5 Key Quotes from US Airways on the Airline Industry

by: David Jackson

Here are five key quotes from US Airways' (LCC) recent conference call:

1. Impact of higher fuel prices

These are the results for the quarter. We reported this morning a loss of $567 million. Excluding special items the loss was $101 million, but we made $261 million profit in the second quarter of ’07. That change in here of course was driven higher fuel prices. Had our fuel prices remained unchanged year-over-year, our second quarter fuel expense would have been $390 million lower.

2. Cutting capacity to reduce costs

During 2008, we planned to retire 21 older aircraft and are adding 19 new ERJ-190s and A321 aircraft. ASMs [available seat miles] are now projected to be 74.1 billion for the year 2008, which is down 2.3% versus 2007. For the quarters, in the third quarter it will be at 19.3 billion down 1.6% and in the fourth quarter it will be at 17 billion, which is 6% down from 2007. We are still working on our 2009 plan at this point. Preliminary ASM numbers project domestic ASMs down 8% to 10% for the full year with total ASMs down 4% to 6%... Starting in the middle of August we’ll see industry capacity begin to decline and expect that it will be down 9% in the fourth quarter and into 2009.

3. New airplane orders

Throughout the year we will continue to replace older aircraft with new fuel-efficient aircraft ending the year with 354 aircraft. This will continue over the next few years as we continue our fleet modernization.

4. Charging for bags and drinks, aka "a la carte pricing"

On the revenue side we’ve taken aggressive steps to mitigate the impact of record high fuel costs. During the quarter we implemented in a la carte pricing model, which includes the first and second bag charge, new choice seat option and sale of beverages... We are increasing our estimate of the annual benefits of this program by $100 million to $400 million to $500 million per year.

5. Higher fuel prices means no more... movies

Fuel conservation continues to be the top priority for us in 2008. We continue to replace older aircraft with more fuel efficient aircraft have added wing widths to all long-haul 757 aircraft and we will remove nonessential weight from all of our aircraft. We recently announced that we will remove our in-flight entrainment system, saving over $10 million in expenses per year primarily due to lower fuel burn.

The quotes are taken from the US Airways transcript which was published on Seeking Alpha a few hours after the call ended. If you think I missed something more important than these quotes, feel free to copy and paste your quote from the full transcript and leave as a comment below.