or the "Company") and US Airways, Inc. (US Airways) issued a news
release disclosing the results of operations for both companies
for the three months ended March 31, 1999, and selected operating
and financial statistics for US Airways for the same period (see
Exhibit 99 to this report).
Rakesh Gangwal, President and Chief Executive Officer of both
US Airways Group and US Airways, Lawrence M. Nagin, Executive Vice
President--Corporate Affairs and General Counsel of both
companies, Thomas A. Mutryn, Senior Vice President--Finance and
Chief Financial Officer of both companies and N. Bruce Ashby,
Senior Vice President--Planning for US Airways, spoke with
industry analysts on a conference call following the news release.
During the call, an update to the status of the Company's
common stock purchase programs was provided. From January 1998,
the date the Company's first common stock purchase program was
authorized, through March 31, 1999, the Company had purchased a
total of 24.6 million shares of its common stock at a total cost
of $1.4 billion. The Company purchased 6.6 million shares of its
common stock for $341 million in the first quarter of 1999.
Also discussed during the call were two factors that had an
adverse effect on the Company's financial results for the first
quarter of 1999: inclement weather in the eastern United States
and the recent conversion of certain information systems
(including reservations, airport customer services and flight
tracking systems) to those provided by The SABRE Group, Inc.
(TSG). The effects on US Airways' operations of the inclement
weather were compounded by the systems conversions. The new
systems resulted in changes to many basic work processes--
temporarily affecting the efficiency at which certain processes
were performed. In the first quarter of 1999, US Airways was
forced to cancel approximately 5.6% of its flights. In contrast,
US Airways flight cancellation rate averaged 2.5% in the first
quarters of 1998 and 1997. The unusually large number of
cancellations of planned flights pushed up US Airways' unit cost
since it was geared to operate a larger schedule. As US Airways
cancelled flights its costs did not go down materially--only
expenses such as aviation fuel, landing fees and commissions were
avoided. At the same time US Airways lost most of the revenue from
the cancelled flights.
On a year-over-year basis, US Airways' capacity (available
seat miles) is expected to increase 5.5% in the second quarter of
1999, 9.5% in the third quarter and 10.0% in the fourth quarter.
For full-year 1999, US Airways' capacity is expected to increase
approximately 7.0% compared to full-year 1998. The increase in
capacity will be driven largely by MetroJet, which will contribute
about 5 percentage points of the 7.0% increase, with transatlantic
operations making up the majority of the remainder of the
increase.
Earnings guidance for the second quarter of 1999 and full-
year 1999 was also provided--the Company expects to comfortably
make the current First Call consensus of $2.10 per share for
second quarter of 1999 and the current First Call consensus of
$5.60 per share for full-year 1999. In addition, it was also
disclosed that US Airways' unit cost is expected to be lower for
full-year 1999 compared to full-year 1998. This reduction will be
driven by the continued expansion of lower-cost MetroJet
operations, efficiencies realized as a result of the
implementation of the new TSG information systems and spreading
overhead over a larger base.
Certain of the information discussed on the conference call
should be considered "forward-looking information" which is
subject to a number of risks and uncertainties. The preparation of
forward-looking information requires the use of estimates of
future revenues, expenses, activity levels and economic and market
conditions, many of which are outside of the Company's control.
Specific factors that could cause actual results to differ
materially from those set forth in the forward-looking information
include: economic conditions, labor costs, aviation fuel costs,
competitive pressures on pricing--particularly from lower-cost
competitors, weather conditions, government legislation, consumer
perceptions of the Company's products, demand for air
transportation in the markets in which the Company operates and
other risks and uncertainties listed from time to time in the
Company's reports to the United States Securities and Exchange
Commission. Other factors and assumptions not identified above are
also involved in the preparation of forward-looking information,
and the failure of such other factors and assumptions to be
realized may also cause actual results to differ materially from
those discussed. The Company assumes no obligation to update such
estimates to reflect actual results, changes in assumptions or
changes in other factors affecting such estimates.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Designation Description
- ----------- -----------
99 News release dated April 21, 1999 of US Airways
Group, Inc. and US Airways, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned hereunto duly authorized.
