US Airways posts $865-million loss in third quarter of 2008

US Airways, the low-cost airline owned by US Airways Group, has posted a huge loss in the third quarter of 2008 on account of the huge increase in the prices of aviation turbine fuel as well as fast decline in the price of crude oil that ate into the value of its fuel hedges.

The company said in a statement that it reported a loss of $865 million in the third quarter, or $8.45 per share, compared with a profit of $177 million, or $1.87 per share, a year earlier.

Excluding a $488-million writedown related to the hedges, and other one-time items, US Airways said its loss was $242 million, or $2.35 per share.

US Airways, headquartered in Tempe, Arizona, the United States, operates flights connecting destinations in North America, Central America, the Caribbean, Hawaii, and Europe. The airline has hubs in Charlotte, Philadelphia and Phoenix and also maintains focus-city operations at Washington’s Reagan National Airport, New York’s LaGuardia Airport, Las Vegas, Pittsburgh and Boston.

The US Airways statement said the revenue in the third quarter of 2008 was $3.3 billion – up by 7.4% over the third quarter in 2007.

The company said it ended the third quarter with $2.3 billion in total cash and investments. Separately, it had raised $950 million in financing and near-term liquidity commitments.

In the statement, Doug Parker, chairman and CEO of US Airways, stressed the “crippling fuel prices” over the summer and added: “The current economic situation is both good and bad news for the airline: Oil prices have now fallen well below last quarter, but the economic crisis may put a damper on air travel.”

As a part of its efforts to coping with its losses, US Airway is now charging passengers extra for drinks, checked bags and better seats.  Those charges, according to the company, will fetch an extra $400 or $500 million in 2009.

Despite suffering the biggest loss yet among major United States-based carriers in the third quarter of 2008 – a whopping $865 million – Doug Parker said: “US Airways has a positive outlook for the rest of this year and beyond, thanks mostly to tumbling oil prices. The third-quarter results don’t reflect current climate. It’s really remarkable how much has changed in a short period.”

Though the airline’s loss on the year is nearly $1.7 billion, executives of the company told aviation analysts and journalists: “Flight cuts and lower oil prices – down by 50% from three months ago – will reduce expenses, while new fees for passengers are bringing in money.”

“Oil is the biggest factor in US Airways’ outlook,” the executives said. “For every dollar per barrel that the price of oil falls, the airline saves about $35 million a year. If the price per gallon had been the same as a year earlier, the airline would have spent about $538 million less on fuel.”

US Airways spent over $1.1 billion on fuel in the third quarter of 2008, and lost another $488 million from the change in value of outstanding hedge contracts, once the oil prices started falling.

US Airways also announced nearly $1 billion in new financing, with a part of the money being used to prepay bank debt.