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US Airways beats Wall Street prediction with $101M profit

| Friday, Oct. 27, 2006

US Airways Group Inc. on Thursday reported a $78 million net loss in the third quarter, which included higher fuel costs and lower revenue when the government restricted passengers' carry-on items.

Results were blunted by $179 million in one-time charges. They included an $88 million charge related to fuel hedge contracts and a $27 million charge related to the merger with America West Airlines a year ago.

But excluding the special charges, the carrier posted an operating profit of $101 million, or $1.09 a share. Wall Street had expected $1.03 a share, according to Thomson Financial's poll of analysts.

"We are pleased to report our third consecutive profitable quarter excluding special items, especially given the new security regulations put into place in August," said CEO Doug Parker.

Parker projected US Airways would show an operating profit in the fourth quarter, as well as for the full year, excluding one-time charges. The winter quarter tends to be the industry's most challenging financially.

Despite the momentum, US Airways does not intend to restore flights in Pittsburgh, where daily departures have plummeted to 164 from their mid-2000 peak of more than 500.

"We don't have any significant plans, up or down, in Pittsburgh," said President Scott Kirby during a conference call.

But in Philadelphia, US Airways intends to launch nonstop service in 2007 to Athens, Brussels and Zurich -- as well as three new destinations in both 2008 and 2009. Specific plans next year hinge on the carrier's ability to secure international gates at Philadelphia International Airport, where officials are trying to shift some gate assignments to accommodate growth plans of Southwest Airlines.

US Airways is hiring about 200 ramp workers and 60 managers in Philadelphia, said Kirby, to combat chronic baggage-handling problems there.

"There's nothing more expensive than running a bad operation," said Parker. "So we feel really good about making the expenditures."

US Airways merged with America West Airlines in September 2005, so results are not comparable to the 2005 quarter.

Quarterly revenue of $2.97 billion was hampered in August and September when the federal government, in reaction to terrorism threats, restricted passengers boarding with liquid and gel items. The action reduced passenger revenue by $30 million to $40 million, the airline estimated, and caused the amount of checked baggage to jump.

Fuel expenses last quarter increased by $179 million over year-ago levels. But it was no more than most of US Airways' peers, said Helane Becker, airline analyst for The Benchmark Group, New York.

"We have a $53 price target on the stock, and we are fairly optimistic about the outlook for the fourth quarter," said Becker, who maintains a "buy" recommendation on the stock.

Kirby said US Airways and America West do not expect to obtain a single operating certificate from the government until "the second half of next year." Last fall, Parker estimated the airline would have the certificate by April 2007, which would streamline recordkeeping and compliance.

US Airways shares closed yesterday at $49.43, up 92 cents.

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