USAir Suffers Loss in Quarter
USAir Group Inc., the parent of the airline USAir, announced another large loss Monday and said it will ask its employees to take salary cuts over the next 15 months.
USAir, reporting a third-quarter loss of $81.4 million, said the pay reductions will be weighted to hit higher-paid personnel the hardest. The first $20,000 of a person’s base salary will be immune to the cuts, for example.
The cuts are the core of a cost-reduction plan aimed at saving more than $400 million next year.
President Seth E. Schofield said employees are also being asked to contribute to medical and dental programs, now paid for entirely by the company. He said the airline will also reduce management and clerical personnel by 10% and cut its non-payroll budget by $100 million.
The company’s financial problems are shared by a number of other U.S. airlines that have been squeezed by the effects of the recession, following steep losses that came during the Persian Gulf crisis, when jet fuel prices skyrocketed and traffic fell off.
In an initial cost-cutting exercise earlier this year, the airline laid off about 7,000 employees, announced a fuel conservation plan, restructured its routes and realigned its hub system.
In fact, the $81.4-million net loss for the quarter ended Sept. 30 was smaller than the loss of $120.3 million in the same period last year, even as revenue for the two quarters was flat at $1.6 billion. Per-share losses for the third quarter were $2.06 this year and $2.87 in 1990.
USAir stock traded Monday at $9.125 per share, up $1.125.
But for the year thus far, the company is doing worse than last year, losing $306.9 million, compared to a loss of $233 million during the first nine months of 1990. Nine-month revenue slipped to $4.85 billion from $4.89 billion a year earlier.
Schofield said the cost-cutting moves “will save USAir hundreds of millions of dollars in 1992, a year that we expect may be very difficult for the airline industry.”
Analysts have said the airlines will suffer massive losses for all of 1991 and cannot hope for a good year until 1993 at the earliest.
USAir still estimates its pretax loss for 1991 at more than $500 million, as it had last month.
If the business conditions do not improve, the “outlook for 1992 may not be much better,” Schofield said.
USAir is not alone in suffering financial problems.
In recent months, Eastern Airlines has gone out of business, Continental Airlines has sought the protection of the bankruptcy laws as has Pan American World Airways, which is selling off most of its assets and plans to emerge as a small carrier concentrating on its Latin American business.
Northwest Airlines is seeking to acquire the assets of Midway Airlines, which also has sought bankruptcy protection. America West Airlines also landed in Chapter 11. Trans World Airlines has experienced difficulty in servicing its large debt and plans to go into bankruptcy early next year.
Schofield and other USAir executives explained the economy moves to unionized workers several weeks ago. Meetings with non-union employees opened Monday.
The airline said it will begin reducing the salaries of its non-union employees when at least one of its three major unions agrees to do the same.
Company executives will take salary cuts beginning Jan. 1 regardless of union actions. Schofield’s salary of about $500,000 reportedly will be cut by 18%.
“Employees are expected to return to their original salary levels at the end of 15 months,” the company said. It said employees also will be offered profit sharing and stock option plans.