US Airways Group, Inc. (REGISTRANT)
Date: April 21, 1999 By: /s/ Thomas A. Mutryn
---------------------------------
Thomas A. Mutryn
Senior Vice President, Finance
Chief Financial Officer
US Airways, Inc. (REGISTRANT)
Date: April 21, 1999 By: /s/ Thomas A. Mutryn
---------------------------------
Thomas A. Mutryn
Senior Vice President, Finance
Chief Financial Officer
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Exhibit 99
US AIRWAYS GROUP 1ST QUARTER OPERATING PROFIT IS $89 MILLION,
INCLUDING ONE-TIME GAIN OF $9.9 MILLION
ARLINGTON, Va., April 21, 1999 - US Airways Group, Inc.
reported a first quarter operating profit of $89 million and a
first quarter net profit of $46 million today, including a one-
time gain. Earnings per diluted share for the quarter were 56
cents, including the one-time gain.
"Facing a simultaneous test of poor weather and a complex
conversion to a new computer system, our employees met the
challenge and demonstrated their true professionalism. As we look
ahead to the next quarter and the balance of the year, we expect
to see a much improved performance," said US Airways President
and CEO Rakesh Gangwal.
US Airways' operations were much closer to normal by the end
of March, as the weather improved and the impact of the
transition to the new computer system lessened. The number of
cancellations declined and on-time performance began returning to
more normal levels.
Gangwal noted that the recent Airline Quality Rating, which
placed US Airways No. 1 among the 10 major U.S. airlines,
underscores the team spirit of US Airways employees in
transforming significant aspects of US Airways' performance.
US Airways Chairman Stephen M. Wolf said the airline's No. 1
ranking in the quality survey is a credit to US Airways
employees.
"Over the past three years US Airways employees have
enthusiastically embraced the goal of becoming the Carrier of
Choice and these results reflect their exceptional dedication,"
Wolf said.
Dean Headley, associate professor of marketing at the Barton
School of Business at Wichita State University and one of the
authors of the quality survey, said US Airways rose above other
major airlines because of its high ranking in most major
categories of service of interest to consumers.
- -more-
US Airways Group 1st Quarter Operating Profit
Is $89 Million, Including One-Time Gain Of $9.9 Million
Page Two
April 21, 1999
"The good thing about US Airways is that they are the most
consistent high-level performer," Headley said.
"If you leave on time, if the airline leaves on time, your
bags get there with you, and they are relatively pleasant in the
process of getting you there, that's performance."
The one-time gain for the quarter was $9.9 million, related
to sale of depository certificates in Equant. Excluding this
gain, earnings per share were 49 cents for the quarter.
Operating revenues for the first quarter of 1999 were $2.1
billion, an increase of 0.4 percent over the first quarter of
1998, while operating expenses were $2.0 billion, higher by 6.0
percent as compared to 1998, mostly as a result of expenses
related to the inclement weather and computer conversion issues.
The operating profit of $89 million was 53.6 percent below the
comparable figure for the first quarter of 1998, while the net
profit of $46 million was down by 53.1 percent.
Revenue passenger miles flown in the first quarter of 1999
were higher by 1.0 percent as compared to the first quarter of
1998 while available seat miles increased by 2.9 percent. The
passenger load factor of 67.7 percent was down by 1.3 percentage
points. Passenger unit revenue was 11.77 cents per available seat
mile, a decline of 3.9 percent from the first quarter of 1998,
while cost per available seat mile increased 2.0 percent to 12.75
cents, primarily reflecting costs related to weather and computer
issues. The cost of aviation fuel, excluding taxes, for the
quarter was 37.17 cents, 28 percent lower than the first quarter
of 1998.
-30-
NUMBER: 3638
US Airways Group, Inc. NEWS RELEASE
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in millions, except per share amounts)
Three Months Ended March 31,
1999 1998(Note 1) % Change
------ ------ --------
Operating Revenues
Passenger transportation $1,856 $1,858 (0.1)
Cargo and freight 40 43 (7.0)
Other 176 162 8.6
----- -----
Total Operating Revenues 2,072 2,063 0.4
Operating Expenses
Personnel costs 801 749 6.9
Aviation fuel 129 167 (22.8)
Commissions 124 124 --
Aircraft rent 114 111 2.7
Other rent and landing fees 108 108 --
Aircraft maintenance 117 114 2.6
Other selling expenses 101 102 (1.0)
Depreciation and amortization 80 72 11.1
Other 409 324 26.2
----- -----
Total Operating Expenses 1,983 1,871 6.0
----- -----
Operating Income 89 192 (53.6)
Other Income (Expense)
Interest income 15 30 (50.0)
Interest expense (50) (63) (20.6)
Interest capitalized 8 5 60.0
Other, net 13 1 1,200.0
----- -----
Other Income (Expense), Net (14) (27) (48.1)
----- -----
Income Before Taxes 75 165 (54.5)
Provision for Income Taxes 29 67 (56.7)
----- -----
Net Income 46 98 (53.1)
Preferred Dividend Requirement -- (6) (100.0)
----- -----
Earnings Applicable to
Common Stockholders $ 46 $ 92 (50.0)
===== =====
Earnings per Common Share
Basic $ 0.57 $ 0.98 (41.8)
Diluted $ 0.56 $ 0.96 (41.7)
Shares Used for Computation (000)
Basic 79,464 93,710
Diluted 80,953 102,781
Note 1. Certain 1998 amounts have been reclassified to conform
with 1999 classifications.
