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US Airways: Fares to jump more

| Thursday, Jan. 27, 2011

NEW YORK -- US Airways Group Inc. thinks it will be able to offset higher jet fuel prices this year by keeping costs low and raising fares.

The airline has already increased fares across its network three times this month and more are likely on the way.

US Airways said it's getting easier to raise prices because more business travelers are flying, and they tend to pay more. It expects more of those lucrative customers this year as the economy gets stronger.

Along with fare increases, US Airways is also sticking with its plan to raise the number of available seats, or capacity, this year only slightly so it can keep costs low and planes full.

Airlines raise capacity by flying bigger planes with more seats or by adding flights. US Airways plans to raise domestic capacity by 1 percent. It will expand capacity by about 7 percent on international routes, as it adds service to several new destinations in Europe and South America through its Charlotte, N.C., hub.

The company issued its 2011 outlook after reporting a fourth-quarter profit Wednesday, its first profit in the last three months of the year since 2006.

US Airways, based in Tempe, Ariz., reported a profit of $28 million, or 17 cents per share. That compares with a loss of $79 million, or 49 cents per share, in the fourth quarter of 2009.

Revenue rose 11 percent to $2.91 billion. The money it made per passenger rose 3.4 percent in the quarter due to higher ticket prices and more money from fees for things such as checked bags and special seats. Business travel was up about 17 percent.

Analysts polled by FactSet Research Systems Inc. expected a profit of 6 cents per share on revenue of $2.90 billion.

Fuel costs jumped 23 percent in the period, but overall expenses rose just 7 percent, as the airline trimmed elsewhere to make up for higher fuel. Fuel costs are expected to rise between 23 and 25 percent a gallon this year.

One of the main ways US Airways reduced costs was by operating fewer and fuller planes. The occupancy rate on US Airways flights hit a record 80.6 percent in the October-to-December period. The planes were 78.6 percent full, on average, a year earlier.

For the full year, the airline made a profit of $502 million, or $2.61 per share, compared with a loss of $205 million, or $1.54 per share, in 2009. Fuel prices were 28 percent higher last year than in 2009. The money US Airways made per passenger rose 11 percent.

During a conference call with analysts, US Airways weighed in on its contracts with online travel sites, a potentially contentious area as airlines try to cut the costs of selling their tickets.

President Scott Kirby said the company is willing to sell tickets through online travel sites, as long as they eventually allow the airline to sell all of its extra fees directly.

US Airways shares rose 67 cents, or 6.6 percent to close at $10.80.

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