Texas Air Posts $255.9 Million Loss in Quarter : TWA’s Profit Nearly Doubled in Same Period
The nation’s biggest airline company, Texas Air, reported Monday that its second-quarter net loss widened sharply, while Trans World Airlines said its after-tax profit nearly doubled.
Houston-based Texas Air said its net loss widened to $255.9 million from a loss of $27 million in the second quarter of 1987. The company blamed a significant part of the loss on government investigations of alleged safety problems at its two main subsidiaries, Continental Airlines and Eastern Airlines.
Texas Air’s second-quarter revenue slipped 1.4%, to $2.13 billion from $2.16 billion a year earlier.
The Department of Transportation and the Federal Aviation Administration began investigations of Eastern and Continental in mid-April, but the probes, which continued for most of the second quarter, concluded that both airlines were being run safely. At the same time, however, federal investigators concluded that labor turmoil at Miami-based Eastern must be defused before it creates risks to passengers.
Losses at Continental
Texas Air said Monday that the investigations cost Eastern and Houston-based Continental more than $60 million in lost revenue and $14 million in expenses such as overtime, advertising and legal and accounting fees.
At Eastern, the second-quarter net loss was $89.8 million, compared to net income of $27.1 million a year earlier. Eastern’s revenue in the most recent quarter declined to $1 billion from $1.2 billion.
Continental lost $150.9 million on revenue of $1.1 billion in the second quarter. In the same period a year earlier, the airline lost $71.1 million on revenue of $1 billion.
This year’s second-quarter loss included a $131-million charge principally involving the airline’s liability for “reaccommodation (of passengers) and ticketing activity during 1987,” a Texas Air spokesman said. The charge had been announced earlier and had no impact on Continental’s cash position.
The results in the latest quarter brought Texas Air’s net loss for the first half of the year to $380.1 million, widened from a loss of $127.7 million in the first six months of 1987. The airline holding company’s first-half revenue rose 1.4%, to $4.26 billion from $4.20 billion.
Rebound at TWA
New York-based TWA said its net profit almost doubled in the second quarter from a year earlier, largely due to a cash payment it received from a lawsuit against its former owner, the late Howard Hughes.
The airline said its net income jumped to $97.2 million from $52.8 million in the second quarter of 1987.
In addition to a $49.9-million gain from the Hughes lawsuit, TWA said its earnings also benefited in the quarter from cost controls, a rebound in international passenger traffic, which had been hurt by fears of terrorism, and the long-term advantages of TWA’s merger with Ozark Air Lines.
TWA’s second-quarter revenue rose 8.6% to $1.14 billion from $1.05 billion a year earlier.
The lawsuit against Hughes, originally filed by TWA management in 1962, alleged that the eccentric multimillionaire failed to provide the carrier with adequate aircraft. Although a Delaware court decided in TWA’s favor last year, the payment was not made until the second quarter of 1988.
In the first half of the year, TWA earned $44.7 million, contrasted with a net loss of $2 million in the first six months of 1987.
Earnings tables, Page 8
