EARNINGS : Eastern’s Parent Sees Losses Grow During First Quarter

Largely as a result of a strike at its Eastern Airlines subsidiary, Texas Air suffered a first-quarter net loss of $255.5 million on revenue of $1.9 billion, the airline holding company reported Tuesday.

This compared to a net loss of $124.3 million on revenue of $2.2 billion in the same period last year for Texas Air, which also owns Continental Airlines. Nearly two months ago, after the strike began, Eastern sought protection from creditors under Chapter 11 of the U.S. bankruptcy code.

Eastern alone suffered a net loss of $255.2 million in the first quarter this year--before a $10.4-million charge for dividends payable to preferred stockholders. Its revenue for the period was $620.6 million. In the first quarter of last year, Eastern recorded a net loss of $31 million on revenue of $1.1 billion.

In its news release announcing the losses, Texas Air said the 1989 first-quarter loss reflected “the impact of the strike by its pilots’ union on March 4, 1989, and Eastern’s subsequent filing for reorganization on March 9, 1989.”

Actually, it was Eastern’s machinists union that struck the carrier. Members of the pilots’ and flight attendants’ unions have refused to cross the machinists’ picket lines, and that has brought about the virtual paralysis of the airline.

Phil Bakes, president of Eastern, said, “While further substantial operating losses should be expected for the second quarter, the company’s business plan which was recently submitted to our creditors and 5,000 working employees shows dramatic future improvements.” Before the strike, Eastern had more than 30,000 employees.

Bakes said that as a result of the planned sale of certain assets, Eastern will be able “to pay down a substantial amount of debt, satisfy all bankruptcy liabilities and finish the year with substantial cash resources.”

Continental reported an earnings improvement in the first quarter of 1989, though it also lost money. Its net loss was $16.5 million in the period on revenue of $1.2 billion. In the first quarter of 1988 Continental reported a loss of $80.6 million.

Analysts said Eastern’s losses were to be expected but that the Continental losses were smaller than they had expected. “The first quarter is always a pretty poor quarter,” said Raymond Neidl, airline specialist with McCarthy Crisanti & Maffei. “It is telling us that the yields (the amount of income per seat) were good in the first quarter, and it indicates that Continental might make a profit in the second quarter.”

Separately on Tuesday, Southwest Airlines, which is headquartered in Dallas, reported dramatically higher profit in the first quarter of this year, compared to the same period of 1988. The airline’s net income for the first quarter was $19.6 million, compared to a profit of $168,000 earned in the year-ago period.

The company said the increase in earnings was largely due to traffic increases of 43% in the quarter, but some of the earnings were derived through non-operating gains from $9.5 million in asset sales.

Southwest’s revenue for the first quarter of this year rose 28.5% to $229.4 million, compared to $178.6 million for the 1988 first quarter.