US Airways, Inc. NEWS RELEASE
(A Wholly-Owned Subsidiary of US Airways Group, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions)
Three Months Ended March 31,
%
1999 1998(Note 1) Change
--------- ----------- --------
Operating Revenues
Passenger transportation $ 1,661 $ 1,677 (1.0)
US Airways Express
transportation revenues 177 149 18.8
Cargo and freight 39 42 (7.1)
Other 163 163 --
--------- ---------
Total Operating Revenues 2,040 2,031 0.4
Operating Expenses
Personnel costs 744 697 6.7
Aviation fuel 119 154 (22.7)
Commissions 113 113 --
Aircraft rent 98 96 2.1
Other rent and landing fees 99 99 --
Aircraft maintenance 88 92 (4.3)
Other selling expenses 91 93 (2.2)
Depreciation and amortization 73 65 12.3
US Airways Express capacity
purchases 146 125 16.8
Other 376 308 22.1
--------- ---------
Total Operating Expenses 1,947 1,842 5.7
--------- ---------
Operating Income 93 189 (50.8)
Other Income (Expense)
Interest income 49 39 25.6
Interest expense (50) (63) (20.6)
Interest capitalized 4 3 33.3
Other, net 13 1 1,200.0
--------- ---------
Other Income (Expense), Net 16 (20) (180.0)
--------- ---------
Income Before Taxes 109 169 (35.5)
Provision for Income Taxes 42 68 (38.2)
--------- ---------
Net Income $ 67 $ 101 (33.7)
========= =========
Note 1. Certain 1998 amounts have been reclassified to conform
with 1999 classifications.
US Airways, Inc. NEWS RELEASE
(A Wholly-Owned Subsidiary of US Airways Group, Inc.)
SELECTED AIRLINE OPERATING AND FINANCIAL STATISTICS (Note 1)
(unaudited)
Three Months Ended March 31,
%
1999 1998 Change
------- ------- --------
Revenue passengers (thousands)* 12,998 13,308 (2.3)
Total revenue passenger miles
(millions) 9,573 9,481 1.0
Revenue passenger miles
(millions)* 9,553 9,445 1.1
Total available seat miles
(millions) 14,134 13,734 2.9
Available seat miles(millions)* 14,107 13,692 3.0
Passenger load factor* 67.7% 69.0% (1.3)pts.
Break-even load factor (Note 2) 65.0% 63.8% 1.2 pts.
Yield* 17.39c 17.75c (2.0)
Passenger revenue per available
seat mile* 11.77c 12.25c (3.9)
Revenue per available seat mile
(Note 2) 13.19c 13.70c (3.7)
Cost per available seat mile
(Note 2) 12.75c 12.50c 2.0
Average passenger journey (miles)* 735 710 3.5
Average stage length (miles)* 614 591 3.9
Revenue aircraft miles (millions)* 105 102 2.9
Cost of aviation fuel per gallon 43.27c 57.66c (25.0)
Cost of aviation fuel per gallon
(excluding fuel taxes) 37.17c 51.63c (28.0)
Gallons of aviation fuel consumed
(millions) 275 267 3.0
Number of aircraft in operating
fleet at period-end 377 371 1.6
Full-time equivalent employees at
period-end 38,832 38,625 0.5
* Scheduled service only (excludes charter service).
c cents
Note 1. Includes US Airways "mainline" operations as well as
the operations of its low-cost product, MetroJet.
Note 2. Financial statistics exclude the revenues and
expenses generated under capacity purchase arrangements
US Airways has with certain US Airways Express air
carriers.
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