By Dow Jones Business News, October 23, 2013, 09:05:00 AM EDT
On the heels of strong results from its proposed merger partner AMR Corp. (AAMRQ), US Airways Group Inc. ( LCC ) posted
a $216 million third-quarter profit on Wednesday. But despite their successes, US Airways said the airlines still need
to merge to compete.
"As well as we're doing, we still have a company that is nowhere near investment grade, nowhere near where other
companies that merge in other businesses are," US Airways Chief Executive Doug Parker said to close an earnings call. "
Just want to make sure everybody understands: What we're really talking about here is merging a single-B credit with a
The U.S. Justice Department is suing to block the airlines' merger, saying it would hurt competition, leading to less
service and higher fares for fliers. The Justice Department has said in court filings that the two airlines' recent
success proves they are fine on their own. The two sides are scheduled to face off in court next month.
US Airways reported net income of $216 million, or $1.04 a share, down from $245 million, or $1.24 a share, a year
prior. The 12% drop in profit was largely because of merger-related expenses and a $120 million income-tax liability,
compared with just $1 million a year prior, because of complex financial-reporting rules related to income-tax waivers
the company holds.
The company said it posted a record pretax profit, and its revenue increased 9.1% year-over-year to a record $3.9
US Airways said the recent government shutdown helped decrease bookings by 8% in late September and early October. But
since the government reopened last week, bookings are back up 9%. "So, it does appear that the impact is temporary and
over," said US Airways President Scott Kirby.
The company had expected October unit revenue, or the amount taken in for each seat flown a mile, to increase by 4% to
5% compared with a year prior, but now it expects that key revenue measure to increase by only 1% for the month--largely
because of the shutdown. But, Mr. Kirby said, November and December bookings are strong and the company doesn't expect
any shutdown-related impact on those months.
US Airways said it expects its capacity to be up 3.5% this year compared with 2012. There should be a similar increase
in capacity in 2014, the airline said, as it takes deliveries of larger planes and adds more long-haul international
American Airlines parent AMR said last week that it earned $289 million in the third quarter, compared with a year-ago
net loss of $238 million.
Separately, on Wednesday, the mayors of seven cities that are American or US Airways hubs sent a letter to U.S.
Attorney General Eric Holder, asking him to settle or drop the antitrust suit. The mayors include Rahm Emanuel of
Chicago and Michael Nutter of Philadelphia.
Last week, 68 congressional Democrats sent a letter to President Barack Obama, urging his administration to allow the
Write to Jack Nicas at Jack.Nicas@dowjones.com
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